Times are Changing
After a period of negative growth construction is now turning a corner and technology has been critical to this upturn in fortune. This is something that has been recognized by the innovation and investor sectors – since 2015, $11.1 billion has been invested in Construct-Tech start-ups. It seems clear that investments in construction technology are set to drive additional productivity and revenue in the coming years, as well as provide a platform for greater sector sustainability.
The opportunities to reduce inefficiencies across the construction ecosystem remain a huge task – data and analytics will be key to achieving this. Data-driven companies are already 23 times more likely to outperform competitors, and 19 times more likely to achieve above-average profitability. And data is becoming an increasingly important asset within construction.
My Word is my Bond
From an investor standpoint, according to Florian Wolff, of Hg Capital, technology is an enabler rather than the product. The investment is in the value created in new workflows, enabling insights, and allowing real-time decision-making. To reinvent construction, value chains are being reconfigured.
Success will depend on transforming closed and proprietary systems to open systems, and moving from centralized to decentralized relationship models.
This level of trust and collaboration can be seen in all successful markets.
Digitalization creates new growth in old industries. As an investment, construction technology is a rapidly emerging opportunity, moving from its earlier low complexity use cases, such as geofencing, to the creation of multi-variable optimization processes.
Today, it is increasingly serving a range of stakeholders, including customers, operators, as well as wider society with sustainability metrics. Responses to Covid restrictions and supply chain disruptions ramped up industry awareness and adoption, with 89% of industry players initiating digital-first strategies, while new technology entrants continue to promote a plethora of solutions to the market. However, fundamental change is required to position organizations to perform in the longer term.
Construction must be more innovative in creating new business models that fully utilize technology and change the business outlook to more data-led, collaborative, inclusive, and sustainable processes. Data from Bain & Co, informs us that business model innovation generates greater than 10 times margin growth against product and operational changes. Moving forward, ecosystem players will drive up to 30% of future revenues.
Standardization in Thought and Deed
Standardization in construction profit pools, such as prefabricated products, and tech infrastructure, will help the growth of interlinked profit pools, creating more collaboration. In a market segment that is expected to grow to $14 billion by 2027, new construct-tech, has been joined by global technology companies fragmenting the segment with no clear data owner. However, the expansion of collaboration in the profit pools with industry players increasing focus on innovation and partnerships show the willingness to implement standards.
Strategic Partnerships will Grow Digitalization
On a granular level, for OEMs like Terex, strategic digital initiatives are being implemented to create more value for customers through increased efficiency and reduced customer downtime. The past two years have seen Terex transition to new business processes with greater digitalization, a restated focus and investment in core initiatives.
Meanwhile, rental company Cooper Equipment has been making further inroads with customers by providing more solutions to a wider breadth of their everyday challenges. These growing relationships provide better resources and technology that assists customers to be more effective.
Both Terex and Cooper Equipment understand it is not just about machine data, we all need to be capturing environmental data to better understand equipment lifecycles, where they are and what conditions they are operating in.
We are seeing that change, with moves towards more shareable data in standard forms. The relationship between rental, OEMs, operators, and technology partners is changing with more ecosystem development. However, we must be aware that this can create unmanageable situations with the availability of multiple data portals. Working with Trackunit, Cooper Equipment now utilizes one portal to access all OEM relevant data, which it states has been a game-changer.
On the question of sustainability, both companies are invested in developing and supporting hybrid and fully electric equipment. In fact, Cooper Equipment’s was the first rental fleet to include battery-powered JCBs and today believes there’s a growing appetite for more electrically powered equipment as customer range anxiety diminishes.
What is evident is that wherever the organization is in the ecosystem, growth in the modern construction market will depend on strong customer service capabilities, constant innovation, and collaboration, while at the same time servicing the entire value chain.