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Labor Supply in an Era of Innovation: Introducing ConTech to Traditional Trades

In this four-part series, construction workforce and industry consultant, Adam Sgrenci, takes a look at the intersection between the building industry’s innovative ConTech solutions and the traditional trades. His positive outlook on the potential for the two institutions to find their synergy is informed by years of experience working intimately with both. This series of stories gives us the big picture, a brief history of corporate-labor relations, some best practices coming out of ConTech and a few guidelines to help us navigate the pitfalls that await us around the bend.

The rise of construction technology (ConTech) firms has brought a renewed sense of pride to an industry that has historically received sharp critique from business-management experts.

Looking at this graph from McKinsey Global Institute on future demand for artificial intelligence (AI), you can see that “Building Materials and Construction” is located all the way at the bottom.

Such data comes as no surprise to those of us who have been working in the building trades for our entire careers. As tradespeople, we matter-of-factly accept the love-hate relationship with our jobs. At once, we feel proud to build a home using some of the same techniques passed down and taught to us by our parents while simultaneously struggling to manage moving targets like schedules, job progress and budgets or wasting time chasing down subcontractors for an invoice.

According to management consultants at McKinsey, this “identity crisis” speaks to a much larger structural problem that has plagued the industry for decades. It turns out that using 100-year-old techniques isn’t the issue.

Poor productivity in construction today is the result of a multitude of factors. Although there are large players around the world, construction also has a large number of low-productivity small firms. The way many contracts are set up is confrontational, which means that disputes and changes to the project specifications are all too common. Regulation is complex and in many countries there is a high level of informality and sometimes corruption.

Poor productivity is a bi-product of a traditionally decentralized industry. Technology alone isn’t going to solve this problem. Let’s take construction management software as an example. After almost 20 years, construction management software still stirs the ire of builders and their subcontractors. The intention was to leverage technology and offer “low-productivity small firms” a full service ERP to manage client acquisition, sales, job progress, payroll and invoicing. However, today, most trades either use these tools improperly, for example cherry picking a few features from the software, or have just gone back to paper-based workflows and traditional computer-based spreadsheets.

ConTech understands this, and is able to offer the industry what it really needs – structural change. Thanks to smart, well-funded companies like Katerra, Blokable, and Dragonfly Group, a more holistic approach to solving the real problem is catching on to the mainstream. Our towns and cities are suffering from an infrastructure crisis and companies like these stand poised to offer real solutions.

From AI-enabled design processes to world class management styles and workflows, the “full stack builder,” or in-house design-to-occupancy, approach may be the missing link that will bring the building industry into the digital age and ensure that environment-forward, affordable and essential housing is delivered to all.

Venture capitalists and technology experts began entering the ConTech, and its sister, property technology or PropTech, space after the housing bubble burst and as the construction management software market became saturated with entrants. For the building trade purists, we can’t argue that fragmented teams contribute to delays and inefficiency. Quality control is practically impossible when you subcontract-out even one aspect of a project.

Integration is essential to mitigating this. And pairing the integration with technology devoted to saving time and gathering data like the following should make us all feel hopeful about the change:

Drone technology for collecting data from in-progress job sites, allowing project managers and others to skip delays in waiting for the site superintendent’s report. Smarter building products that measure environmental conditions, from sending notifications digitally to identify a structural failure in “smart” concrete, to “smart” window glass that dims itself in an effort to manage climate inside a building when the sun shines. Augmented Reality, which allows design teams to collaborate in real-time, while allowing safety experts to catch potential hazards before the build begins.

The investors are happy because digital solutions mean scalability and “network effects.” The business managers are happy because dashboards and metrics can more easily by applied to a vertical integrated organization. The consumer is happy because mass production means affordable products.

So how about the labor supply? What’s the impact there?

Having development, design and manufacturing in-house is a big step in the right direction. But the moment we take a peek into the installation teams, things start to, well, fall apart.

A common complaint across the board on for both PropTech and ConTech is that these NextGen company managers have not yet figured out what to do with labor: how to on-board the existing workforce of tradespeople into new workflows, how to manage their performance, or simply how to recognize their value. The initial impact of this has been high turnover in management and in the field.

One place to start mitigating the turnover is in an open forum. When on-boarding new field staff, give them the opportunity to offer their perspective on how to make the process move efficiently. It’s easy to sell the future of building to field-based new hires, but harder to implement how their existing knowledge will play a role in it.

So while some of the new solutions are a game changer for the industry, missing the mark on integrating with the existing labor supply could mean game over. We need to get this right.

As more and more research is done to forecast the future of work, the need for knowledgeable tradespeople will remain constant. Of the top-10 jobs at high risk of displacement over the next 10 years, construction isn’t one of them.

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