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Analysis

Seven digital construction targets for venture capital

20 November 2020

A new report from McKinsey has highlighted the areas of construction technology that remain ripe for investment.

Noting that “financial and strategic investors continue to fuel a rapid expansion of the construction technology industry” and that the Covid-19 pandemic “has only served to provide additional urgency to the pre-existing productivity and data-visibility issues facing construction companies”, McKinsey lists seven areas for growth

1. BIM and electronic document management

The report states that BIM and electronic document management are nearly ubiquitous among major firms, “but there are still opportunities to tailor solutions and build scale with smaller subcontractors and other market players, such as those in building materials–delivery tracking”, according to McKinsey.

2. Robotics and other disruptors

“There are major opportunities for the tech industry in cutting edge robotics apps for repetitive construction tasks such as brick laying, road paving, lumber cutting to standardized dimensions, and 3-D printing of building materials,” the report said.

3. Underlying tech infrastructure

As hardware and software volumes and diversity continue to increase on job sites, there will be a corresponding need for supporting solutions, McKinsey said. Construction-drone and electric-vehicle docking, wireless-internet backbone connectivity to support Internet of Things–enabled devices, information security, data- quality management, and data architecture are all examples of where investments in IT infrastructure can help capture opportunities from these technologies.

4. Digitise payments

Offerings that increase technology penetration in the payments space, particularly with small- to medium-size businesses, will become increasingly critical to enable the full digitisation of the construction industry value chain, according to McKinsey. Tools for processes, such as quote-to-cash and procure-to-pay, will enable broader data visibility across the value chain and free up working capital for contractors, suppliers, and owners alike.

5. Platforms with a specific angle

While the generalist technology platform companies are well established, other companies have opportunities to build platforms that cater to specific industry sub-segments or value providers. As an example, the report cited “an incumbent construction-materials company recently announced the launch and scaling of a platform solution targeting the bulk-materials supply chain and producers operating in that space”.

6. Solutions that enable broader connection in the built environment

“Integrative technologies will be needed to better connect tech solutions and the physical built environment,” the report said. “The near-real-time collection of project data coupled with the integration of design, project management, and scheduling tools will further unlock the promise of platform solutions as companies strive for truly end-to-end digital projects.”

7. A data-analytics engine

McKinsey stated: “The construction industry has few, if any, truly predictive analytics solutions at the project or industry scale. Furthermore, many descriptive analytics tools are limited to trade-association surveys or dashboards built from mined company data and suffer from low update frequencies or low granularity. Both investors and the industry overall can create significant value by developing analytics and insights platforms that leverage the growing pool of inter- and intra-company data. These platforms will enable more proactive, data-driven management of both individual projects and companies overall.”

Read the McKinsey report: https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/rise-of-the-platform-era-the-next-chapter-in-construction-technology

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