Construction’s sudden digital renaissance

Posted: November 04, 2024

Many of the world’s top industries embraced digitization long ago. In manufacturing, it’s been more than seventy years since automation revolutionized assembly lines. In finance, digital trading started to surpass paper slips back in the 1970s.   

But one top industry – worth an estimated $12 trillion¹ – remains remarkably analog: construction. Laborers still pour concrete and lay bricks much like they did a century ago. Contractors often prefer 2D paper designs over 3D modeling software. And even though construction is a data-heavy field—relying on precise datasets for structural integrity, safety, and compliance—the industry has yet to fully embrace digitization on a broad scale. 

The construction industry has long been known for its slowness to innovate and resistance to digitization. But in the last four years, there has been a flurry of digital transformation and a surge of investment in construction tech. We dive into why this is all happening now, and how it’s rebuilding the industry.

Historical Barriers to Innovation

Construction has certainly achieved some of humanity’s greatest feats without digitization – after all, the Taj Mahal, the Hagia Sophia, and Notre Dame were all built without a CAD model. So, does the industry remain largely analog simply because tried-and true methods are fine just the way they are?  

Some industry professionals might say yes. A significant reason for the slow adoption of digital tools is cultural, with building professionals tending to status quo biases and risk-averse approaches to tech adoption. In an industry with little profit margin to invest in innovation, coupled with high-profile fails in construction tech, skepticism around new innovations is understandable. New tech startups regularly promise to revolutionize construction with yet another flashy digital tool. But they often overlook the complex realities of the industry, which has good reason to rely on traditional tools and time-tested methods. Construction, after all, is hardly an industry that should adopt the motto “move fast and break things.”   

Data fragmentation is another big hurdle to full-scale digitization. Any construction site is a highly complex endeavor, involving numerous stakeholders—contractors, subcontractors, architects, suppliers—who all operate within silos, using different data sets, with their own priorities. It’s not so easy or affordable to usher in technologies that seamlessly integrate these varied workflows. Plus, software designed in a cushy office doesn’t always translate well to a rough, dusty job site. Paper and pens are still cheaper and more portable than tablets or VR headsets, so they remain the go-to tools at most construction sites.  

While traditional practices have served humanity well for generations, the industry's hesitance to innovate comes at a cost. The challenge of coordinating diverse stakeholders often leads to communication mishaps, which in turn beget rework, delays, and unforeseen costs. Just consider the Berlin airport fiasco: plagued by poor project management and a cascade of communication blunders, the highly complex megaproject was delayed by nearly a decade and exceeded its budget at least 4 billion euros.   

Overall productivity in construction has remained nearly stagnant for decades. Labor productivity in the construction industry has actually been declining, which keeps the cost of new housing high. In contrast, other sectors such as manufacturing, retail, and agriculture have seen dramatic increases in both overall and labor-specific productivity, with some U.S> industries achieving growth as high as 1,500% since 1945. New technologies contributed significantly to this exceptional growth in productivity.   

What are the drivers behind construction's digital transformation? 

Change, however, is finally afoot. In the last four years, a convergence of lower tech costs, regulatory mandates, and global disruptions has sparked a wave of digital transformation in construction. And investor optimism in construction tech is at an all-time high. From 2020 to 2022, investors poured $50 billion into construction technology, 85% more than in the previous three years. Much of that capital went toward digital solutions that promote sustainability and data integration. But what made 2020 such a big year for construction tech? 

The COVID-19 pandemic served as a crucial turning point, accelerating digital adoption in a sector long resistant to change. Construction, with its heavy reliance on in-person labor and smoothly flowing supply chains, was particularly hard hit. Suddenly, cloud-based project management software and other deprioritized tech solutions became mandatory to stay competitive.^[1] In fact, one poll recorded that in 2020 alone, nearly two-thirds of 250 surveyed construction companies adopted new technologies to manage projects remotely and ensure continuity. These tools proved to be no mere stopgap during the crisis—many companies saw such efficiency gains that they continued using them long after workers returned to the construction site.^[2]  

Workplace safety has also benefited from increased technology adoption. Drones, initially implemented during the pandemic for virtual site inspections and walkthroughs, proved invaluable for inspecting hard-to-reach or hazardous areas. In an industry as dangerous and physically demanding as construction, these safety gains are paramount. Moreover, as drones, sensors, and AI tools that gather real-time safety data have become more affordable, their adoption rates have continued to rise, making construction sites increasingly safe places to work.^[3] 

What is the role of construction tech in sustainability?

Besides stagnant productivity, the construction industry’s other key challenge is its significant waste and emissions. The construction sector accounts for a staggering 37% of global carbon emissions, largely due to the production of essential materials like cement and steel, and over a third of all waste in the EU per year, largely due to demolition in construction. 

Governments are stepping in to combat this. Regulations like the European Union’s 2020 Circular Economy Action Plan push the industry to dramatically reduce waste by promoting material reuse and sustainable building practices. Here, advanced analytics and other high-tech innovations are also offering promising solutions, and some countries are specifically encouraging the digitization of the sector as a sustainability practice². The UK’s 2020 Construction Playbook, for example, aims to embed digital technologies across the industry, promoting both efficiency and sustainability. 

Startups, in turn, are seizing the opportunity to innovate under these new mandates,  leveraging advancements in analytics to finally harness construction data in meaningful ways. 
 
We spoke with Ieva Sibilla Strupule, CEO and Founder of Norway’s Material Mapper, which uses AI-powered solutions to map reusable building materials. “By digitizing building permits and offering predictive insights into future construction, renovation, and demolition activities, we’re enabling companies to better plan their resource use and logistics. This allows for more efficient project management and smarter material sourcing,” she explains.  
 
Tools like Material Mapper not only reduce waste but also minimize the demand for raw materials, concretely lowering carbon emissions in construction. “Overall, I see Material Mapper driving a shift toward sustainability and circularity in the construction industry. By facilitating the reuse of materials, reducing waste, and offering insights into future project timelines and CO2 emissions, we’re enabling a more sustainable and resilient construction ecosystem.”
 
As technological advancements, regulatory pressures, and a cultural shift toward digitization converged around 2020, the construction industry has finally laid the groundwork for its digital future.