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E 26: Fragmented Construction Tech Landscape
51 Plays2 years ago
In this episode, Carlos and Jason talk about what contractors think they want out of construction tech, what happens as contech companies grow, and how the approach to contech is changing.
They also discuss what might fill the role of HS2 Phase 2 for contech startups in the UK too.
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Transcript
Introduction: Episode 26 Overview
00:00:00
Speaker
Hello and welcome to episode 26 of the Offsite podcast, where we chat all things construction and technology. My name's Carlos Caballo. And I'm Jason Lancini.
How is technology reshaping construction?
00:00:10
Speaker
So today, I recently read through Jason, one of your posts on LinkedIn, which are doing quite well at the moment, I have to admit. And I think as we're a tech-focused pod, we've gone quite heavy into planning recently. So I thought that's actually focus on technology.
00:00:27
Speaker
one of your posts was kind of focused on giving some context to what you describe as a fragmented construction text or the landscape. So I think that's something we can dig into and I guess to frame it let's have a think about what contractors actually think they want in terms of technology for those organizations.
Why are contractors favoring best-in-class products?
00:00:47
Speaker
And I guess
00:00:48
Speaker
If we go back five years ago, most contractors, I'd probably say without hesitation, wanted that sort of one-stop shop, a suite of tools from a big player like Autodesk. If you think about why, it's probably it's one purchase, it's quite simple and it sort of ticked lots of boxes and it's like the easy thing to do.
00:01:07
Speaker
And I think now there is a bit of a shift towards contractors wanting like best in class products and I'm willing to move away from these big suites. It's not exactly easy to do that, but there was that sort of willingness. How are you feeling about that? I like, I guess on the context of the Australian market.
00:01:24
Speaker
Well, I guess, do you, would you thank you for referencing or reading my, uh, one of my posts? That's one person that did. That's good. Yeah. Someone else. Exactly. Um, be helpful if you'd like, like it or make a comment. I think that does something to the LinkedIn algorithm. Uh, but, um, no, the, I get, do, would you agree that like it is fragmented?
00:01:48
Speaker
I do not envy being in certain positions within a contractor where you've got countless vendors trying to convince them that they solve all their problems.
Can vendors communicate effectively with contractors?
00:01:59
Speaker
A lot of them don't solve problems. A lot of them can't communicate actually the problem they solve very well. It's like throwing spaghetti and seeing what sticks from a vendor point of view.
00:02:10
Speaker
And how you actually wade through that and make a decent decision. And obviously a decision isn't like a yes, no, it's pilots and processes and validating like with teams that things work and gives them what they need. It's a shit show really that you have to deal with.
00:02:28
Speaker
I think depending on who you're talking to at a contractor, what the industry wants is totally different. You get different answers for different people. If you talk to a senior executive or you listen to them, we went into an event last year where a bunch of them were talking on stage.
00:02:47
Speaker
We want one thing to solve all the things that we need to do. We don't want to have to buy from a million different people. But I think a lot of that is the result of a million different software vendors shouting at them to say, this, this, this, this, this, or people within the business being like, we need this thing, then we need this thing. But I think if you talk to someone on a project, they want something that makes their life easier.
00:03:14
Speaker
Let's say best in cost for the thing that they need to do.
00:03:19
Speaker
I think what people really want is like what we have and the way that we as like a software company choose the tools that we use. It's all about context. So like in certain circumstances, we've built or bought whole suite of tools. And in other case, we have best in class. And when I'm doing something, I want to have the information that helps me do that thing from those other tools available wherever I am.
00:03:48
Speaker
It's like an example in construction would be, let's say I'm updating my, let's go back to just planning. Cause it's what's in my head, but like you say you're updating your plan for the week as an engineer. Well, obviously you want to know how much of a certain gravel or quantity of something was installed in the last week. You know, that doesn't have to come from the same system, but it has to be available in that system. And.
00:04:15
Speaker
I think the sort of heuristic to think about what you need is like, imagine you were updating your spreadsheet for your plan. What other spreadsheets or emails do you have to open to do that thing? And it's just that information. You want that information to be available at the place that you're doing that job. And you can apply that to any, I guess, process that you might be doing
Is there a technology maturity gap in construction?
00:04:41
Speaker
on a day-to-day basis.
00:04:43
Speaker
I guess we, like in the context of the web of apps that we use, a lot of those are like almost single click type integrations, which obviously makes things a lot easier. Like there's that call set of apps that just hooks into everything and that, um, we haven't really seen that in construction. Yeah. Like we're miles away from in like a maturity level. We're miles away from like making it easy to set up, but.
00:05:08
Speaker
You know, you might be updating some sales flow and you need to know like the latest email correspondence or the latest session that one of the customer success team might've had. And so it's like they're doing it in another app or another platform or whatever.
00:05:26
Speaker
And it's about like understanding the workflows that people are doing, what context they need and where the information lives within the business and making that available from here in there. And that can be through one app that does everything.
00:05:42
Speaker
But if you look at other industries, it often requires some suite of tools that are a combination of maybe one big thing that's at the heart of everything, which you might ask is like a construction management platform or something, and then a set of best-in-class tools that integrate with that.
00:06:00
Speaker
Yeah, touching back to the contractor and I guess the process of picking and purchasing tools, you've also got obviously the completely different interests from projects and execs. And it's usually the execs making the big calls on large purchases of software.
00:06:19
Speaker
And then pushing it down on teams who actually saying this isn't what we needed as work for us. And it's really difficult. Like you can pilot software really well, but it's still hard to get that message, like that, the real message back up the tree as to what works, what doesn't work and what should be taken into consideration. So there's a big sort of difference in drivers in terms of what execs want to achieve.
00:06:41
Speaker
Yeah. And it's, it's constructions, really constructions, really unique in this context because it almost becomes like, um, it's almost like a franchise. You've got the sort of, I think I've said this before, you've got this like head office and there's a bunch of projects and.
00:06:58
Speaker
In a lot of companies, they're vertically integrated or somewhat integrated where if you make something change, it's automatically changing for everyone. But in construction, you are essentially collections of lots of little businesses almost. And the head office isn't the driver often. They're providing a service to the projects. The projects are where the money's made. And so making change from a top-down perspective in tools is
00:07:25
Speaker
It's, it's part of the reason I believe that like construction ranks so low on the like digital adoption charts that everyone sends out on LinkedIn. You've probably given you, I've seen a lot of my posts on LinkedIn cars, you've probably seen a lot of other, there's always these charts showing like construction's the least digitized industry. And part of it is like, if you are trying to make a change in the business from like a central perspective,
00:07:50
Speaker
You've got projects that are halfway through. You've got projects that are really behind. They're in dispute. You've got projects that are just starting up, but they're not quite like all the other projects. There's so many different stakeholders and contexts.
How is the vendor landscape evolving?
00:08:01
Speaker
It's very hard, like you said, to make the change from a top-down approach, for sure.
00:08:09
Speaker
If we pivot slightly, I think about the vendors. So we've got this mass collection of software vendors who are trying to pitch solutions to every problem in construction. Every vendor goes through a process. You have an idea, the idea either comes from experience or through, I don't know, research. You then sort of build an MVP, you test it with someone, you highlight what doesn't work, you iterate forever until you get something that you think you could sell and scale.
00:08:37
Speaker
And you can make mistakes along the way, like having a narrow pool of maybe feedback. You focus on like the wrong type of customer or project. You believe your own ideas are better than everyone else's and you end up with a product that no one wants. Do you think, like how much is that driving the landscape that we have now? Do you think everyone goes, oh, look, it's so easy. There's so many products out there. I can do it better.
00:08:59
Speaker
Or do you think they are really all driven from like proper needed industry? Because a lot of these apps, you go on the website and you can't even work out what it is until you actually see it. You go, oh, that's this because the language is so like, yeah. Yeah. Yeah. I would say the like, if you were to take stock of where things are at the moment in the industry, there is, there is a sort of grading of maturity of where vendors are. And like, that's not a revolutionary statement. That's going to exist at all at any point in time.
00:09:29
Speaker
But you've got a couple of big platforms that are
00:09:35
Speaker
still, I guess, trying to find their total place. I don't know if I'm saying it the right way, but it feels like they haven't got all the pieces that they want to fit into. This is what the construction management solution is. They're acquiring bits. They're trying to stitch bits onto what they have. There's a lot of shuffling of the deck of their offering quite a lot. There's big platforms that have lots of customers, but not as many as they want.
00:10:05
Speaker
Probably some of those customers are only using a part of their product and they're trying to work out how to sell them. There's like that world. And then there's just like a ton of these like point solutions that really like overlap with each other. Like, I don't know. I do, I do site diaries and dockets. This other thing does dockets and site dyes. And the other one does this thing. Like, you know, like it's just, they're all kind of like, if you do a Venn diagram, they're just, it's just a circle of all these things overlapping.
00:10:31
Speaker
What's tricky is because it's in that sort of messy phase from like you said before, I wouldn't want to be in the shoes of like the company, the contractor trying to wade through this mess because it's hard to really, some of these tools, these point solutions are going to be leaders and sort of emerge and other ones are just like,
00:10:53
Speaker
You know, Bill used to do things this way on a project and he thought it was the best way to do it. And now there's an app that's like the way Bill does stuff. Yeah. That's a deep cut.
00:11:14
Speaker
Yeah, exactly. So like, yeah, if you're, if you're, if you're, you are trying to be a vendor that helps this industry, you have to start with a point solution, but you have to really start with a problem that you're going to solve. You need to understand that problem so deeply. You need to know how it fits in the, the, the circle of everything around it. Um, and you have to.
00:11:35
Speaker
take an approach that has like a fundamental, this is the way that we do stuff, but is kind of flexible and loose on the detail because you will overfit to one thing if you're not careful. And that's where you end up with, yeah, like Tom's planner, Tommy's planner, whatever. And the other thing that happens, sorry, just to like, now I'm like really going on the tangent, but the other thing that happens is that construction has this really unique power
00:12:04
Speaker
to like, okay, you've got a handful of customers for whatever point solution you've made and those customers like it. So you're, you know, you're on a, you're on a, you're on your way. And then if you listen to their feedback, what you'll hear a lot of is this is, you know, your point solution here is good. Could you solve this like a Jason problem for us? It's like so close to what you do. If you just added these five features, you would be doing this other thing for us.
00:12:33
Speaker
Well, if you don't have a direction that you're heading, it can very easily get this big product really early with not enough customers. And now suddenly you're not selling the thing that someone would buy to solve X problem.
00:12:49
Speaker
You're the orange, blue, green, yellow construction management platform. You're diluting your like core, like the core thing that you did well is suddenly this you're, you're competing against sweets and then you can lose that basketball.
00:13:05
Speaker
Yeah, for sure. You have touched on it. So like there will be some emerging players that have to be, like if we look at the UK in the last 10 years, there's like a whole bunch of startups that like rode the HS2 wave of all these innovation schemes that helps get exposure and contracts, things like that. So now it's going to be hard graft, actually selling to real projects that don't have these big innovation budgets that everyone had on HS2.
00:13:31
Speaker
How do you actually see that playing out? Is it going to be whoever generates the most revenue wins? Is it going to be truly contractors picking best products? If you saw a bunch of startups, how would you make you accessible and who you're better? First of all, the point that you were making at the start about how these projects or these tools that they managed to get off the ground because there was big project innovation budgets and
00:13:58
Speaker
Then they can't like last beyond it is like funny because that says something about those innovation programs on those projects, right? The goal should be to build something that, um, can like stand on its own two feet. Yeah. How there is the question, how would I choose what to yeah. Like if we actually play out there with someone emerge as leaders and front brothers or like major players in the space.
00:14:27
Speaker
How do you think that selection will occur? And what are the factors that really drive it? Because you could have some tools that do very well, but actually aren't best in class. Or do you think it will be the best in class that make it and things will run its course because it's an industry that's quite incestuous and everyone talks.
00:14:45
Speaker
Like it's definitely like a mirror. It's like, it's a, it's capitalism. I think like the ones that do well, we'll get more money with the money. They can reinvest in the wall things. And then, and like your, you're off. They can hire better marketing teams. They can hire.
00:15:00
Speaker
They can throw better parties for the construction industry. They can hold conferences. So like, yeah, like I think it will be the, the, the thing that you measure on the thing that will determine which ones emerge is customers and therefore revenue and, uh, for sure. And now let's look further at sort of, I don't know, 10 years time, all of these applications.
00:15:24
Speaker
How are they sitting together? Are the big players
What does the future hold for construction tech?
00:15:27
Speaker
snapping up all of these apps? Is there a nice ecosystem of interconnected apps? What do you think it will look like in 10 years time?
00:15:34
Speaker
Well, yeah, this goes back, I guess a little bit to like the thing that you read at the start, like the post that I wrote, there's, there are these like phases. If you look at, I've like, this isn't a framework that I've invented. This is something that exists in other industries, but you, yeah, you get this start this stage at the start where there's like, apparently lots of opportunity to solve a million different problems. People start attacking those problems, you know, one by one by one with lots and lots of little companies.
00:16:01
Speaker
Lots of overlap because each one tries to get slightly bigger and then they bump into each other. And at that point there for the vendor, for the customer or the industry, it's really tricky. It's really tricky because there's so many people like shouting at you by me, by me, by me. There's no categories and this is like one of the hardest things because
00:16:23
Speaker
If we were trying to start a software company, we'd know, we'd need a CRM. We know we'd need a marketing automation platform. You know these set of tools or categories of things you would need and different products within those categories or branch across them. At the start of the first phase, isn't really defined categories. There's just lots of products trying to build categories. And that's really hard. There's no integration because there's no winners.
00:16:52
Speaker
No one tiny little app is going to integrate with 400 other apps. Um, so you've just got this sort of disconnected mess and lots of products. Yeah. Everyone's trying to carve their own tiny little niche, but yeah. And then I'm going to build a project. So I need these five apps, like, yes, like you need nine and a half apps and you couldn't really name them at first because you don't know what the team are going to want. Um, yeah.
00:17:18
Speaker
Exactly. And like, and by each, each of the vendors are trying to build the beach head to like, okay, from there, can I progress?
00:17:26
Speaker
Because of that, the customers have got this hard battle of defining what they need. Nothing integrates. So if they ever want anything to integrate, they have to make it happen and stitch it together. Just jam everything into Power BI is usually the solution. And then the next phase, maybe a couple of those start to get momentum attraction and then you start getting
00:17:51
Speaker
Uh, competitors to those pop in, you know, like, you know, let's say a category, you know, you start to define categories, you have like a reality capture category, and then you have a couple of competitors in the reality capture space. And then from a vendor's perspective, it's starting to be a bit easier because you can go, we need this category of tool. We need a reality capture tool. You can present that to a board. You can present an ROI for it. And then it's a selection of which of the tools are the best one for us.
00:18:20
Speaker
Yeah, because they try to get through procurement processes at the moment.
00:18:24
Speaker
Procurement processes for tech is normally a process they've pulled together because they need to demonstrate that they've gone to market and found the best products for them. The requirements that are set in the doc is based on the product that the person wants to be successful. And it's a bit sort of backwards done, right? Where you can't just say, we need X. And these are the five shortlisted companies we're going to because they were claiming they do different things. So that's really difficult.
00:18:54
Speaker
Part of that is also because construction projects and companies are really professional at purchasing super bespoke stuff all of the time, because that's literally the job of delivering projects. And so there's a super defined process. We go to market. We write a scope of work. We write a spec of what we're going to need. Then people quote. And then we do an evaluation. And so you try and force fit that in this early phase. You don't even have a category of the thing that you're going to buy.
00:19:24
Speaker
So you're just evaluating like a ruler against a pencil. Which one do we need? So yeah, this second phase is like a ruler, but you obviously go for that. That's the category, pencil rulers.
00:19:43
Speaker
But that's what would win, weirdly. That's the thing that sometimes happens, which there's a really interesting point, right? You get these software tools that say that they just do everything and they'll build all of life for you. And it's just a part, like who wants a pencil ruler? Because first of all, the pencil ruler, you can't mark the thing and measure, but that's what you're effectively buying in a software perspective.
00:20:03
Speaker
So yeah, you get this sort of get some winners, you get some categories emerging. Okay. So, um, too, if I'm not one of the winners or I'm in another category to sort of push myself forward to, to progress, there is a strategy that I could start integrating with the ones that are starting to win. So there's a natural incentive to start building some integrations.
00:20:27
Speaker
And we're kind of there in some space, like there are certain platforms which are clearly like protocols, like I think there are hundreds of millions of revenue. In fact, check me on that. But like, yeah, there is a clear incentive if you're trying to build something for the construction industry, for example, to build an integration there.
00:20:44
Speaker
So that starts to make things clear. Construction contractors have categories. They then have maybe some products that they already have and they're looking for things that will, they can start to look for things that integrate with the things that they already have. So that's like a much better spot to be for the contractors and I guess the client. And then the next phase is sort of the bigger guys, because you asked about like what happens going forward.
00:21:08
Speaker
And what I guess you sometimes see in other industries is the big guys sort of sell their current offering to the sort of as many people as they could possibly sell them to. They want to keep growing at, you know, 40% a year, 50% a year, 60, whatever the number is.
00:21:26
Speaker
And they start to this problem of like, there's not enough people to sell our reality capture software to. So now we have to be reality capture and something else, and something else, and something else. And they start adding more products and they might start doing that by building it, but often they'll start buying.
00:21:42
Speaker
the other things, leveraging their distribution to their existing customers, selling those products. And so you start getting this sort of amalgamation of products under one brand. An example for us, like for our CRM, this will be super deep. So people in construction might not know, but.
00:21:59
Speaker
We use a product called HubSpot, which is a competitor sales force. And that is a collection of lots of what would have previously been separate products. So you get this amalgamation. And then if you go even further, and that's kind of maybe the spot that people are saying they want to be at now, where it's like one thing does everything. If you go even further than that, what happens is because these things get so big, maybe the user experience doesn't quite like keep up
00:22:28
Speaker
You know, you're kind of jamming a lot of apps together. And so you can almost get this like stratification where someone comes along and goes, well, this part of this mega app platform thing, people don't really love. And so I'll make a competitive to that bit of it that has a better user experience that does something differently that I don't know, integrates AI or whatever the thing it is. They start breaking out the big thing back into lots of small things.
00:22:54
Speaker
Um, you get it a lot like with Salesforce. So Salesforce doesn't have the greatest user experience. So people will build parts of like, you know, like, I don't want to keep dropping texts off of that. No one's going to know, but like parts of Salesforce and now their own apps to sort of break out and stratify that, that whole offering. So it goes like together and then splits again.
00:23:17
Speaker
Yeah, as long as it's not contractors trying to build the apps that they want to replace within these series. That's definitely bad. That's pencil ruler.
00:23:29
Speaker
Yeah, tying back to, I actually lived through a conversation the other day where you sort of touched on software vendors saying, I would just like build features to suit any client need. And I was talking to one customer, they use this app for like logistics management. So you just literally like draw a box and you can label that like crayonage area and draw another box materials.
00:23:53
Speaker
And, um, there was one guy that really liked the software and he was like, yeah, we're going to like switch it with a fix. And let's always say, well, that's not planning software. He went back to the spender and said, Oh yeah, but it's not planning software. And they said, Oh, like what's missing? And he's like, he said a gantt chart and they went, Oh yeah, we'll build you one of those. Like the logistics mapping file was the thing I would just say, I would just build you a gantt chart. And he was like, Oh, this is a valid solution. And.
00:24:20
Speaker
like got shot down immediately but like the mindset of oh yeah we've got this core thing that works well. If a customer says something has a requirement let's just build it and throw it on and not really think about what that means and how it changes your entire angle.
00:24:36
Speaker
Yeah, but it's like getting the, uh, it's like getting the, um, it's like another construction thing that can happen. Like you've got a vendor in place. You want to use them for all the problems that they can solve. So like, we used to get like an FRP subby and then get them to build our site captains because we already have the contract in place. We can just tell them, you know, it's kind of like that, but you're already doing this. Yeah. Yeah. No, no, no.
00:25:00
Speaker
Yeah, yeah, I think we burnt through some time there. So let's call it a day. Yeah, thank you very much everyone for listening.