By now, most everyone in the construction industry is familiar with the McKinsey study from 2015 arguing that construction has seen a standstill in productivity improvement since the 1990s, while other industries have vaulted in productivity. The study offered a range of explanations including poor communication, poor planning, and insufficient risk management. It also helped ignite a boom in software solutions aimed at addressing these problem areas.
But despite billions of dollars of investment, arguments persist that the industry is not seeing improvement. Witness the piece by economists Austin Goolsby and Chad Syverson published in January of 2023 which paints an even more grim picture of the industry, suggesting that productivity may actually be declining. Given that the period from the mid-1990s to today parallels the era of rapid proliferation of software solutions for the construction industry, it's tempting to ask the question of whether the industry’s focus on software technology is part of the solution or part of the problem, and if, in fact, the industry has taken its eye off the ball of where productivity gains are actually achieved - construction tools and equipment.
The past decade has marked an era of billion-dollar exits for construction software companies such as Aconex, PROCORE, and Bentley. However, construction's tools and equipment startups, though continuing to proliferate, have so far struggled to gain similar economic traction. The possible exception may have been Hyundai Motor Group's 2021 acquisition of Boston Dynamics, maker of the industry's imagination capturing Spotr commercial robot.
If the recent Consumer Electronics Show is an indicator, however, things in the tools, equipment, and robotics part of the construction innovation ecosystem may finally be changing. Traditional construction equipment players including Caterpillar, John Deere, Doosan, Kubota, and Hyundai all put in appearances at CES this year with a clear intent to burnish their construction industry technology and innovation leadership bona fides. The confluence of interest from traditional industry leaders, proliferating startups, and contractors frustrated by the industry's productivity malaise may be creating a moment for a resurgence of construction equipment innovation, and that may finally be what the industry needs to move forward.
Neither McKinsey nor the University of Chicago economists offer a picture of the industry’s productivity performance stretching back to 1800s, but if you look at construction sites today, nearly all of the tools and equipment currently in use were invented more than 60 years ago. To be sure, improvements have been made to that equipment over the years, but the golden era of invention for the tools and equipment that we use today on our job sites appears mostly to be concentrated in the first half of the 20th century.
Construction Equipment Innovation Timeline
1838 - William Armstrong introduces the hydraulic crane.
Step improvements in equipment since the 1960s include increased lifting capacities and reach, superior fuel economy and energy transition, and enhanced safety and operating features. However, one has to wonder whether the productivity gains from these incremental improvements over the last 60 years can compare to the gains achieved in the 60 years prior with the near wholesale introduction of the industry’s full lineup of machinery.
In that light, one might conclude that the industry’s greatest period of innovation ended long ago and that the key to bending the industry’s productivity flatline may lie - not in software innovation - but in sparking a new era of innovation in hardware.