Construction: The Newest Technology Companies

DAVID THALHAMER Senior Managing Director, Ferguson Partners

CONSTRUCTION: THE NEWEST TECHNOLOGY COMPANIES

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While most people think of the Nasdaq

as a stock exchange, Adena Friedman,

president and CEO, said she views the firm

more as “a technology company serving

the capital markets.”

Friedman’s view is representative of

what leaders across other industries –

including construction – are seeing as they

recognize the critical role technology plays

in their businesses. While the $10 trillion

construction and engineering industry

has been a late technology adopter, some

forward-looking firms are riding the wave of

technological disruption to create significant

competitive advantages.1 Many in the

construction and engineering industry now

consider technology to be a main driver

and differentiator of their businesses and

a greater focus of spending. This changes

the skill sets that new executives and board

members require.2

According to a recent BCG report, companies

are leveraging technology in the beginning

and end phases, instead of just the actual

construction phase. Areas that are ripe for

technology adoption include project planning,

inventory management, risk and safety

management, quality control, and talent

development and retention.3 Engineering and

construction firms are poised to capitalize on

greater efficiency, better cost control and

improved management by implementing

innovative technology solutions.

1 https://www.mckinsey.com/industries/capital-proj-ects-and-infrastructure/our-insights/artificial-intelli-gence-construction-technologys-next-frontier

2 https://www.bcg.com/publications/2018/will-3d-print-ing-remodel-construction-industry.aspx

3 https://www.mckinsey.com/industries/capital-proj-ects-and-infrastructure/our-insights/artificial-intelli-gence-construction-technologys-next-frontier

Disruptive construction and engineering trends

In addition to improving productivity,

integrating technology into business

operations can help the bottom line.

Technology that’s sweeping the industry

includes the industrial internet of things

(IIoT), cybersecurity, virtual and augmented

reality, drones, 3D printing, pre-fabrication

and sustainability solutions.

One key way construction and engineering

firms can take advantage of IIoT is leveraging

data from assets. IIoT that enables buildings,

equipment and other objects to send and

receive data is a valuable tool in improving

operational efficiency, enabling remote

operation and usage tracking, allowing tool

and equipment tracking, and controlling and

monitoring energy usage. Harnessing insights

from these varying pieces of equipment can

help companies make more valued decisions

about materials, labor, equipment and other

tools needed to run their businesses.

According to research from Accenture,

companies will use IIoT to improve production,

create new business models, change the

nature of their workforces and spark new ways

of doing things.4 Construction companies

need to consider adding professionals who

understand data analytics and how to apply

these insights into process improvements in

order to fully realize the benefit of creating

connected assets.

4 https://www.accenture.com/us-en/labs-insight-industri-al-internet-of-things

FERGUSON PARTNERS | 3

Another technology innovation that is

changing the nature of construction is the

need to implement cybersecurity measures

to safeguard data. Construction and

engineering firms have critical information

on their servers, especially heavy users of

building information modeling (BIM). While

BIM helps improve construction management,

keeping blueprints and schematics secure is

a top concern for construction executives,

especially in sensitive areas or for high-

profile, large-scale projects.

As cybersecurity expert Alan Mihalic wrote

for Engineering.com, “Cyber criminals who

had previously concentrated on enterprise

networks and online service are now targeting

industrial control systems at an increasing

rate.” It is important for engineering and

construction firms to pay as much attention

to cybersecurity as they do to structural

integrity, Mihalic says.5

Boards must now think about protecting

building data and other valuable information

– such as personnel data (including Social

Security and bank account numbers) and

client/vendor payment information. For

many firms, that means hiring or contracting

with cybersecurity experts to set up internal

safeguards to keep company and client

information secure.

Construction and engineering firms also

stand to see improved efficiency from the

use of simulated environments. Augmented

reality and virtual reality (AR/VR) can improve

communications, training and safety. Change

5 https://www.engineering.com/BIM/ArticleID/15476/Pro-tecting-Smart-Buildings-from-Cyber-Attacks.aspx

orders and process decisions are more

straightforward when they can be viewed and

discussed using a 3D environment instead of

conveyed orally or in writing.

More precise communication across office

and field teams reduces mistakes and

delays.6 Sophisticated construction firms

can use AR/VR to streamline processes and

identify potential challenges before breaking

ground, saving time and money. Safety

also improves with AR/VR, mobile apps

and simulations that provide cost-effective

training on operating equipment properly,

working at height or in small spaces in a low-

risk environment, as well as administering

onsite first-aid.7 Increasing site safety is

critical to protect crews and reduce insurance

and liability costs and lawsuits. Hiring experts

to integrate this technology effectively will

improve profitability.

Drone use is also being deployed in the

construction industry. A Capterra report

notes that drones “allow construction

managers to more effectively and

efficiently survey sites that are difficult to

examine on foot either due to their size

or accessibility.” Drones can also help

improve safety by keeping crews away from

dangerous environments.8 Finding creative

and innovative uses for this new technology

offers competitive advantages for those

with the talent to develop new applications.

6 https://www.autodesk.com/redshift/connected-bim/

7 https://www.constructconnect.com/blog/construc-tion-technology/how-technology-is-improving-construc-tion-sites-safety/

8 https://blog.capterra.com/2018-construction-industry-trends-heres-what-to-expect/

CONSTRUCTION: THE NEWEST TECHNOLOGY COMPANIES

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Another new application for construction and

engineering firms to consider is 3D printing,

also called additive manufacturing. Many

firms are using it to fabricate specialty parts

or produce models in a variety of materials

(including metals and concrete). This allows

designers to create customized solutions for

reasonable costs either onsite or off. According

to BCG, these capabilities make this technology

“a near-perfect match for the construction

industry.” Since many companies are turning

to automation to mitigate delays, control

costs and counter labor shortages, having the

ability to print components and other building

supplies on demand is appealing.9

Technology can also shift where building

occurs for some projects. Off-site building is

emerging as a cost- and labor-efficient option

for many firms because modular components

are produced quickly and at high quality in

a tightly controlled factory environment.

This also makes the building process more

predictable since weather and workforce

delays are no longer an issue.

Recently, Marriott committed to using pre-

fab components for 13% of its hotels in 2018.10

That changes the type of field oversight and

coordination in the construction process,

as well as communications, something

construction executives will need to take

into consideration when thinking about

training and development.

Another trend sweeping the industry is

sustainability. Developers and owners are

9 https://www.bcg.com/publications/2018/will-3d-print-ing-remodel-construction-industry.aspx

10 http://news.marriott.com/2017/05/marriott-internation-al-expands-modular-construction-initiative/

insisting on buildings with built-in energy and

resource conservation, emissions control, waste

reduction and renewable energy. Integrating

BIM and the IIoT makes it easy to gather, monitor

and analyze data in real-time, meaning key

sustainability metrics can be quickly improved.

Construction teams should consider adding

executives with expertise in these socially

responsible areas to implement best practices

and show improvement over time.

What technology disruption means for recruiting and hiring

Capitalizing on the opportunities of disruption

requires construction and engineering

firms with board members and executives

to have strong technology, security and

innovation credentials. Construction leaders

need to effectively integrate technological

advancements and stay abreast of

cybersecurity trends and innovations.

Candidates must be champions for

adopting new ways of working that promote

productivity without sacrificing safety. These

new ways of working will foster increased use

of technology such as mobile devices, virtual

environments, and drones and 3D printers.

The new breed of leaders also must be able

to demonstrate comfort with assuming and

managing some near-term risk as technology

is adopted and deployed.

Executives also need to prioritize direct

experience in capitalizing on technological

innovation, IIoT, BIM, digitized manufacturing

and pre-fab construction in hiring searches.

FERGUSON PARTNERS | 5

Focus on prospects with experience in data

analysis and management, cybersecurity

and technology integration. Look for leaders

with track records of responsible risk-taking

and successful management of digital

transformations in similarly entrenched

industries, such as homebuilding or agriculture.11

A McKinsey report notes that construction

firms will need to “alter fundamental aspects

of their organizational structure, corporate

culture, and IT systems, with the goal of

seamlessly integrating new tools into daily

work.” Those making investments now will be

the industry leaders in 10 to 15 years.12

11 https://www.mckinsey.com/industries/capital-proj-ects-and-infrastructure/our-insights/reinventing-construc-tion-through-a-productivity-revolution

12 https://www.mckinsey.com/industries/capital-proj-ects-and-infrastructure/our-insights/the-new-age-of-engi-neering-and-construction-technology

Conclusion

Technological disruption is changing the

way construction and engineering firms

do business. Companies that resist change

or are complacent about adopting new

technology will find it difficult to compete

as others innovate.

Just like Adena Friedman at Nasdaq,

construction and engineering firms need to

start seeing their enterprises as technology

companies and ensure that board members,

executives and top-level managers have the

skills to engineer their company’s evolution.

Mr. Thalhamer is a Senior Managing Director at Ferguson Partners.

His principal focus is on all areas of real assets including investment

and development, infrastructure, and construction. His clients

include private equity investors, sponsors, construction companies,

developers, and financial institutions on a global basis.

Prior to joining Ferguson Partners, Mr. Thalhamer was a Partner in a

large global search firm. He was also a Partner in a New York based

boutique search firm specializing in the real estate and financial

services industries. Mr. Thalhamer began his executive search

career at Russell Reynolds Associates in 1997, focused on the real

estate and construction industries and co-led its global real estate

practice for four years. He was also a member of the firm’s financial

officers’ recruiting practice.

Mr. Thalhamer holds a Bachelor of Architectural Engineering

Degree from Pennsylvania State University, an M.B.A from Fordham

University’s Graduate School of Business Administration, beta

gamma sigma and a M.S. in Real Estate Finance and Investment

from New York University.

DAVID THALHAMER Senior Managing Director

Ferguson Partners

646-779-6008

dthalhamer@fergusonpartners.com

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CONSTRUCTION: THE NEWEST TECHNOLOGY COMPANIES

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