Presentation of analysis of US Construction industry demographics, market sizing. Also presented a look at GPT-3 and Artificial Intelligence, IPaaS in Construction, and McKinsey's 3-Horizon model. Video is: https://youtu.be/-ziRiFs4TrA

1. Construction
Technology Quarterly
Q1, 2021
March 25th, 2021

2. Construction Technology
Quarterly
2
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Demand:
• Contractor Segmentation
• Labor, Demographics and Technology
Supply: • Market Sizing
Ideas:
• Update on AI
• Interoperability & IPaaS
• McKinsey’s 3-horizons
Community • Roundup of awesomeness

3. Demand:
Contractors
(quick recap of Q4)
3
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4. No One is In a $1.3 Trillion Market
(except maybe Microsoft Excel)
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530
440
351
29
0 100 200 300 400 500 600
Residential
Commercial
Public/Local
Federal
Billion $

5. Different
Sectors
Behave
Differently
https://www.bls.gov/lpc/construction.htm

6. 6

7. 7
~155
~390
~1,360
~6,160
~13,000
~550
>500
~1,900
>250
~8,000
>100
~21,000
>50

8. 8
~155
~390
~1,360
~6,160
~13,000
~550
>500
~1,900
>250
~8,000
>100
~21,000
>50
Different go to market:
• 2k
• 15k
• 700k

9. 9
~155
~390
~1,360
~6,160
~13,000
~550
>500
~1,900
>250
~8,000
>100
~21,000
>50
You Do Not Sell a >1,000
Person firm the way you sell
to a >50 person firm.

10. 10
~155
~390
~1,360
~6,160
~13,000
~550
>500
~1,900
>250
~8,000
>100
~21,000
>50
Competition is Fierce.
Is there really room for 500
software companies to sell
to 550 top-tier companies?

11. Implication: Sell to Bulge Bracket, or Mid-Tier
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12. Demand:
Demographics of
Construction
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13. Thinking about Change: Secular vs. Cyclical
• All Change has a Timespan.
• Some changes are Cyclical.
• Permanent changes are Secular.
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14. Construction Labor:
Looks Cyclical, but Is It?
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-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Year 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Construction Employment

15. What About
Labor
Supply?
• No developed economy, and almost no developing
economies, are replacing themselves.
• Every* birthrate is below 2.1/woman
• No society has figured out how to reverse this
trend.
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*except Israel

16. The Goldilocks US and World Economy
• Between 1990 and 2018 the world was flooded with labor:
• US: Millennials: ~40 million
• China: ~240 million
• Eastern Europe: 209 million
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Source: The Great Demographic Reversal, Charles Goodhart, Manoj
Pradhan, 2020
• Effects:
• Depressed Labor Costs
• Off-shored production
• Low Inflation
• Low Interest Rates
• Relatively easy to find labor

17. Population
Pyramid

18. Increasing Construction Job Openings
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0
50
100
150
200
250
300
350
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

19. Why That Era is Ending
• Beginning to see the end:
• US: Boomers Retiring, Gen X too small
• China: One Child Policy After-effects
• Western Europe: Post-war generation retiring
• Supply chains re-shoring construction-competitive industries
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• Effects:
• Labor competition will increase
• Costs will go up
• Need to attract labor will increase

20. Fewer Working-Age People
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52.0
54.0
56.0
58.0
60.0
62.0
64.0
66.0
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Percent of population working

21. Labor
Shortage is
Secular, Not
Cyclical
Hypothesis: Construction is unlikely to
ever have enough skilled labor
We need to look elsewhere
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22. Inputs to Job
Completion –
One View
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Process
Design
Required
Worker Skill
Available
Human
Labor
Automation

23. Worker Skill Level and Technology
Training
• Virtual Reality Simulations
• Apprenticeships
• Learning Paths & other
eLearning
Performance Support
• Augmented Reality overlays
• AI assistant
• Tablet AR
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24. Process Design and Technology
Process
• Lean Construction
• Process re-design
• Factory Processes
• Stratified Processes
Technology/Products
• Simplified Products
• Re-designed assemblies
• Factory Produced Sub-
assemblies
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25. Automation and Technology
On-Site Automation
• Robotic transport & site
operations
• Resource allocation
• Paperwork & information
automation (e.g., RPA)
Off-Site Automation
• Production
• Planning
• Transportation
• Materials Prep
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26. Revisiting Value Chain Idea
Most software supports what field labor does.
Demographics and labor supply point towards developing technologies
that directly help labor put work in place.
Putting
Work in
Place
Project
Initiation
Design Estimating Submittals Scheduling Project
Management
Jobsite
Management
Inspections Closeout Facilities
Management
26
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27. Summarizing
The Demand
Picture
• Companies:
• About 20k companies are large enough for
many new products
• About 400 companies get most attention
• Find ways to reach the other 19,600
• Labor:
• It is running out
• Find ways to maximize labor skills
• Find ways to minimize level of skill needed
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We must recruit & try to get youth into the industry,
but it will not be enough.

28. Technology Landscape
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29. How Large is the Construction Tech Market?
• No freely available studies exist
• Cannot just throw up our hands
• Let’s try with available data – stating assumptions
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30. Back of the Napkin
Deloitte puts the industry’s spending at 1.51% of Revenue*
• A survey of CIOs, just the largest co’s.
$440 Bn from the ENR 400 @ 1.5%
$400 Bn from the next 19,500 @ 1.0%
Assume below >50 limited budget
This gives us roughly $10.6 Billion for the entire Construction IT Spend
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*https://www2.deloitte.com/us/en/insights/focus/cio-insider-business-
insights/technology-investments-value-creation.html
Note: Market Sizing is
Speculative Only

31. Back of Napkin Estimates
• Low Estimate - $10.6 Billion
• Procore estimates $9.2 Billion on
software globally
• High Estimate - $19.5 Billion
• whole industry @ 1.5%
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Procore Takes $2 Billion*
Autodesk Takes $2 Billion
Trimble, CMiC, Oracle, Hexagon, Bentley
Take $2 Billion
Salaries & Internal Expenses Take $2 Billion
Addressable Market is
$2.6 - $11.5 Billion
*Procore S1
Note: Market Sizing is
Speculative Only

32. The Point: The Market is Smaller Than We
Might Assume
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33. Could The Addressable Market
Grow?
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34. Sources of
Growth:
Labor
Substitution
• If labor is never going to be adequate
• At 300k shortage/year
• At $70k/year salary
• Foregone Labor Expense = $21Bn
• What if you capture 2/3 of that =
$14Bn
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Note: Market Sizing is
Speculative Only

35. Sources of
Growth:
Disruption
• Software has been ‘eating the world’
since the 1990s
• What that means is digitizing processes
means replacing larger analog costs
with smaller digital ones
• In the process, the market for software
and other digital technology increases
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Note: Market Sizing is
Speculative Only

36. Conclusion
Every market is hard to properly size.
Imagine Construction Technology as:
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Established software that is highly competitive
(field management, project management) ~ $9 Billion
Emerging technology that is new addition to budgets
(Revit Plugins, IoT)
$2.6 – 11.5 Billion
Yet-to-be introduced technologies that create new markets
(labor enhancing/substituting)
~ $14 Billion
Note: Market Sizing is
Speculative Only

37. Ideas & Developments
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38. What’s Happening in AI
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39. Pre-Trained Models
• Every cloud provider has very good models for language and vision
• Available as a direct API you can plug right in
Or
• As an API that you can train with your data
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40. New Class of
Supermassive Models:
GPT-3
• Two orders of magnitude larger
• Able to generate whole
paragraphs
• Write code
• Write birthday cards…?
2019
1.5bn parameters
2020
175bn parameters

41. Startups Using GPT-3
• Hosted by Microsoft, it is available for development
• Otherside.ai – Automatic email writing
• Compose.ai – Super-powered autocomplete
• Copy.ai – Copywriting, automated
• Growing list of others…
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42. What This Means
• For truly new AI applications, you still need lots of data
• For many others, especially for language or vision (photo & video),
you can often get what you need from an API, or train with 50-200
examples/data points.
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43. Software Doesn’t Talk to Software
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44. IPaaS: Integration Platform as a Service
• Mulesoft, Tray.io, Boomi are all major platforms that allow contractors
to connect data flows and functions.
• Ryvit, ProjectReady and others are Construction Specific and have
“pre-built” connectors to different data sources like Sage, Procore and
more.
• Procore, Autodesk app stores do some of this
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45. Data Standards & Interchanges
• CDX, or Common Data Exchange – led by the Construction Progress
Coalition, this is a set of practices and standards to help project teams
connect data flows. (https://www.constructionprogress.org/cdx)
• CSI Crosswalk – developed by CSI to offer all versions Masterformat,
Uniformat and OmniClass digitally, this API translates across building
phases. (https://www.crosswalk.biz)
• BuildingSMART – a global set of data dictionaries and standards for
construction.
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46. Framework : McKinsey’s
Three Horizons
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(h/t Gregg Wallace)

47. How Do You Look at Technologies Over Time?
This year will behave differently from five years away.
Organizations need different things at different times:
- Solve immediate issues
- Ensure innovation of new revenue opportunities in the future
- Ensure creation of truly new directions
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48. The Three Horizons
• Features this year
• Products in 3-5 years
• Technologies 5+ years
The balance between these
three is what strategy is about.
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49. How That
Aligns with
the Above
• Near Term: Existing software market
• Medium Term: Emerging products
(MVP)
• Longer Term: Re-thinking processes
(deep tech)
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50. Where to Learn More
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51. Stuff to Read
• Electri (research arm of Electrical Contractors Assoc)
• https://electri.org/research-overview/
• Dodge Analytics:
• https://www.construction.com/toolkit
• FMI:
• https://www.fminet.com/
• Deloitte:
• https://www2.deloitte.com/...industrial-products-construction
• McKinsey:
• https://www.mckinsey.com/business-functions/operations/our-insights
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52. Cool Stuff, Cool People
• CPC Monthly Round Tables (Next Weds!)
• https://www.constructionprogress.org/virtual-roundtable
• Construction Dorks (right now, and once/month)
• https://www.constructiondorks.com/
• ConTech Crew (weekly)
• https://jbknowledge.com/thecontechcrew
• Bridging the Gap
• https://bridgingthegappod.com/
• Constructed Futures (2x a week)
• https://www.constructedfutures.com
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53. Coming…
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Product Management
in Construction White
Paper (Mid-April)
CTQ Directory
Relaunch (Late April)

54. Thank You
Hugh Seaton
hughseaton@gmail.com
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