Making sense of data generated is a challenge for companies across the construction sector, and a new report from Procore Technologies is helping to put this in perspective.
The construction industry has faced its fair share of challenges over the past few years. Construction leaders around the world are feeling the heat of rising interest rates, supply chain disruptions, skilled labour shortages and thin profit margins as well as the surging rate of insolvencies.
To help construction businesses tackle these challenges, Procore Technologies (Procore) has released its annual How We Build Now industry benchmark report, to help shed light on the current challenges, opportunities and perspectives of construction industry leaders and the technical trends they pursue.
Procore Director, Solutions Consulting, APAC Will Twomey describes How We Build Now as a research tool to reflect on the issues impacting the industry at a moment in time.
“It serves as a temperature check of the industry; it shares insights on the mood of construction leaders at a moment in time, as well as the challenges, risks and plans for the future,” says Twomey. “At Procore, we understand the power of data.”
“But unstructured data is meaningless without insight – so we produce a market report to help construction companies turn information into intelligence and insight, and data into stronger businesses.”
Now in its fourth year, How We Build Now has grown in scope and sample size. This year, in partnership with independent research body YouGov, Procore surveyed more than 1,600 construction leaders across the Asia Pacific, prompting it to split the report in two – one for Australia and New Zealand (ANZ); and a separate report for Malaysia, Philippines and Singapore.
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Procore canvassed 768 construction decision-makers and influencers across Australia and New Zealand to unearth the current technology and industry trends connecting ANZ construction in 2023, with some surprising results. Inside Construction sat down with Twomey to unpack the ANZ report findings.
The How We Build Now report found construction industry sentiment has softened, with a 10 per cent decrease in Australia from last year. “This indicates that construction companies are now being squeezed from both sides,” says Twomey. “On the one hand, they continue to grapple with cost escalation, skills shortages and rising interest rates; on the other hand, they are still delivering fixed-price jobs secured in the pre-pandemic halcyon days.”
“Profit margins are under extra pressure and the number of insolvencies has reached an almost decade high – all these factors play into sentiment.”
According to the report, fewer Australian construction businesses are expecting either an increase in the number of projects over the next 12 months or in their value, even though there is a record number of government commercial and infrastructure projects in the pipeline.
There are many reasons for this, says Twomey, but one of the primary reasons is that the industry is at capacity and the workbooks of most construction companies are full. Large public infrastructure projects continue at pace, while the near-record levels of insolvencies mean the pool of contractors has narrowed considerably.
Improved productivity is high on the agenda for Australian construction businesses, with 41 per cent of ANZ survey respondents identifying improved access to project information as the top strategy to improve productivity and 40 per cent thinking the same for profitability.
Twomey says construction companies understand that better access to the information they have is top of the tree – above investment in new technology, upskilling or automating. “It’s important to note that true intelligence leads to better decisions,” he says. “Before construction companies can take off down the artificial intelligence (AI) superhighway, each one needs a roadmap – a data strategy – to know where it is going and why.”
“Only 14 per cent of ANZ construction companies have implemented a data strategy and the quality of those varies depending on company maturity.”
Managing cost increases and maintaining cash flows were identified as the top two challenges facing the Australian and New Zealand construction industries, a result that Twomey says isn’t surprising and reflects the overall economic environment. “Inflationary pressures and fluctuations in material prices, rising costs of labour and energy, coupled with increased regulatory compliance requirements, have contributed to cost escalations,” says Twomey. “Project delays as a result of unexpected disruptions – such as floods on both sides of the Tasman – are still causing extra headaches.”
“All these factors, and many more, make projects more expensive to deliver.
“In a volatile environment, construction businesses are now looking for strategies that add predictability to every project – and that means grounding their decisions in data.”
While technology can help improve the quality of construction, project visibility and reduce human error, 42 per cent of ANZ survey respondents identified improved cost management as the biggest impact of technology adoption. Yet, 41 per cent of respondents said the costs involved was the top challenge in their digital transformation journey.
Procore customers are expressing that they need more help to identify and mitigate risk, says Twomey. “They are turning to solutions that integrate financial and site data, support more accurate tendering, better forecast labour requirements, offer real-time insights into project actuals, and can monitor and maintain cash flow,” he says. “Ultimately, they need systems that ensure nothing falls through the cracks – because the cracks are currently very wide.”
The construction industry has made great strides to pick up its slack in the technology adoption department and construction leaders are jumping on the technology train. Almost half of ANZ businesses surveyed state they are looking to increase the spend on construction technologies, as a proportion of their annual budget, over the next 12 months.
Some companies are in ‘catch up’ mode, following a long era of under-investment, says Twomey, others continue to invest in large-scale, multi-year technology programs – either way, more businesses want to own their data and protect their future.
Construction management platforms took the cake as the top technology to drive change in the next three years, followed by pre-fabrication/design for manufacturing and assembly. According to the report more than half (51 per cent) of ANZ respondents intend to invest in a construction management platform and Twomey says it’s easy to see why – construction management platforms tick a lot of boxes.
“They address multiple pain points, enable data-driven decision-making by capturing and analysing project data in real-time and they foster collaboration and communication among project stakeholders,” Twomey says. “Because they are scalable and user-friendly, those companies who choose to invest in construction management platforms like Procore will benefit from improved productivity, risk management and insights.”
In good news for ANZ construction industries, hours spent on rework have fallen by 25 per cent over the past 12 months, and according to survey respondents, some companies are implementing technology to track, resolve and improve rework outcomes.
“Technology is one secret among several, however,” says Twomey. “When used in harmony with quality control measures, and robust planning and design, collaborative technology platforms undoubtedly reduce rework by making it easier to communicate and spot potential clashes.”
ANZ respondents identified a number of technologies they are looking to introduce within the next five years, with next generation building information modelling (BIM) coming out on top. AI and machine learning (ML) were also high up on the list. The explosion of generative AI tools this year shows just how rapidly AI is changing the world, explains Twomey.
“While 44 per cent of construction companies may have ambitions to introduce AI or ML into their operations over the next five years, just 14 per cent of them have a data strategy in place, and 35 per cent aren’t even considering the implementation of one,” he says. “Construction companies should start with a data strategy to lay a solid foundation for AI and ML.”
With only 29 per cent of ANZ companies saying they are confident they can implement a data strategy with success, according to the How We Build Now report, Twomey says they should start by defining clear objectives. Construction companies should look at what they want to achieve through data analysis and how it aligns with their overall business strategy.
“Then, establish a robust data governance framework that ensures data integrity, privacy and security,” says Twomey. “Invest in the necessary infrastructure and tools to collect, store, process and analyse data effectively.”
Importantly, Twomey says, to foster a culture that embraces data-driven decision making, make the starting point easy and take the team along for the ride. “A data strategy is an equally human journey at this initial point,” he adds. “It can then be an iterative approach, as you continually monitor and evaluate your progress.”
“It’s a fairly simple formula that, when executed well, builds confidence and capability.”
While technology has positioned itself ahead of the pack as a main priority for ANZ construction businesses, gender diversity, sustainability, collaboration and quality have been put on the backburner, according to How We Build Now.
Addressing issues around gender diversity, sustainability, collaboration and quality are still important to construction companies, says Twomey, but in a volatile and somewhat hostile economic climate, the primary focus has shifted to staying afloat.
“Construction companies that ride out this choppy period will continue to prioritise these issues, because they know gender diversity, sustainability and quality are pillars of a strong business,” Twomey adds.
The valuable insights derived from Procore’s How We Build Now demonstrate that although the ANZ construction industries are making headwind in some respects, such as reducing rework, significant challenges remain. As technology adoption continues to rise, construction leaders need to approach transformation with a strategic mindset and prepare for the future while navigating today’s unpredictable market – data should play a huge role.
The future of construction, says Twomey, is about unlocking the complete data journey of a project. “As the world turns to AI, getting our foundations right today will ensure success in the future,” he adds.
“Real-time insights and robust data sets will be crucial to decision making, unlock productivity, and will drive profit potential for construction companies.
“In this climate, it will be about using accurate, complete and comprehensive data to predict and mitigate risk for now and in the future.”
It’s integrated construction management platforms like Procore that will enable construction businesses to use their data effectively. It’s these platforms that bridge all data connections across all projects to help construction leaders leverage the power of real-time, data-driven decision making.