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It has been a busy summer of events and podcasts for me. After talking to so many people about technology in the built environment, I have drawn a few passionate conclusions.
I think it is a sign of incompetence and disrespect to compare the AEC industry to manufacturing, aviation, automotive, etc. AND parrot that we are laggards. I cannot tell you how often I see the McKinsey report referenced in pitch decks and echoed in nearly all public discourse (I have been guilty of it in the past, too). But it misleads on many fronts. Those folks at McKinsey should stick to helping the pharma industry and stay away from ours.
Here’s the truth about the nature of the built environment that they miss:
1. Collectively AEC and real estate are the largest industries in the world (representing nearly 20% of annual global GDP) . These industries are very large, very fragmented, very decentralized, and very specialized.
2. "We" have to develop, design, build and operate an Asset over multiple generations. While I love my iPhone, I throw it away every few years. We don't have the option of throwing away a building every few years or a car after it reaches 200K miles. We have to engineer and build to last, and design/develop a product that is still useful and relevant in 50 years.
3. Our customers are not the users. We have to serve an asset owner and the users of the asset at the same time. There is no simple alignment of incentives here. A customer may be a university, but the user is a student.
4. We are project based. While we are much larger, the most similar business is the movie industry. Project based, different source of funding/budget every time, the team changes (but we have our faves).
5. The results of our work affect communities, economies, individual health/wellness and our planet. We shape the future of humankind.
6. Companies operating in the built environment are responsible for solving several of the largest problems in the world in housing, infrastructure, and decarbonization (to name a few) and they are incentivized to use the absolutely best tools at their disposal at the tradeoff of cost/risk.
There is literally no other industry like the built environment in size, complexity, and risk. Any direct comparison to an adjacent market is apples vs. oranges. So no, mass adoption of technology in our market will not mimic others.
However, value creation speaks the same language in any industry.
There are many outlier companies likely already being built. The problems are simply too large, too important, and too obvious. It’s a founder’s honeypot. But in time, they each will learn that you cannot circumvent the nuances of this market.
-KP
