The role of ConTech start-ups in digitalisation - BDBau

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Start-ups, digitalisation and the construction industry: these terms have been repeatedly discussed together, especially recently. We talked to Roland Riethmüller about how they are connected and what this connection could mean now and in the future. Among other things, he is the founder of the Bundesverband Digitales Bauwesen e.V. (Federal Association of Digital Construction), which aims to give ConTech start-ups more visibility and to network them with companies in the industry. Riethmüller makes it clear right at the beginning of the conversation that it is important to distinguish between construction technology (ConTech) and property technology (PropTech): 

"Of course, both disciplines work closely together and are also definitely interlinked. But essentially they are completely different target groups, two completely different areas."

So how can ConTech be defined, especially in comparison to PropTech? 

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ConTech and PropTech

The term PropTech was introduced earlier in the industry, which is why many people initially assume that ConTech is a subcategory. 

The overlaps between the two areas are clearly present, because the associated tech companies pursue the same goal: the digitalisation of workflows around real estate and buildings. Nevertheless, in order to differentiate them, one should be guided by the different life cycle phases of buildings. While PropTech relates to the processes of portfolio maintenance with building operation, management and sale, etc., ConTech refers to the phases before that, including planning and construction. The target groups also need to be differentiated, says the expert. He adds: 

"ConTech is basically about everything that concerns construction. For example, new process technologies, 3D concrete printing, robotics and so on. Of course, also the whole topic of BIM and digital twins. There is hardware, software and very innovative building products in general. The bandwidth is very wide." 

Generally defined, ConTech concerns all areas that support the construction industry. To give start-ups from this area space and make it easier for them to enter the industry, Riethmüller works with the BDBau to promote networking with construction companies. To this end, he has launched, among other things, the startup fair "Tech In Construction" and the online pitch event "digital construction week", events that are exclusively for ConTech startups. Since 2018, these have grown steadily, a sign that they are getting more and more attention. 

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Outsourcing digitisation to start-ups

It is often discussed that start-ups play an important role in the digitalisation of the construction industry. Many companies are not able to provide the resources needed to drive such a transformation. In most cases, employees are trained professionals for the construction process, not for technological processes. Riethmüller compares it to other situations: 

"If you have a legal problem, you go to the lawyer, he takes care of it. If you have a tax problem, you go to a tax advisor."

Outsourcing digitisation to start-ups offers many advantages in his eyes, because they have the necessary knowledge, time and better access to technology. They also offer a new perspective, as they have not emerged from within the company.    

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Scepticism towards young tech companies is not the only challenge 

The advantage of non-industry ConTech start-ups is that they can provide professionally programmed solutions. These are developed by the technology experts that construction companies often lack. Of course, newcomers may not directly understand the construction industry and vice versa. This challenge needs to be overcome in order to advance the networking of the various players. In addition, the term start-up does not inspire confidence for many long-established companies, as doubts arise as to whether they will survive in the long term. There is a concern about losing resources if projects with a startup fail.

Riethmüller affirms that companies must show a certain willingness to engage with the issue, and not just in passing. 

"It must also be recognised in the management of construction companies that digitalisation is not something that can be done on the side, but that you need someone who knows the ropes and can drive the whole thing forward. 

SMEs in particular rarely find the time in their daily business to deal with innovations. If they also lack the technical know-how, they are quickly overwhelmed. It is therefore all the more important to train employees who can mainly deal with digitalisation. The problem here is often not the acceptance and willingness to work with new solutions, but rather the access. Above all, it is important to communicate in a way that is appropriate for the target group in order to avoid misunderstandings. 

Especially employees who have been in the business for a long time sometimes don't see the need for change. In their opinion, things have been going well for the last few decades by analogy, why change that now? But the danger of being left behind already exists. The big construction companies have long since adapted to digitalisation, which could change the competition if the smaller ones don't keep up. 

Another frequently discussed challenge associated with digitalisation is the elimination of a certain knowledge gap that often exists between project participants. In the past, profit was readily made from this lack of transparency, which is why some people are sceptical about disclosure. Here, too, it becomes clear how important it is to change awareness within the industry in order to achieve more partnership and collaboration. 

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How do you meet these challenges? 

A positive trend can already be seen, especially at trade fairs and events around ConTech and PropTech, where attention and participation is increasing. To push this even further, it is important to keep bringing the necessity and benefits of digitalisation to the fore. Companies should be shown that cooperation with start-ups makes sense and that reservations that they might no longer be on the market next year, for example, are unfounded. However, it is still difficult to prove this with concrete figures, as most investments in digitalisation have only recently been made, so the extent of the profitability cannot yet be made visible. Nevertheless, it can be said that given the size of the market and the potential for digitisation, the need is clearly there. The construction companies also seem to recognise this more and more, because the willingness to collaborate is increasing. The larger corporations in particular are very interested, but it will certainly take time for the development to reach the SMEs and smaller subcontractors. Riethmüller notes:

"Basically, the industry is slowly waking up. You can see that just by looking at the fact that the interest in start-ups is huge. In 2017 or 2018, start-ups were housed in the back corner at trade fairs, where no one saw them. Today, startups are put in the front row by organisers to show how innovative you are."

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The role of the platform economy  

In most cases, innovation is understood as the use of software that is already available on the market or the development of own and tailored solutions. Problems that are mentioned in the course of the implementation of new software or the connectivity of existing solutions include the fact that it is difficult to exchange information with each other. Open interfaces that connect IT landscapes are essential for several reasons. On the one hand, companies can only prevent the emergence of data silos internally or externally if there is a smooth flow of information and they are not isolated solutions. Furthermore, increasing efficiency through digitalisation only works if subcontractors and other project participants also have access to the corresponding data. Since there is currently still a great deal of fragmentation, this is not always possible. On the other hand, when implementing new solutions, it must be considered that processing data during the planning and construction phase is not enough. They are also needed beyond that, in later lifecycle phases. Here again, the overlap between ConTech and PropTech becomes clear. Platforms with the possibility of cross-interface networking also offer the possibility of adaptation or expansion in the long term and thus represent a sustainable, sensible investment. 

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Corona and the lack of a digitalisation push 

In many industries, it could be observed how the pandemic became a digitalisation driver. Home offices became largely compulsory and companies were forced to adapt processes and make data accessible online. This necessity did not necessarily exist in the construction industry, as work could continue as normal for the most part and the order situation also remained stable. Nevertheless, Covid 19 has led to more digitality in many areas of everyday life, says Riethmüller:

"You couldn't go to shops any more, so you had to order online. Or you couldn't go out to eat anymore, so you ordered online. That's kind of the lowest common denominator at that point."

This has brought the topic of digitalisation more into focus. But according to Riethmüller, the hoped-for push in the construction industry failed to materialise. He names what he sees as the stronger drivers for digitalisation, which are often the subject of discussion: A lack of skilled workers and a shortage of resources.

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Outlook: the leverage effect of technologisation 

In the past, work in the construction industry was associated with physical exertion and dirt. This makes it rather unattractive, especially for upcoming generations, the so-called digital natives. The trend is towards studying and away from training, which is why the change in the construction industry towards technologisation should clearly be seen as an opportunity. Thus, digitalisation can counteract the shortage of skilled workers in more ways than one. It not only increases efficiency and thus reduces the workload of employees, but also increases the attractiveness for technology-savvy young professionals. Young construction managers in particular can become pioneers here, as they are more open to new technologies and cooperation with tech start-ups. Once they have seen the added value of software solutions, it becomes easier to convince the rest of the company or others involved in the project. Many universities now offer courses that combine construction and technology. However, due to the rapid development, it is important that companies also offer approaches to continuously train their staff. At the same time, companies that are willing to engage more with technology become more attractive to young professionals. Upcoming generations who have grown up with digitalisation can thus become drivers of cooperation with start-ups.