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Construction has a reputation as a Luddite industry.

This label isn’t without merit. Consider the oft-cited 2017 productivity report from consulting firm McKinsey, which revealed that labor-productivity growth in the construction industry was only 1% per year over the prior two decades, compared to 2.8% for the total world economy and 3.6% for manufacturing.

This improvement gap remains an issue: A 2024 follow-on report from McKinsey showed that construction productivity improved by only 10%, or 0.4% annually, between 2000 and 2022. Again, these productivity gains lagged severely behind the total world economy and manufacturing, which posted 50% and 90% gains respectively.

But the tide is turning as contractors across the country embrace new technologies to aid in tasks across the built lifecycle, such as to speed up invoicing, implement autonomous machinery on jobsites and deal with change order management, not to mention the advent of artificial intelligence and generative AI.

Builders themselves are taking advantage of this environment and these offerings via steps into the investment arena. These businesses, which handle multibillion-dollar projects, partner with later-stage startups to tailor a firm’s product to its specific needs.

All this is to say technology is far more common on jobsites than it once was. As builders become more technologically literate and comfortable, the onus that once existed on these construction pros to adapt may be flipping back to the startups themselves, which experts say are struggling to meet the demands that construction firms actually have.

Contech products need to innovate

In construction, a solution doesn’t just need to work — it needs to be 10 times better than something that already exists, Jim Barrett, chief innovation officer for New York City-based Turner Construction, told Construction Dive.

“It’s got to be significantly better to make us want to spend the time to think about either changing out an existing solution or trying to spend the time integrating it into our organization,” Barrett said.

One such example would be Turner’s implementation of change order management tech Clearstory for all of its project teams. The contractor announced an agreement with the firm in October.

“Clearstory layers onto a high-touch workflow that impacts hundreds, if not thousands, of people on our projects and makes it simpler and faster in a way that raises the bar for outcomes,” said Maria Pantelaros, director of innovation for Turner, in the announcement. “That’s the kind of innovation we embrace.”

Barrett added that there’s only so much time and energy that a company can give to startups, particularly to companies that present unproven solutions. 

“The effort it takes to bring a new solution into our organization is significant,” Barrett explained. 

This is compounded for firms that deal with AI offerings. Turner recently revealed a partnership with OpenAI that has led Barrett to question the value of farming out the development of AI agents. He questions whether paying an organization to build an AI tool is worth it when a Turner employee could create it in-house, likely with more insight on the desired functionality to address existing needs.

Such circumstances can put a builder at odds with a startup that wants to prove that its product works. Startups can’t rely on a single contractor to prove products are a general solution for the industry, said Henning Roedel, the founder of startup Hardhat Robotics and the former robotics lead at DPR Construction.

Rather, startups need to prove their products can work for the whole industry.

“It’s really important that you get a high touch and a lot of reps as a startup founder,” Roedel told Construction Dive. “When I was at DPR, I tried to optimize for speed for these startups.”

What builders need from startups

Market fit is key to selling any product. If it doesn’t fit a consumer, from retail to robotics, then it’s not going to make money.

That’s a problem that Aaron McClellan, construction technology manager for infrastructure builder Granite Construction, has run into in his work. Tech can often be geared toward vertical construction, he said, rather than to the horizontal infrastructure his firm builds.

“I think there’s definitely a trend in the tech to be more focused on the vertical construction side,” McClellan told Construction Dive.

McClellan said Granite networks with venture capital firms, startups and attends tech conferences to help make the differences between vertical and horizontal construction clear, but the trend remains nonetheless.

McClellan said that products can also be tailored to a financial backer, which can lead to a situation where the rest of the industry is left to figure out what to do with the solution.

This can be especially true when a startup founder has a lack of experience with the construction industry. Given construction’s productivity gains gap, the industry has been an enticing target for disrupters who want to change the status quo. But as these entrepreneurs try to solve “problems” they see in the industry, they may find themselves surprised by the sector’s numerous quirks.

Nowhere was this more apparent than the fantastic flameout of the once high-flying modular juggernaut Katerra. By trying to bring all trades inhouse and cut out industry go-betweens in the name of efficiency, the builder alienated those accustomed to the relationship-first nature of the industry, an aspect that contributed to its downfall.  

Solving the bigger problems for builders

Turner’s Barrett flagged a different problem: founders who show up with an unproven hypothesis for a construction-specific issue. In the past, the company would’ve made itself more available in these cases. But because of bandwidth limitations, this is no longer the case.

“If you’re not sure of the problem you’re solving and who you’re solving it for, then honestly, we’re telling people to come back in six months when you figure that out,” Barrett said.

Roedel added that many startup founders today are looking for easy problems to solve. On the contrary, he noted, construction has a lot of hard problems, which can yield better opportunities. 

“My advice to anyone is, if you’re tackling something for construction, tackle a hard problem. The industry will reward you for it,” Roedel said.

What startups can do next

So, without bandwidth from contractors, how can startups show their value and improve their products for the construction industry?

The answer may be programs geared toward construction startups, such as Suffolk Technologies’ BOOST program, an annual tech accelerator that helps these businesses find their niches. The eight-week initiative helps startups gain access to jobsites and tailor their products for the industry.

Indeed, the perceived lack of founder and construction industry knowledge from startups may be changing, said Parker Mundt, partner and head of platform at Suffolk Technologies, the investment arm of Boston-based Suffolk Construction.

“Historically in the past, maybe the interactions between the stakeholders themselves, and where most of the value of these tools is actually recognized, I think, was muted for the first wave of construction tech,” Mundt told Construction Dive. 

Now, forthcoming startups may be helmed by serial entrepreneurs, or people with experience in construction. The products and founders in this wave — which Mundt said began after the COVID-19 pandemic — are more informed.

Now, if a founder can get out in the field and see what’s not working, it’s a good start. It’s really the only way startups can see what’s out there to fix.

“Get out, be with the operations, understand the skepticism, understand the needs, the wants, face to face.” Granite’s McClellan said. “If you’re not building rapport with the people, you’re making a lot of assumptions. I think that we have to clean up those assumptions, get feedback, and actually start building together.”