17 Conference Report #techonomy17

How Tech is Remaking the Construction Industry

Speaker

Michael Marks
Chairman and Founder, Katerra

Lincoln Wood
Regional Director of Technology and Innovation, Turner Construction Company

Tracy Young
CEO and Cofounder, PlanGrid

Moderator

Simone Ross
Co-founder and Chief Program Officer, Techonomy


Session Description: The $10 trillion global construction industry has been slow to digitize. Now it is finally embracing tech—from off-site and modular/prefab construction, to robotic bricklayers, and IoT-enabled job sites. What will the construction landscape look like in a few years?

Below is an excerpt of the panel discussion, with a full transcript available here.

Ross: Why construction? It is a highly, highly inefficient industry. It’s wasteful. It’s a $10 trillion dollar industry where pretty much most projects go over budget, over time, pretty much all the time. I’ve got three great panelists here today.

We’re going to start with Michael Marks who is the co-founder of Katerra. You might know him from his previous life as CEO of Flextronics. So, Katerra, you’re not a construction company—that’s what you told me on the phone—you’re not a tech company; you’re a design build company. What exactly is that?

Marks: Well, we are both a technology company and a construction company. But, what we mean by that is we take complete responsibility for a whole project. We design it and we build it. So, we have architects, we have engineers, we’re the general contractor, we’re the subcontractor, and we’re the material supplier. We just do an end-to-end, fully integrated offering to the developers, much like we did the electronics industry—we just had different customers.

Ross: So, you’re kind of like a one-stop shop for the developers?

Marks: We are.

Ross: Okay. Got it. You’re basically doing, and I might be oversimplifying this, but you’re basically doing prefab housing to some degree?

Marks: Well, I don’t really know quite what that is. We get a lot of people go like, “you’re modular, or prefab, or whatever it is.” We make—

Ross: What’s the difference between the two?

Marks: We make building components of all kinds and we make them in factories and then we deliver them and build them. But, we don’t build boxes in the factory, which is what a lot of the prefab guys are. We just dissect a project into a bunch of parts and we make the parts and we bring them on a truck and we assemble them on site.

Wood: And you’re doing them digitally too?

Marks: And we’re doing them digitally too.

Ross: And it’s not just sort of the windows and the walls—it’s the electric, it’s plumbing, it’s everything?

Marks: We make walls, for example, and our walls come with windows and doors, and sheathing and insulation, electricity, plumbing, drywall. Just think of it as a part—a part number. It’s different from prefab, the way a lot of people thought about it, that wall can be any kind of wall. And we have lots of different walls. They’re just parts and then we assemble them on site.

Ross: I read somewhere that you can build a 24-unit apartment building every two weeks from your factory in Arizona. Is that correct?

Marks: Yes, but that’s probably not the most valuable metric. The more important metric is how long it takes to build, let’s say, a 24-unit apartment. And today we do that in about 60 days and by next summer, we’ll be at 30 days.

Ross: Right. So the two weeks for you is more about the components at the factory and then you have to go to the site—

Marks: We do that just in time and we don’t store a bunch of inventory. We do it as it’s needed for the sites.

Ross: So, you basically brought to construction what you sort of did with electronics and manufacturing.  I know what you’re going to say to this because I’ve asked you this on the phone, but to me, building buildings seems to be like it would be a lot more complicated, so is it really as simple as you say it is to do this?

Marks: It’s breathtakingly simple at the factory level, compared to what I used to do. When you make a cell phone, we might have, in a factory, an electronics manufacturing factory, it costs, maybe $300 million dollars into a factory and that may be 2,500 suppliers—maybe 5,000 different suppliers—you’re responsible for. You know, a factory, to build walls is $15 million dollars and the inputs of are, kind of, wood and nails. I mean, it’s just much, much, much simpler. That doesn’t mean the whole thing is simpler—you know, design is complicated and customers are complicated and there’s a lot of different trades involved, so there’s a lot to do. But, from a factory standpoint, this is a piece of cake compared to my past.

Wood: The ability for your guys to manage a supply chain is critical.

Marks: Right.

Wood: Right? You’re not just the subcontractor, you’re delivering the whole product—which is an advantage. It takes a huge investment to do that. That’s why it’s been a discussion for the last 15 years—

Marks: It’s really why people haven’t done it. Because being a real global supply chain company is complicated.

Ross: Lincoln is with Turner Construction, which is one of the largest construction management companies in the U.S. You’re sort of like the innovation guy there, is that correct?

Wood: Yes, it’s my title now, officially. Innovation is kind of a nebulous word, of course. For us, it’s been—for me personally, it’s been kind of a position that’s grown out of design, technology—kind of grass-roots piloting of new tech that’s coming out, when you’ll hear about Tracy’s company. That was one of our earlier companies we used several years ago to start.

But, what I’m doing now is more working with just teams around problem-solving and kind of trying to look at what does our business need. What are our core business needs in trying in trying to bring in tech strategically, and kind of drive this argument—is technology really just getting it out on our job sites and having VR and AR, or is it truly something that we can leverage for our business and kind of have our executive management understand the value of it.

Ross: So, what are you seeing that is sort of really helping right now? Do your guys sort of roll their eyes when they hear the phrase “Silicon Valley is going to disrupt building or construction.”

Wood: The disruption part, maybe a little bit but, the Silicon Valley [part] definitely not. Half of my week is spent talking to startups—some are in stealth. My network with early growth companies is absolutely paramount to our competitive advantage in how we’re bringing in the technology. So, I’ll be meeting with those companies far in advance—we’ll never actually use them on a pilot; it’s just more or less to learn who’s out there—vet them. I work closely with venture capital companies because we share similar kind of interests around understanding. How do we look at technology strategically? They’ll obviously look at it from the investment standpoint. We’re looking at it from a client’s perspective—who would we want to partner with?

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