Collaborating or Competing with Construction Tech Startups

I recently interviewed 20 experts and thought leaders about real estate and construction technology and innovation. Many of the interviewees talked about collaboration with startups and how to make the most of it.

There’s a growing interest in construction technology. Construction tech firms have garnered $10 billion in investment funding from 2011 through early 2017, according to McKinsey & Company. AngelList, a startup and investor website, currently features over 13,000 companies with “construction” as a keyword.

Are Startups the Speedway to Innovation?

One of my interviewees, Maurits Cammeraat of INREV, said, “The real estate industry has already changed quite a bit over the last 10 years. But today, the real innovation comes from startups and new entrants.” That’s one of the reasons why established construction industry firms have started to or are planning to collaborate with or invest in startups.

It is a popular belief that incumbents are very good at what they’ve always been doing but cannot really innovate. According to this belief, startups represent a new culture, unburdened by tradition, inflexible decision-making, and corporate politics. They are agile and fast and know how to use the latest technologies creatively.

Innovation is becoming a necessity in many construction-related fields. Pekka Metsi, CEO of Granlund, a Finnish consultancy, said recently, “The best way to evolve in the long run and to do it sustainably, both locally and internationally, is through continuous innovation. If we can do things smarter and more efficiently than others, we gain a clear competitive advantage.”

Can a company outsource innovation to startups? Danish consultant and author Anders Hvid talked about exponential business growth at the CTO Forum in Helsinki a few weeks ago. A local tech magazine, Tekniikka ja talous, featured Hvid’s talk with the headline, “The Time for Startups is Over.” The magazine quoted Hvid saying, “There’s Facebook and Google, Uber and Airbnb, but what are the more recent examples? They’re hard to find.”

Hvid claimed that big companies have all it takes to be disruptive and innovative. They have substantial resources, they are directly connected to customers, and have access to lots of customer data. They can imitate startups by creating small internal teams and give them challenges with a tight schedule. The best areas for innovation are at the fringes of the company’s business: “I like Google’s 10x thinking. If you want to build a vehicle that is 10 times more efficient than today’s cars, it’s not enough to start optimizing the current car. The team must start by defining what a car is and how it functions,” Hvid said.

The kind of thinking that Hvid is promoting is quite rare in construction industry companies. That’s why many in the industry turn to startups to find inspiration or learn how to innovate.

Ways to Work with Startups Successfully

Many of the industry experts I interviewed considered investing in a startup as just one, and not necessarily the best, option. If a company sees that investing in a startup could give them a strategic advantage, an investment may be reasonable. The investor becomes a strategic partner, providing industry knowledge, connecting the startup to customers and partners, and perhaps even pivoting the business model if necessary.

A company can find a win-win relationship with a startup without being an owner. The company can learn from startups, get to know their technologies, and become an early adopter. Many potential growth companies can have a great product or service concept or technology, but they lack real-life experience or a context for their innovations. That’s what an established construction industry firm can provide and doing this can reciprocally influence innovations might be applied to their business.

Meetups and hackathons provide the fastest access to several startups and teams at once. Hackathons are intensive events where tech and design teams solve problems posed by industry experts and professionals. AEC Hackathon is a global community with events across the world, but companies can also arrange hackathons of their own. “Companies are struggling to innovate alone and are looking for inspiration from companies in other industries and from startups,” said Hanna-Kaisa Vaittinen of SRV, a Finnish contractor. SRV wanted to get fresh ideas for services for REDI, a large residential and commercial building project. They organized a service hackathon in September 2016 together with KONE, Microsoft, the K-Group, and Idean.

Meetups like ReCoTech are about matchmaking. Startups and teams pitch their solutions to companies that could become either customers or investors.

Coworking spaces are gaining in popularity. They offer startups, SMEs, and large corporations a shared space to work and intermingle. The organizers typically arrange events, and offer training, mentoring, or matchmaking.

Most coworking spaces are industry-agnostic, but there are exceptions. Danish BLOXHUB is an urban innovation hub, inviting architects, designers, contractors, and tech companies to create better cities. BLOXHUB has a physical space in downtown Copenhagen, and by 2018, this space will boast 10,000 square meters of brand-new space and roughly 500 desks, 20 percent of which will be dedicated to startup companies.

Some companies, like Fira, a Finnish contractor, have started their own startup programs. Fira is not just interested in acting as an investor, but also in being a customer, matchmaker, mentor, or employer, depending on the situation.

To address real challenges in construction, startups must become a part of the construction ecosystem. That can happen either in collaboration or in competition with existing businesses. In both cases, startups can contribute significantly to the renewal of the industry.