Buzzy construction tech startups could see their values balloon to Silicon Valley levels. Here's where McKinsey is seeing the biggest opportunity.
A new McKinsey report says that $265 billion in new or shifting profits are at stake as the construction industry invests more in technology. This transformation, already underway, has been accelerated by the coronavirus crisis, with 50% of the construction experts surveyed by McKinsey saying they've increased their investment in technology since the virus hit. While the changes will disrupt the whole construction value chain, the biggest impacts will be on the contractor and subcontractor labor field, design and engineering, and material production and logistics. Visit Business Insider's homepage for more stories.
A $265 billion pool of annual profits is up for grabs for construction companies that invest technology and digitalization, according to a new report from McKinsey Global Institute. This shift, already underway, has been accelerated by the coronavirus pandemic, and the unprecedented amount of remote work that followed. The report, published Thursday, found that 40% to 45% of construction incumbents' value added in certain segments, such as design and engineering or actual contracting, is at risk in the face of increasing tech adoption. The report estimated that players that "move fast and manage to radically outperform their competitors could grab the lion's share of the $265 billion in new and shifting profits and see valuations more akin to those of Silicon Valley start-ups than traditional construction firms." In a call with the press on Tuesday, Jan Mischke, a partner at the McKinsey Global Institute stressed just how existential this particular moment is: "Companies need to move now or be left behind." Construction's lack of digitization, compared to industries like manufacturing or logistics, had kept the industry from seeing a drastic increase in productivity, McKinsey found. But in the last few years construction technology has gone from an extremely niche industry to one of the buzziest sectors in venture capital. The latest McKinsey report said it expects the coronavirus to accelerate that growth. McKinsey surveyed around 100 experts and construction executives, half have already increased their investments in tech since the pandemic began. Read more: 7 top VC investors reveal where real-estate tech portfolios are hurting the most and what they need to stay alive through a year of crises Mischke said that some of the people they talked to said they were now squeezing their five-year plan for tech adoption into a six month period to accelerate the rate of change. As in every industry, the shift into remote work has highlighted exactly why a digital workflow is so much more efficient. Construction executives had a number of realizations during the crisis, said Maria João Ribeirinho, a McKinsey partner and global leader of the firm's engineering and construction practice, on the call. "It is not okay to get to your construction project and have to deal with a bunch of paperwork or have to do 10 phone calls to see that your materials end up on-site in time," she added. The transformation in the industry, which could lead to a 60% increase in productivity over time, will turn a localized and fragmented industry into one that is consolidated and focuses on buildings as if they were repeatable products, instead of one-off projects. It will be driven by both new entrants, like SoftBank's Katerra, and from more traditional, incumbent builders. While there are potential impacts across the construction value chain, companies in the design and engineering, materials, and general and specialist contracting fields will see the biggest potential impact. In design and engineering, new software will reduce the amount of human input necessary in building, while materials companies, powered by recent changes in logistics, will become much more efficient, and likely cheaper. Contracting and subcontracting may also see big hits, as easier offsite construction and modular building will require less labor than traditional building techniques. Read more: 5 startup founders explain how they reimagined an old-school industry to break into the buzzy construction-tech scene Mischke noted that private equity has taken a very close interest in the industry, investing in both innovative startups and in more traditional building companies that are adopting technology. In 2019, Goldman Sach's venture capital arm made an investment in Built Technologies, a construction lending platform, and in TopHat, a modular housing company. Alternatively, private equity may also seek out underperforming companies to transform by connecting them with innovative technology. The public sector, which Mischke said is the "single biggest constructor" will also be key, both in the types of buildings and infrastructure they have built and in the way they adjust regulations to accommodate technological change. Another key element to this change will be attracting Silicon Valley-type tech talent to an industry that isn't typically known for its innovativeness. In order for that to happen, firms will need to show a commitment to using new technologies. "We need a renovation of the sector to attract more diverse and more digital talent," Ribeirinho said. Read more:
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This is how COVID-19 will change offices forever, according to Pi Labs, a VC that invests in real estate tech firms
Summary List Placement The COVID-19 pandemic has hammered the commercial real estate sector, and forced companies...Summary List Placement The COVID-19 pandemic has hammered the commercial real estate sector, and forced companies to think about how they can use technology to improve both employees' productivity and their wellbeing. A 2019 PwC survey found that nearly 90% of property investors believe that technology innovations in real estate will continue growing over the next five years — COVID-19 appears to have accelerated that growth. Pi Labs, a London-based venture capital firm investing in property tech startups, has written a report on the future of work and the workplace. Business Insider got an exclusive early copy, and interviewed Pi Labs' CEO and founder, Faisal Butt, to learn more about what the future holds for the commercial real estate sector. Visit Business Insider's homepage for more stories. The COVID-19 pandemic has forced companies to rethink their office spaces. Firms want to adapt their space to maximize both employee productivity and wellbeing — and technology has a big part to play. A 2019 PwC study of more than 900 European property investors in 22 countries found that nearly 90% believe technological innovations in real estate will continue to grow over the next five years. COVID-19 has accelerated the digitization of the sector, and more companies are realizing the benefits of tech, said Faisal Butt, CEO and founder of Pi Labs, a European venture capital firm in Europe that invests in tech startups in the real estate sector. "Those that don't embrace innovation will be the ones that lose out," he said. Pi Labs' new report on the future of work, released today, was shared exclusively with Business Insider before publication. The report outlines the changes Pi Labs forecasts for coworking, automation, and the tenant experience. The future of the office is, clearly, far more complicated than just checking people's temperatures at the door — read through the best bits of the report, selected by Business Insider, below. Offices will be more sustainable to improve your wellbeing and productivity COVID-19 has made many people rethink their relationship with work. Home offices are also virtual social venues, gyms, and yoga studios, depending on the time of day. The concept of being at work has shifted, and commercial property owners will have to adapt, focusing more on the health and wellbeing of employees. Property owners and developers will prioritise tech to improve employees' wellbeing and productivity, Pi Labs' report said. A 2019 Deloitte's study found that 92% of 750 commercial real estate executives plan to maintain or increase investment in tech that affects how people use their office in the coming years — one example is a mobile app that lets people book meeting rooms. Investments will focus on office culture, employee focus, and learning, the report said. For example, the startup Demand Logic provides a cloud-based analytics platform that helps property managers monitor and improve the environmental conditions of their building, and eliminate complaints around ventilation and heating. Lighting, ventilation, and temperature are the three environmental factors that most influence staff productivity, according to the report. A surprising impact of the pandemic is the rise of the importance of air quality monitoring in office buildings, Butt said, "which previously was a fringe concept but now essential in providing a workplace that prioritises employee health and wellbeing." Green buildings and resource-efficient properties will cut costs while improving staff efficiency, Pi Labs said. These buildings can double cognitive function, it added. Only transparency, and an emphasis on employee health, will make people feel safe to return to the office, Butt told Business Insider. The co-working comeback While companies are slowly returning to the office, employees still want to work at least part of their week from home. Firms will have to give employees more freedom, and their workforce may be scattered across different regions. Coworking, which offers shorter leases, might make a comeback, the report said. What used to be the most popular option for startups will become the normal for large corporates too, "because you just don't know when the next pandemic might arrive and you don't want to be tied into long term liabilities," Butt said. Your workplace will turn into a learning hub Pi Labs forecasts a growing focus on the relationship between employees and tech, especially when it comes to training. The adoption of new technologies, including automated services, such robots designed for cleaning, will minimize the need for human workers in some areas. Companies will need retrain their employees: Around ten million workers in the UK alone will have to develop new skills and change roles by 2030, the report said. Firms will emphasize soft skills in the workplace, such as communication and critical thinking. Tech startups are working on transforming offices into learning hubs through virtual and augmented reality (VR and AR). While these tools haven't yet reached maturity, a 2020 PwC study expects VR and AR to boost the global economy by $1.5 trillion over the next 10 years — $294 billion of that growth will come from their use in training. Augmented reality will, for example, enable retailers to better understand buyer behaviour, and train their staff accordingly. Automated property management on the rise To cut costs, companies should invest in tech, Butt said. For example, real estate companies might invest into technologies that allow them to automate property management. Tools that encourage collaboration could prove popular too — startup Aprao has developed a tool that makes development appraisals more transparent by giving developers and other stakeholders, such as investors, information about a proposal on a streamlined platform. Tech that helps connect companies with customers that they can't physically meet will also help, such as visualization tools. The Romanian startup Bright Spaces, for example, allows office owners to showcase their space for tenants before they visit. "Only those types of solutions will do well," Butt said. "If you're a real estate owner that's ignoring tech you'll be left behind and you can't teach or prove your business. If you're looking to be around, only investments in technology and digital innovation are going to give you staying power," especially after a global pandemic," he added.SEE ALSO: 3 ways that offices will change post-coronavirus, according to the co-CEOs of the largest architecture firm Join the conversation about this story » NOW WATCH: What makes 'Parasite' so shocking is the twist that happens in a 10-minute sequence
THE DIGITAL BANKING ECOSYSTEM: These are the key players, biggest shifts, and trends driving short- and long-term growth in one of the world's largest industries
This is a preview of Digital Banking Ecosystem research report from Business Insider Intelligence. Purchase this report. Business...This is a preview of Digital Banking Ecosystem research report from Business Insider Intelligence. Purchase this report. Business Insider Intelligence offers even more fintech coverage with Banking Pro. Subscribe today to receive industry-changing finance news and analysis to your inbox. The banking industry is in the grips of an identity crisis. Leaders of the world's largest banks — such as Citi, BBVA, and Goldman Sachs — have begun describing themselves as technology companies with banking licenses. However, this description is still aspirational. Executing the vision will require billions of dollars in investments, the restructuring of teams, a reimagining of the entire banking technology stack, and the adoption of a far more customer-centric business view. The stakes of failing to transform are high: Accenture projects that 35% of all bank revenues could be at risk from more tech-savvy competitors like fintechs as soon as 2020 for incumbents that fail to up their game. As a result, a wave of digital transformation is now sweeping the banking industry, as incumbents shore up against consumer demand and competitive pressures. Major banks have already announced multibillion-dollar, multiyear digitization projects: By 2021, global banks' IT budgets will surge to $297 billion, up 14% from $261 billion in 2018, according to Celent. Many incumbent banks are opting to decrease their branch budgets and networks and reinvest their resources in digital channels such as mobile instead to cater to current consumer preferences, and are enlisting the help of tech-savvy software vendors to modernize their tech stacks from top to bottom as part of this process. In the Digital Banking Ecosystem report, Business Insider Intelligence explores the incumbent banking landscape as a whole, and the third parties banks are calling on to help their transition to digital. We then take a closer look at the three biggest drivers for incumbent banks' digitization push: digital-native competitors like neobanks and Big Tech companies; changing consumer behaviors and banking channel preferences; and a growing array of cybersecurity threats. Lastly, we examine what incumbents are already doing today to transform themselves into digital-first organizations to compete in a customer-centric, data-driven global economy, and how they are learning to meaningfully measure the progress of their transformations. The companies mentioned in this report include: Acronis, Amazon, Ant Financial, Apple, Ario, Banco Galicia, Bancorp, Bank of America, Bank of England, Barclays US Consumer Bank, BBVA, BNP Paribas, Caixa Geral de Depositos, CaixaBank, Capital One, China Construction Bank, Citigroup, Citizens Bank, Compliance.ai, CSI, Dave, Detroit Fintech Bay, Deutsche Bank, Diasoft, Emirates NBD Bank, Finastra, Finn AI, Finxact, First Direct, FIS, Fiserv, Flagstar Bank, Forcepoint, ForSee, Forward Networks, Geezeo, Gemalto, Goldman Sachs, Google, Grab, Hello Bank, Help Systems, HotJar, HSBC, IBM, ICBC, Infosys, ING, ING Direct, Intesa Sanpaolo, Jack Henry, JPMorgan Chase, Kenna Security, Lloyds Bank, Lyft, Midwest Bank, Mission Bank, Monzo, N26, Nationwide, NatWest, nCino, ObserveIT, OnDeck, Openbank, Osano, Personetics, PNC, RBS, Reciprocity Labs, Saga, Santander, Sberbank, Square, Starling Bank, Strands, Tanium, Temenos, Tencent, Thomson Reuters, Thought Machine, Tink, TSB, Uber, United Income, US Bank, Wells Fargo, Zelle, and Zopa. Here are some of the key takeaways from the report: Incumbent banks are intensifying their digitization efforts in the face of changing consumer demands and growing competitive pressures. The number of US consumers considering switching banks in the next 12 months increased by 86% from a year before, from 6.9 million to 11.9 million, per Resonate, with consumers citing the need for better digital banking services and more personalized products and tools as major motivators. Meanwhile, tech giants like Google and Amazon are poised to grab up to 50% of the $1.35 trillion in US financial services revenue from incumbent banks, per McKinsey, leveraging their tech expertise to lure away customers. Legacy channel usage is steadily dwindling, while digital channel usage is firmly on the rise. This turn to digital is being accelerated by younger, tech-savvy generations like millennials and Gen Zers quickly becoming banks' largest addressable market. Once the most widely used banking channel in the US, branch use will drop at a compound annual growth rate (CAGR) of -2.01% between 2019 and 2024, per Business Insider Intelligence projections. Meanwhile, mobile banking, the least-used banking channel in 2008, is expected to grow at a CAGR of 2.83% between 2019 and 2024, the highest among all channels. To digitally transform, banks need to join forces with partners, enemies, and frenemies alike. Vendors will be key to the modernization of banks' IT, with specialists catering to each layer: 81% of banking executives surveyed by Finextra and the Euro Banking Association cited working with partners as the best strategy for achieving digital transformation goals. Banks' growing IT budgets reflect their changing priorities: By 2021, global banks' IT budgets will surge to $297 billion, up 14% from $261 billion in 2018, according to Celent. Banks' digital transformations are already well under way, and incumbents are making massive changes to the way they operate and plan for the future to compete in a digital economy. They're doing this by embracing digital-ready innovation models; adopting new business models like open and direct banking; and reorienting their tech stacks around the digital customer experience. In full, the report: Outlines the incumbent banking landscape and its components, and the structure of the banking tech stack and the vendors supplying each of its layers. Explains the biggest drivers behind banks' digital transformations, especially the rise of tech-savvy competitors, shifts in consumer behaviors, and a growing number of cybersecurity threats. Highlights the steps banks are already taking to turn themselves into digital-first, data-driven, and customer-centric organizations. Evaluates the progress incumbents have made towards digitization, and how deeply they've embedded themselves in the emerging cross-industry digital banking ecosystem. Interested in getting the full report? Here's how to get access: Purchase & download the full report from our research store. >> Purchase & Download Now Sign up for Banking Pro, Business Insider Intelligence's expert product suite tailored for today's (and tomorrow's) decision-makers in the financial services industry, delivered to your inbox 6x a week. >> Get Started Join thousands of top companies worldwide who trust Business Insider Intelligence for their competitive research needs. >> Inquire About Our Enterprise Memberships Current subscribers can read the report here. Join the conversation about this story »
BIG TECH IN TRANSPORTATION: Strategies legacy players can deploy to limit the threat to their market position
This is a preview of The Big Tech in Transportation research report from Business Insider Intelligence. Purchase...This is a preview of The Big Tech in Transportation research report from Business Insider Intelligence. Purchase this report. To check to see if you already have access to Business Insider Intelligence through your company, click here. Big tech companies — specifically Google-parent Alphabet, Apple, and Amazon — have their eyes set on the transportation space, which is undergoing a rapid transformation. Across the globe, legacy transportation firms are contending with forces that are reducing the appeal of traditional gas-powered vehicles, including the rise of mobility companies like Uber and Lime, regulatory pushes for cleaner vehicles, and consumer demands for a more streamlined, digital in-car experience. These forces have made traditional transportation companies both more vulnerable to challengers and more willing to work with nontraditional players. Having already shown an ability to disrupt traditional industries by rapidly innovating, creating best-in-class user experiences, and earning the loyalty of consumers across the globe, big tech now appears poised to propel the transportation industry into a new era. This includes launching mobility services of their own, backing some of the world's most successful transportation startups, supporting alternative energy sources for vehicles, and bringing their popular tech products into vehicles. In the Big Tech in Transportation report, Business Insider Intelligence examines the moves that Alphabet, Apple, and Amazon are making to gain a larger foothold in the transportation industry. We outline potential next steps each may take based on those moves. Finally, we highlight the different strategies legacy auto firms will use to better compete as big tech companies raise their profiles in transportation. The companies mentioned in this report are: Alphabet, Amazon, Apple, Aurora, Automobile, Ford, GM, Google, Fiat Chrysler, Rivian, Volkswagen, Waymo. Here are some of the key takeaways from the report: Within big tech, Google-parent Alphabet, Apple, and Amazon have been the most active firms to push into the transportation space. Alphabet has quickly ramped up its transportation efforts, becoming the most formidable big tech firm in the space. The company has focused its efforts in three core areas: autonomous driving technology, vehicle operating systems (OSs), and alternative mobility. Despite Apple being quite secretive in its efforts, we know that the iPhone maker is working on self-driving technology and is using its OS to enter the auto space. Amazon, renowned for disrupting countless industries, is deploying an early strategy that appears to be focused on capturing control of the in-car experience with its voice assistant and leveraging new transportation technologies to improve operations. In full, the report: Details the different avenues big tech firms are taking to build out a presence in the lucrative transportation space. Highlights how big tech will look to build out their transportation offerings going forward. Discusses the different strategies automakers can take to ensure they hold onto their respective market positions as big tech becomes a potential competitor. Interested in getting the full report? Here's how to get access: Purchase & download the full report from our research store. >> Purchase & Download Now Join thousands of top companies worldwide who trust Business Insider Intelligence for their competitive research needs. >> Inquire About Our Enterprise Memberships Current subscribers can read the report here. Join the conversation about this story »