Executive Summary

Whether Canada’s economy can thrive in a postpandemic world will largely be a reflection of the health and competitiveness of its largest business sectors. The construction industry stands out as a huge contributor to GDP, but also a sector that is particularly slow to adopt and use new technologies, which impedes productivity. The competitiveness of Canada’s construction sector is central to a large number of challenges such as housing affordability, infrastructure build-out, and climate resiliency.

In Picking up Speed, the Brookfield Institute’s recent report on digital maturity across firms in Canada, we analyzed data from the Canadian Survey on Business Conditions (CSBC) which identified some critical sectors that stand out as laggards in technology adoption, with the construction sector among them. For example, seven percent of businesses in construction had adopted software or databases for purposes other than telework or online sales. This is a fraction of the adoption rate when compared to front-runners such as wholesale trade, professional and technical services, and informational and cultural industries, which had adopted new software and databases at 24,19, and 15 percent of firms respectively. Similarly, only three percent of construction businesses said they had automated certain tasks, compared to finance and insurance at 13 percent, agriculture and forestry at 12 percent, and information and cultural industries at 11 percent.

Low technical maturity is having a detrimental effect on both labour and capital productivity in comparison to the overall economy, which is hurting international competitiveness. Between 2015 and 2019, labour productivity in the construction sector dropped 2.2 percent below the economy standard to 11.2 percent, while capital productivity hovered between 0.7 percent and 3.9 percent below the standard throughout the period.

In an effort to understand low technological maturity in the construction sector and point to policy solutions that might address it, this report draws upon interview responses from fourteen experts from the sector as well as companies that innovate specifically for the sector.

THE LAY OF THE LAND: Characteristics of the Construction Industry that Impact Technology Adoption

Risk is central to the structural challenges that the construction industry faces when trying to increase its technological maturity, which comes from three main sources:

1. Physical Mishap

From structural collapse that endangers lives, to smaller, but still costly, problems like lost materials, breakages, and other mistakes that require redoing work, these risks create an aversion to implementing new technologies.

2. Long timelines

Large commercial and residential projects take years to complete, and innovation, whether process or technological, begins with trying something new, monitoring the effect, learning lessons, and modifying. Long timelines that are due to these complexities, directly contribute to the significant costs of projects, and, in turn, to the difficulty in increasing technological maturity at a firm level.

3. A highly competitive environment

Fierce competition and thin profit margins contribute to a lack of coordination and information-sharing across the industry. Such a large number of competing firms also contributes to some firms isolating themselves to preserve their competitive advantages.

BREAKING GROUND: Factors Contributing to Technological Maturity

While technological maturity in the construction industry is low, responses from our sample of interviewees reveal there is at least a keen awareness of this situation, with steps being taken to address it. Of the construction companies that were interviewed, all were in the process of improving their technological maturity, and some have advanced quite far. Below are some of the steps taken by the firms that are successful in moving forward.

1. Careful planning

Moving forward in that technological maturity journey requires careful planning, being cognizant of what is actually needed, and being flexible. A technology roadmap moves forward by nurturing innovation skills and instincts in individual teams building their own “guiding inspirations” about how they would like their work to integrate with technology, and what solutions they need.

2. Forward thinking leadership and flexible culture

Simply adopting a new technology is a necessary but not sufficient condition for reaching technological maturity. A culture that enables the successful integration and deployment of technology is equally essential. Research from BDC that explored the concept of digital maturity identified five key factors that are necessary to foster a technologically mature culture:

• A strong digital strategy and vision
• Support from leaders
• Appropriate planning
• An environment that rewards risk taking and collaboration
• A focus on training and continuous learning

Not only are these features necessary for technological maturity, but in the construction industry they are also necessary for overcoming the risks described above to adopt in the first place. The construction firms that are successful in adopting new technologies are those that have the necessary culture and leadership.

3. Industry-wide solutions

While new technologies often create risk, they also lower it. For example, better sensors can detect water damage, quickly lowering the risk of that particular physical mishap. This is increasingly recognized by the industry in general, and especially insurance firms, a few of which have built technology review panels and discussion forums to work on the problem. A major hurdle is the competitive nature of the construction industry and the siloing of information. One solution being pursued is a strategy called integrated project delivery (IPD), where instead of keeping stakeholders siloed there is a single agreement to design and deliver projects together.

BUILDING TO NEW HEIGHTS: What More Can Be Done to Boost Technology Adoption

While this report has not presented a comprehensive examination of the different levers that could be deployed to increase technological maturity in Canada’s construction sector, there are nevertheless a few key actions that have been identified by our interviewees as next steps towards this goal:

1. Draw on international best practice

In the effort to build policy that addresses digital maturity in construction, a good first step for policymakers may be to look internationally. A notable example is the Centre for Digital Built Britain in the United Kingdom. In partnership with the government, the Centre educates the industry on how the construction and infrastructure sectors could use a digital approach to better design, build, operate, and integrate the built environment. Building Research Establishment (BRE), also in the UK, is designed to inspire and showcase the latest in technologies to support age-in-place, sustainable materials, and low-carbon technologies, enabling the industry and government to fast track to a net-zero economy.

2. Better utilize government procurement and regulation to encourage technological maturity

A greater willingness by governments to create new partnerships with the industry, while taking on some burden of risk alongside firms, was also a cornerstone of interviewee suggestions. There are a number of ways that governments can encourage innovation and technological maturation. These include:

• integrating technologies into government-funded projects
• creating test-beds where experimental products can be tested
• enabling more flexible regulations that are more responsive to emerging technologies
• Implementing purpose into adoption: technology adoption and integration is risky in construction, but it is worthwhile for governments to take on that risk instead of firms if it fulfills important policy goals

3. Encourage youth uptake of skilled trades and building science programs

Governments should focus on continuing to encourage more young people to join building sciences and skilled trades programs. Investing in building science and skilled trades would not only elevate the number of qualified people in the field, but it would also make the industry younger, and therefore perhaps more technologically-aware and willing to take risks. Clearer pathways need to be created for young people to enter these careers in order to show them that they are attractive options. Curricula should also be reassessed in order to integrate more innovative and sustainable practices. This not only has the potential to attract more young people, but would ensure that workers in the future have the skills to reach sustainability goals.

4. Build structures to share information

Implement “pre-competitive collaboration”, a process whereby a group of competing companies comes together to develop a solution for a problem that they all share, and from which none of them would gain a competitive advantage. To address the reality of limited resources faced by smaller companies, larger organizations with a vested interest in the technological maturity of the industry—such as regulatory agencies or insurance firms—should be tasked with setting up such platforms.