Construction projects are known for their sprawling budgets and schedule overruns. Underlying these issues are disjointed processes, a lack of data transparency, and project delivery models that don’t adequately address the needs of modern projects. To tackle these challenges, the industry must let go of doing things the way they’ve always been done, but there are hurdles in the way. Many AEC firms are hesitant to pursue new business models, make major investments in technology, and provide new offerings. Ironically, this aversion to taking risks actually invites risk in the form of high costs and unplanned delays.

Spurred by the pandemic, a convergence of external forces and persistent challenges within the industry are forcing change. Innovation is no longer for outliers––every player in the industry needs to identify their own forward-looking strategies to remain relevant and deliver more value to partners and investors.

Innovative AEC firms that adapt to disruption stand to unlock $265 billion in new profits.
Source: McKinsey, The next normal in construction


Here’s why it’s more important than ever for AEC firms to be open to new practices, tools, and processes to make strides in productivity, quality, and sustainability.


3 Factors Driving Innovation in Construction

Demand for higher performing assets, the growing urgency of environmental issues, and the upheaval caused by the pandemic are driving the construction industry to confront its long-held aversion to change.

1. Increased demand for high-performing assets

New buildings and infrastructure assets must meet high standards for performance, including addressing growing demands around energy consumption, safety, durability, future adaptability, and interactivity through Internet of Things (IoT) technology. Driven by stricter building codes, trade initiatives, and user demand, the push is on for assets to optimize performance throughout the building lifecycle.

Reduced Energy Consumption

Inspired by the standards set in the Paris Climate Agreement, industry organizations like the American Institute of Architects (AIA) and World Green Building Council (WGBC), as well as regulators in the Biden Administration and California, are setting lofty goals to reduce energy consumption. They’re calling for new buildings to be carbon neutral by 2030 and zero energy by 2050. Zero energy buildings (also referred to as net zero) leverage energy-efficient practices and renewable resources to meet their own energy requirements. Commitments to net zero were reaffirmed by global leaders at COP26, the 2021 United Nations Climate Change Conference.

Watch On-Demand: How Sustainability Shapes Innovation

More Smart Buildings and Infrastructure

As the cost of IoT technology comes down, and its benefits become clear, many asset owners view it as essential to enhancing the user experience and improving operations. New buildings and infrastructure should be engineered with this connectivity in mind. By leveraging digital information gathered during design and construction, owners can make more informed decisions about repairs and future renovations. They can also offer users the connectivity they desire (such as smart temperature controls) on Day One.

Greater Flexibility and Adaptability

Extending the lifespan of an asset is vital to maximizing the initial investment and reducing the environmental impact of construction. Interest in designing buildings with flexibility and adaptability in mind is on the rise. To make wise decisions about future use and properly budget for adaptability features, it’s important for project stakeholders to collaborate often and early. An added benefit of adaptable assets is that they enable owners to recoup some value when a building is no longer operational due to business closure.

2. Expanding opportunities in sustainable construction

While sustainability is a key element of high-performing buildings, addressing construction’s environmental impact requires a more holistic approach. The concept of sustainable construction is expanding beyond reducing energy consumption and using green building materials. AEC firms must reduce the environmental impact of the construction process itself.

A growing focus on embodied carbon––the greenhouse gas emissions generated by the extraction, transport, and installation of construction materials––is broadening the scope of how we look at energy consumption in the built environment. From the early stages of design through the final phases of onsite construction, project teams must do their part to reduce unnecessary energy consumption and waste.

Using construction materials more effectively not only reduces carbon emissions, it also reduces consumption. Raw materials usage is on the rise, and much of it is driven by construction.

40-50% of resources extracted for global materials are used for housing, construction and infrastructure.
Source: World Green Building Council, Beyond Buildings


There’s no single approach to addressing these challenges. Project scope changes, rework, and poor materials handling all contribute to construction waste. Design and procurement decisions play a critical role in preventing these issues. Job site practices and innovations, such as machine control, can also help reduce fuel consumption and prevent materials from being used improperly.

The expanding scope of environmental stewardship will continue to loom large for construction stakeholders. Sustainability is an integral component of environmental, social, and governance (ESG) initiatives, which are coming under increasing scrutiny from investors, partners, and the general public. Innovative firms will be best positioned to respond accordingly.

3. Accelerated disruption driven by the pandemic

The COVID-19 pandemic is the dominant force driving disruption across all industries. In construction, the pandemic accelerated many trends that were already occurring. According to McKinsey, changes driven by evolving customer demand, labor challenges, new materials, and new regulations will lead to increased industrialization and digitization, as well as the emergence of new materials and entrants in the AEC ecosystem.

The pandemic pushed these disruptions into hyperdrive. For example, prefabrication and innovative materials usage were already growing in popularity pre-pandemic. But the sharp rise in costs and the current challenges in attracting skilled labor has sparked increased interest in new construction methods.

Driven by pandemic-related rising costs, 26% of AEC executives plan to increase the use of prefabrication and modularization and 20% plan to source advanced materials.
Source: KPMG, 2021 engineering and construction industry outlook


As disruption occurs at scale, firms are responding. As a result of the pandemic, 60% of AEC executives are investing in technology and facilities and 52% are investing in value chain control and integration, according to McKinsey. With engineers, designers, contractors, and materials suppliers facing increased commoditization, this openness to adapt is vital to surviving the disruption and delivering clients more value.


The Construction Labor Shortage and Competitive Pressures Distract from Innovation

Many AEC firms face pressing issues that can distract them from pursuing innovation. When much-needed skilled labor positions go unfilled, or a competitor is expanding its market share, it can be difficult to set time aside to consider innovation. Instead of being seen as a distraction, innovation can be the solution to these immediate issues.

One of the factors driving the skilled labor shortage is a dwindling pipeline of young workers ready to replace those that are retiring. White-collar office jobs appeal more to young people who are wary about safety issues and being prepared for the future of work. Young adults want to work for innovative firms, and the construction industry could take some cues from the military, which used gaming and an emphasis on non-combat, technology-focused opportunities to drive recruitment.

Innovation is also key to remaining competitive. Forward-thinking AEC firms that can deliver cost reductions and time savings will gain an edge. Those efficiencies can come in the form of new service offerings and better internal practices. They can also be realized by adopting technologies, such as digital as-builts, to meet requirements for digital delivery and support better asset operations and maintenance.


Construction Innovation In Action

Innovation can encompass new business models, project delivery methods, and areas of speciality. But with digitization being the force driving transformation in our time, technology must be central to any innovation initiative. Here’s how three AEC firms are leveraging technology to push boundaries:

Building a bridge with BIM

The Randselva Bridge in Norway is a 634-meter-long cantilever concrete bridge that’s being built with only BIM models––no drawings have been generated throughout the entire project. The project team is using Tekla Structures, Tekla Model Sharing, and Trimble Connect to build and collaborate on models. By leveraging a data-rich model, the team has better control over time and cost planning. The contractor can export data directly from Trimble Connect, reducing miscommunication and errors. And the universal nature of the BIM model allows for stakeholders to collaborate across national boundaries. Read More >>

Making sustainability practical

Ramboll is a global engineering and architecture firm that collaborates with clients and partners to drive the sustainability of construction projects. The company created its own Sustainability Dialogue Tool to help clients visualize their sustainability ambitions for their project. The digital tool is used to steer conversations, and in many cases, show clients that they can achieve more than their initial goals. Because project owners play a vital role in setting sustainability goals, Ramboll’s innovative approach helps them think bigger and accomplish more. Read More >>

Making digital transformation a priority

Dutch construction company VolkerWessels is widely regarded as a leader in digital constru and BIM innovation. In 2017, the company launched DigiBase, a startup focused on driving in construction and real estate. In addition to BIM systems, DigiBase will focus on IoT, GIS, reality capturing, and virtual and augmented reality technology. The DigiBase center is a venue where project stakeholders can use the latest tools to consult, plan, and use innovative tech like virtual reality to experience a project before construction begins. Read More >>


Leverage Construction Technology to Drive Innovation

While pressing issues like a lack of skilled labor and a growing focus on sustainability can steal your attention away from other initiatives, prioritizing innovation is essential to addressing these and other challenges in the long term. From environmental challenges to demands for higher performance to increasing competitive pressure, the need for innovation is more apparent than ever. While hitting the gas on innovation may seem like a risk, the bigger gamble is in failing to act and falling behind as the construction ecosystem rapidly evolves.