Update from the Technology Frontier
It
seems to me building and construction will become a laboratory for the fourth
industrial revolution. This update from the technology frontier broadly looks
at both open and closed emerging platforms. It covers Katerra’s expansion and links
to a recent interview with Executive Chairman Michael Marks, a recent paper in Construction Management and Economics on the digital evolution of DPR Construction,
RAD Urban and Project Frog, and a new JV between Bentley and Topcon, Digital
Construction Works, to provide digital ‘twinning’ services to contractors. The
last topic is venture capital invested in the built environment related firms, which
was over US$75 billion between 2015-2019.
A previous post
looked at site production, with remote controlled equipment, 3D printed
machinery and 3D concrete printers. My view is that economies of scale will
increasingly favour site production, with exceptions like poured concrete, and
the future will see building and construction move to a form of hybrid
production that combines off-site manufactured components with those printed
on-site. The mix of the two determined by the project’s characteristics.
I suggest three pathways
for the development of industry processes and structures over the next few
decades, in the sense of technology adoption and implementation trajectories.
These are the business as usual, upgraded and modified, and transformational versions
of the industry. What really differentiates the three is the rate at which new
technologies are taken up, which in turn leads to different trajectories of
technological development for firms within those three pathways, which are:
1. Business
as Usual - Similar But Smarter
Where the industry as a whole is much
larger than any given project, and the individual projects reflect a consensus
view on what the appropriate technological mix might be for that type of
project, in that place at that time. Over time this industry consensus moves to
include whatever the most effective or efficient piece of technology available.
2. Upgraded
and Modified - Manufactured Mass Customization
These firms invest considerably more
in technological development, making significant changes to the way they are
organized and the way they organize their projects. Some businesses are much
better at this than others. The companies included in this post are clearly on
this path, laying the foundations for the future industry, or in Bentley’s case
meeting a requirement for an industry built on digital twins.
3. Transformational
- Faster, Higher, Stronger
New production technologies automate many tasks and
processes and create new machines that are far more capable than existing ones.
Materials and machinery become smart, with embedded processors, are networked
and communicate with each other. Components are location and condition aware. Humans
partner with machine intelligence to accomplish many tasks, and use robots or
exoskeletons for most physical work, with remote control of automated heavy
plant and equipment, while fabricated and modular components combine with
automated systems and onsite robots to transform the building process. This is
happening, as the KES example below shows.
Katerra
Katerra was founded in 2015, and in 2017 raised $130
million reaching a $1 billion valuation. The company’s goal is complete
vertical integration of design and construction, from concept sketches to
installing the bolts that hold their buildings together. On its projects the
company is typically the architect, off-site manufacturer and on-site
contractor, and usually contracts directly with developers, who are its
clients. The company’s focus is on reducing the time needed to get approval,
to document and to build, with significant cost savings to those developers.
The company started by developing software to
manage an extensive supply chain for fixtures and fittings from around the
world, particularly China, then added a factory in Phoenix making roof trusses,
cabinets, wall panels, and other elements. In September 2017 it announced plans
to build a factory that
will make panels of cross-laminated timber (CLT), a high-tech
structural wood.
Initially, buildings were designed by outside
architects, but in 2016 the company started a design division. In 2018, five
months after raising another $865mn led by SoftBank’s Vision Fund, Katerra
acquired Michael Green Architecture and architects Lord Aeck Sargent. Since then
Katerra has acquired lighting manufacturer Shanghai Dangoo Electronics, precast
and prefabrication company KEF Infra, engineering firm Equilibrium, and general
contractors United Renovations, Fields Construction Co., Bristlecone
Construction, UEB Builders and Fortune-Johnson. Expected revenue this year is
between $2 billion and $3 billion.
One of the company’s three founders is a
multi-family developer, and his projects provided the initial pipeline of work
that made the company viable, and a second founder has a tech venture capital
fund. The third founder and CEO is Michael Marks who, after revolutionising electronics
hardware manufacturing and a stint at Tesla, raised
nearly $2 billion in capital. Their ambition is to leverage new technologies to transform building by
linking design and production through software, and their strategy now appears
to have four legs.
First, modular construction using CLT is
what Katerra has become known for, and there are now two multifamily building
platforms. The company has two mass-timber factories in California and
Washington respectively, the latter the largest CLT manufacturing facility in
the US, with another in Texas due next year. Three more factories are planned
in India, where Katerra does precast concrete. All structural components are
standardised.
However, Katerra is moving on from
structural components to fittings and finishes. Katerra plans to outfit its
buildings with Katerra Energy System (KES), a proprietary energy and mechanical
system, an intelligent power-metering and distribution platform, and KTAC air
conditioners, while delivering Katerra Windows from their factory to site in
one week. There is a new line of bathroom kits and interior fixtures and
finishes under the brand name Kova, with carpet, tile, plumbing fixtures, hardware, wood
trim, light fixtures, light sources, and mirrors, as well as a curated line of
products called Kova Select.
Third is
operations and maintenance services to maintain mechanical and prefabricated
systems. Katerra will contract these out but be responsible, because their
mechanical and electrical systems talk to the cloud and an operating center
gets notified if there’s a problem. This will get the IoT into buildings.
Finally, another significant
development for Katerra is a software platform called Apollo. Initially building
designs were done in Revit and then the files converted to a different format
for machines in the factory. Apollo integrates six functions:
1. Report
uses an address to find site information, zoning, and crime rates etc.;
2. Insight
focuses on design with the two building platforms;
3. Direct is
a library of components used in the building;
4. Compose is
a used for coordination between the different groups working on a project;
5. Construct
is for construction management (similar to Procore and Bluebeam):
6. Connect
is a way of managing the workforce on a project, a database of subcontractors.
At this point, Katerra may be the lead
disrupter in building and construction. They have the most fully developed view
of integration of the site and supply chain, and are creating a platform for project
development and delivery that could become one of the major, widely used systems
across the industry. If Apollo works as advertised in linking design and building,
it will move well beyond the current focus on document control and
communication of software from Oracle Aconex, Trimble Connect, Procore and SAP
Connect, and is one model of what second generation PM systems look like.
Interviews
with Michael Marks:
Rob Sobyra from Construction Skills
Queensland and Michael Marks discuss Katerra:
There is an Australian series of podcasts on engineered wood, including another 2019 interview:
Digital
Twin as a Service
In what may another big step forward
toward a platform for Construction 4, Bentley Systems and Topcon Positioning
Systems have a new joint venture company, Digital Construction Works,
to provide digital automation, integration, and ‘twinning’ services to constructors.
Bentley and Topcon have been working together since 2016, collaborating on
surveying, modelling, scheduling and logistics, work packaging, machine
control, and progressive assurance for construction. In 2017 they opened Constructioneering
Academies, to further the automation of digital construction through surveying,
engineering design, model development and as-built data collection.
The company will ‘embed’ people in
contractor’s organisations to act as what I’d call a project information
manager, taking some of the responsibility for managing digital work flows off
contractors and PMs and maintaining the digital twin of their project. One can
see how this could be a successful model for construction. For SMEs in
particular, who generally do not have much digital competence, this type of
platform may be important, possibly necessary, as clients increasingly require BIM
capability from contractors and suppliers.
Digital
Construction
A recent paper in Construction Management and Economics examines three San Francisco
firms: DPR construction, RAD Urban, and Project Frog. The case studies describe
the strategic evolution and restructuring of firm boundaries five years, to
enable greater adoption of digital manufacturing. Each firm has developed a
different approach: relational, project-based spinoff; vertical integration; or
digital systems integration. These approaches are theorized as a form of
strategic mirror-breaking intended to redefine the current paradigm of
knowledge and task dependencies. They enable the firms to develop products with
new system architectures and access more opportunities for innovation in
digitally-enabled manufacturing. In a “mirroring trap” incumbent firms resist
organizational change: “the knowledge about design, engineering and
construction are deeply embedded in specialty firms and their employees’
individual actions. In other words, knowledge about tasks has become tightly
aligned with the task dependencies themselves.”
DPR and RAD have both developed
in-house systems prefabricated of walls, building factories and managing
workloads in interesting but rather conventional ways. DPR has three product
lines: a load-bearing structural panel system, exterior wall panels, and
interior wall panels with MEP systems.
In 2016 Project Frog moved to a strategy
of mass customization: “They transitioned away from modular construction toward
a flexible kits-of-parts called their “Frog Kit.” Using the principles of mass
customization, Project Frog developed a web-based configuration platform called
myProjectFrog. The configuration platform draws from a library of Frog Kit parts
designed in Autodesk Revit. Using heuristic rules for design and assembly and
the logical constraints of shape grammar, myProjectFrog enables designers to manipulate
building design on a standardized grid.”
By coordinating and integrating product
design and production from digital-manufacturing suppliers, and the development
of a platform which “integrates a product-ready supply chain”, where they provide
the core infrastructure of digital integration but other firms participate,
Project Frog hopes to build an industrialised construction ecosystem, with these
partners developing the products Project Frog inputs into their platform.
Hall et al. conclude with the importance
of platforms: “One proposition is that future platform development will tend to
be open or closed, depending on the level of vertical integration for the firm.
Open platforms will be developed by digital systems integrators such as Project
Frog. These firms will develop the platform core and leverage the principles of
industry 4.0 to organize the periphery into new digital ecosystems. Closed,
internal platforms will be developed by vertically integrated firms such as
RAD. These firms gain advantage from total control of system architecture
and the ability to push the limits of
technical change.”
They also note: “The start-up Katerra
can make an interesting deviant case as a vertically-integrated company that
began with a closed product platform but has recently positioned its Apollo
Construct software platform as a hybrid between open and closed ecosystems.”
The research the paper is based on was done in 2016-17. In 2018 Project Frog released KitConnect, bringing together a decade of development into prefabrication and component design, and integrating BIM with DfMa and logistics.
Daniel M. Hall, Jennifer K. Whyte & Jerker Lessing (2019):
Mirror-breaking strategies to enable digital manufacturing in Silicon Valley
construction firms: a comparative case study, Construction Management and Economics, DOI:
10.1080/01446193.2019.1656814.
Venture
Capital in the Built Environment Sector
Also just out is a report
from EY’s Global Real Estate, Hospitality & Construction team Venture
Capital Funding Points to the Hottest Concepts in Built-World Tech.
Since 2015, US$75.2b has been invested in built-world tech by venture capital
(VC), in the first three quarters of 2019 US$24.6b was invested. EY calls built-world tech a subset of the more
than 7000 private real estate tech firms globally that have received a combined
$US155 billion in funding over the past three years.
