Israeli builders and construction professionals believe they can leverage local technological prowess to revolutionize the highly regulated, conservative and traditional building industry and make their country a global leader in the field.
“How do we bring innovation to an industry that is stuck in the seventies, technologically?” asked Shay Pauzner, the deputy director general of Hitachdut Boney Ha’aretz, the Israel Builders Association, which represents some 2,000 construction companies working in Israel.
“We want to build a construction-tech sector in Israel,” said Pauzner.
The idea is to make Israel a global technology hub that will spearhead innovation in the sector, similar to what Mobileye and other automotive startups are doing for the automotive industry globally.
Intel Corp.’s massive acquisition of Jerusalem-based Mobileye for $15.3 billion in March this year has pushed Israel to the forefront of the highly competitive autonomous car and auto-tech industry. Some 450 companies in Israel are currently engaged in smart transportation fields such as travel sharing, communication, sensors and control systems, according to the Israel Innovation Authority. Israel represented some 4 percent of the global auto-tech deal share in 2016, the third-largest globally after the US (68%) and Canada (7%), a CB Insights report said.
Now, Israeli builders, together with the government, want to replicate that success in the construction sector.
The Israel Builders Association has teamed up with the Construction Ministry, the Ministry of Economy and Industry, and SOSA, a company that connects startups with investors and corporations, to set up the Construction Innovation Zone. This initiative aims to create a whole new ecosystem, bringing new technologies to cranes, planning and building procedures, and infrastructure. The key is to raise awareness and channel the interest of entrepreneurs and investors into the field.
The global construction industry is estimated to be worth $10 trillion and in Israel the sector turns around some NIS 90 billion ($25 billion) annually, accounting for some 10% of the nation’s GDP.
Most construction sites today still use traditional tools while costs for the sector have doubled since 2000, according to Marc Andreessen, the co-founder of US venture capital firm Andreessen Horowitz. In addition, productivity growth in the industry has stalled.
The technologies used are sometimes hundreds of years old: the first known construction cranes were built by the ancient Greeks. Hammers were first used in the Stone Age. Many other tools in use today are also still mechanical contraptions, leading to flawed security practices and a chronic shortage of workers to operate the machinery in an industry that often needs to meet tight deadlines.
Thus, there is a huge opportunity for startups to “disrupt” — in a good way –the so-called construction-tech industry, with solutions that can improve efficiency at construction sites and in project management processes, shorten timelines, sharpen building techniques, create new building materials and digitalize the industry with IoT tools — and cut back on use of expensive manpower. Israel can use its prowess in software, artificial intelligence, sensors and computer vision to spruce up the building of homes, offices and roads, just as it did with auto technologies.
“Our vision is to transform Israel into a global technological fulcrum for construction-tech,” said Zachi Flatto, a road planner and the manager of the Construction Innovation Zone initiative at SOSA. It may be an audacious goal, but it is doable, he declared.
The success of Israel’s auto-tech is encouraging, he said. “The car technology was unchanged for many years and now it is undergoing a revolution. We believe that can happen, and is already happening, in the construction industry as well.”
Indeed, globally, change has already started to take place. While funding to construction-tech lags behind that of other industries, the industry has grown in recent years, New York-based CB Insights said in an August 2017 report.
Some $1.08 billion has been invested across 207 deals in the construction-tech sector since 2013. Investors and industry players “are paying more attention to the industry, as new crops of startups emerge to tackle industry pain points such as collaboration, labor concerns, and site safety,” the report said.
This year has already seen approximately $169 million in disclosed equity funding invested in construction-tech companies across 25 deals globally. At the current run-rate, 2017 is projected to see $375 million invested across 56 deals, representing a 7% increase in funding and a 7% decrease in deals from 2016, CB Insights data shows.
Thus the aim of the Construction Innovation Zone is to build a local ecosystem that includes startups, construction workers, building companies, investors, regulators and policy makers to increase awareness among entrepreneurs and investors about the potential of the sector.
The initiative is taking a three-pronged-approach: it seeks to boost the number of startups dealing with revolutionary technologies for the field; to connect these technologies to the industry heads who will communicate what’s needed and try the products out; and to increase the amount of private and government funding for these technologies and pave the regulatory way for them to get the green light. The project sees the construction site of the future with smart cranes, robots and pre-fabricated materials — with construction and labor costs decreased significantly.
“I realized that we needed to do something when I suddenly noticed one of my workers with his smartphone on one hand and a hammer in the other,” said Nir Yanushevsky, a third-generation building contractor who is an active participant of the Zone. “The gap is so huge that I realized we couldn’t continue like this.”
The initiative, which started at the beginning of this year with an initial investment of NIS 1.6 million ($457,000) by the government and the Israel Builders Association for 2017, has already created a buzz both with startups and with builders, said Yanushevsky. The word technology has entered the lexicon of the contractors, he said, “something that wasn’t there just a year ago.”
“The potential is a blue ocean,” he added. Construction companies have a lot of money and are prepared to pay for solutions that will cut costs and improve efficiency and safety, he said.
Still, getting the contractors on board, he admits, is not an easy process. Some of them don’t even have a computer on site at times. “It takes time,” Yanushevsky said. “It is a learning process and they need to overcome the fear of technology.”
“You need to teach an industry to adapt to technology; we must change the psychology,” said Pauzner “But there is a hard-core nucleus that is talking about this and pushing this idea forward. The next generation of builders will be different.”
Some interesting local technologies have already popped up. Datumate, for example, founded by Arab Israeli entrepreneur Jad Jarroush, is using computer vision, big data analytics, machine learning, and drone and camera technologies to digitally transform the civil engineering processes used in construction, surveying, and infrastructure inspection.
The company’s software, DatuBIM, can transform drone and camera images into 2D and 3D maps with a high degree of accuracy. This helps cut back on the amount of time that surveying crews spend in the field, speed up construction progress and shorten infrastructure inspection duration, while maintaining survey grade accuracy, the company’s website says.
Another company, ShapeDo, has developed software that tracks changes in drawing versions of plans to avoid errors and monitor costs. The company’s software has been used by some 50 projects in Israel and the firm has just opened up operations in the UK.
“This sector offers a huge business opportunity for the local and also international market,” said Oded Distel, the director of Israel New Tech at the Ministry of Economy and Industry. “The opportunity here is just as big as the problem.”
“Israel can also become a beta site for foreign firms who want to try out their technologies locally,” he suggested.
“Ideally in 20 years we will look back and wonder how we ever worked as we do in the industry today,” Distel said. “In 40 years, the industry will be more transparent, faster, more energy friendly and cost effective.”