While technology has turbocharged performance in virtually every industry, construction's productivity has grown a sorry 1 percent in the past 20 years. Labor, which represents 50 percent of costs, is a particular drag. Daily progress frequently stalls as workers retrieve materials and equipment from around a job site or await the arrival of a subcontractor. "Time on tools" (the industry's uptime metric) can be as little as 3.5 hours out of 10. That contributes to a large majority of billion-dollar projects coming in 40 percent behind schedule and 30 percent over budget, according to McKinsey & Co.

Rhumbix offers a solution: software for hard hats. The San Francisco-based company is among the newest and most ambitious startups to attack the $12 trillion global construction market. Its app records what happens in the world of hammers and cranes and compares that data against project plans and schedules in real time. It then feeds its performance analysis to a project's foremen, who use it to improve productivity by, for example, moving a shop saw closer to a work site, making sure a backhoe is in place and ready to go, or allocating a second welder to a task.

"When you look at the construction-tech ecosystem, the craft workforce is really the underserved bottom of the pyramid," says Rhumbix co-founder and CEO Zachary Scheel. "You have project engineers running around with augmented-reality Hololens glasses, and the workers still have pencil and paper."

Scheel says Rhumbix improves labor productivity by 5 to 10 percent, which translates to a 200 to 300 percent increase in project profitability. Those prospects have won over nine customers since the product's launch in August, and the startup is conducting proof-of-concept projects with 11 of the world's 20 largest construction companies, including Bechtel, Skanska, and Fluor. The company projects it will generate $2.7 million in revenue this year and become profitable in 2018. It offers two products, one for $6 per month per worker and one for $22 per month per worker.

Most large construction companies are already using or at least experimenting with tools like Rhumbix's, says Mukund Sridhar, a partner at McKinsey. Such technologies are "very effective," he adds, and "help address many of the core problems that have plagued the industry, including a lack of communication on complex projects and limited transparency into day-to-day site performance and status of critical workflows."

Global origins

In 2010, Scheel was an officer in the Navy's Civil Engineer Corps, stationed in Djibouti, East Africa. He spent his days managing utilities construction for a new permanent base there, and his nights monitoring the activities of 3,000 troops around the continent with a GPS-enabled tool called Blue Force Tracker. As a graduate student at Stanford three years later, he landed an internship at Bechtel, which was building a processing plant at a vast copper mine in Chile. There, he noticed that decision making suffered from inefficient gathering of information.

Scheel realized large construction sites could track labor with an approach similar to the one he had used in the Navy. "I could tap into the workers as our source of ground input the same way Blue Force Tracker leveraged input from soldiers, sailors, airmen, and marines to be our eyes and ears," he says.

At Stanford, where he was pursuing a dual major in business and construction, Scheel partnered with fellow student Drew DeWalt, a former nuclear submarine officer. The pair launched Rhumbix in 2014, with a professor providing the first investment check. The startup, which now has 21 employees, hired coders to develop the product. "I am a mechanical civil engineer and Drew is a nuclear engineer and between the two of us we could build a small modular nuclear reactor," says Scheel. "But if you ask can we code, the answer is no."

Rhumbix has raised $13.25 million from such firms as Greylock Partners and Brick and Mortar Ventures. "You have two Navy veterans who work in construction coming together to form this perfect intersection of domain expertise with Silicon Valley DNA," says Jerry Chen, a partner at Greylock, which invested $6 million in 2015. "They know the problem intimately. They are bringing labor productivity and worker management into modern times."

Rhumbix captures and digitizes field data from construction sites, and then uses that data to help project teams better understand what is driving costs. At its most basic, the product is a cost-accounting tool that replaces paper time cards with smartphone-based GPS features that track different kinds of workers doing different kinds of jobs at different rates of pay. "As an analogy, it took the notebook out of the foreman's pocket and replaced it with a smart device," says Chris Ovens, executive vice president of strategy and innovation at Modern Niagara, a $500 million mechanical and electrical contractor in Canada that became a customer in January.

In the longer term, Ovens expects to gain much more value from Rhumbix's larger platform, which feeds information from foremen on things like delays and corrective actions, equipment needs, safety concerns, and the effects of weather directly to management, and then sends management's responses back to the crews. It also analyzes information collected on-site to produce reports that show how crews are performing compared with their plans. Those reports inform foremen's decision making and encourage crews to step things up. "We gamify production by highlighting the high performers," says Scheel. "Someone sees it and says, 'Hey, we can do better than that!' It drives behavioral change."

Although the industry increasingly embraces digitization, Scheel says the biggest challenge for startups still is finding tech-savvy people within construction companies who understand the potential and aren't unnerved by the cloud. "In two to three years, we will be on every worker," says Scheel. "But the industry is not ready for that yet."

Published on: Mar 1, 2017