Patric Hellermann from Foundamental argues that construction’s so-called “productivity gap” isn’t a software problem – it’s a demand standardization problem. The real growth drivers are infrastructure, data centers, energy, and defense capex hitting $15 trillion globally. Materials, labor, and machinery matter more than another SaaS tool. Understanding the project economy, not just construction tech, is how founders and investors win.
There’s a chart that makes construction executives twitch. McKinsey’s productivity curve, referenced in nearly every ConTech pitch and industry report, shows construction labor productivity stuck since 1950 while every other industry tripled. It’s been the rallying cry for why the sector desperately needs software and automation. But what if the chart itself is the problem, not the answer?
Patric Hellermann, founder and partner at Foundamental, spent his keynote at Contech Connect in Paris dismantling that narrative. His take: the productivity debate has been framed wrong from the start. The issue isn’t that construction needs to work faster through software standardization. It’s that demand itself needs to standardize first – and when it does, the rest follows naturally.
That distinction matters. It reorients how founders build, how investors deploy capital, and how corporate buyers think about technology spend.
The McKinsey Chart Problem: Why You’re Reading It Wrong
The productivity story everyone believes doesn’t hold up
The McKinsey curve has dominated ConTech thinking for years. Construction productivity up slightly negative since 1950. Manufacturing, healthcare, finance all up 3x. The implication feels inevitable: construction is broken and needs fixing through technology.
But Hellermann points out a critical flaw: the chart doesn’t account for price inflation in materials and labor. When you strip out China from the productivity data (which has achieved measurable efficiency gains), the US picture gets actually worse. And in the EU, productivity is basically flat – kept from going negative only by price increases offsetting real output declines.
This matters because most people cite that McKinsey chart as proof that software is the answer. Standardize processes, automate workflows, reduce manual labor. The logic sounds airtight. Except it misses the actual bottleneck.
“Productivity in construction has nothing to do with efficiency,” Hellermann said. “It has everything to do with standardization.” But – and this is the critical turn – standardization doesn’t happen on processes. It happens on demand.
- Productivity ≠ Efficiency. You can automate a workflow all you want, but if the workflow itself is different for every project, you’ve solved nothing.
- Standardization ≠ Process Optimization. Real standardization comes from the market defining what it wants to build, not from vendors defining how to build it faster.
- Demand Drives Solutions. When demand standardizes, founders and corporate buyers can finally build scalable solutions against that demand.
In other words: stop fixing processes. Start reading the market. And the market right now is signaling something very clear.
The $15 Trillion Market and Five Demand Drivers
Infrastructure, data centers, energy, civil, defense – where the real growth is
The global construction market is $15 trillion and growing at 5-6% annually. That’s not a typo. The growth is real, the demand is real, and it’s heavily weighted toward specific sectors that are actually standardizing their requirements.
Hellermann identified five demand drivers reshaping construction spending:
Compare that to residential construction, which is fragmented, customized, and varies wildly by geography and client preference. That’s where process standardization matters – but it also won’t move the needle industry-wide.
The real growth is in capex-based markets where demand is already standardized. And the venture and corporate buying decisions should follow that reality.
Materials, Men, and Machines Matter More Than Software
Why cost inflation is the real productivity drag
Here’s the uncomfortable part of the story that software vendors don’t want you to focus on: construction is getting more expensive because materials are more expensive, labor is scarcer, and machinery costs are up. Software won’t fix any of that.
Since 2020, cement prices are up 2.5x. Steel is up 2x. In the US, construction material costs have doubled. Add in tariffs – 25% on steel, 10-50% on lumber – and you’re looking at roughly $10,900 of additional cost on every new US home before a single worker shows up on site.
Construction machinery hasn’t escaped the inflationary wave either, up about 40% since the pandemic. When you account for these inputs, the productivity question becomes: How do we maintain margins when our input costs are rising faster than we can charge?
Software that automates a few workflows might save 5-10% on labor in one phase of a project. But if materials and machinery are your binding constraints – which they are right now – you haven’t solved the actual problem.
This is why the market is seeing money flow into building products companies like Kingspan, Heidelberg Cement, and Saint-Gobain rather than workflow software. The economics are clearer. The demand is standardized. The margins are defensible.
The Project Economy: Bigger Than Just Construction
Why Foundamental thinks about construction + infrastructure + capex as one market
Hellermann frames his investment thesis around something broader than construction alone: the “project economy.” It includes construction, infrastructure development, renovation, and any capex-based market where you’re building something at scale.
This distinction matters. It moves the conversation away from “How do we make construction contractors more efficient?” and toward “Where are large capex projects being deployed, what are they standardizing, and what solutions emerge from that standardization?”
Capital formation in these markets is concentrating in five regions: China, India, the US, France, and Germany. Forty percent of global capex is in China and India alone, where government-directed infrastructure spending is massive and standardized. The US has 14 contractors generating almost $200 billion in annual revenue. And Europe is home to contractors like Vinci, the largest general contractor outside China, though European contractor valuations remain flat even as revenue grows.
The money isn’t flowing equally. It’s concentrating in specific markets with specific demand patterns. Founders and investors who understand those concentrations first will build solutions that actually matter.
When the demand standardizes, you as founders or you as corporate buyers can now create and find solutions against that demand. And that’s how you standardize.Patric Hellermann, Foundamental
How Demand Standardization Actually Creates Tech Opportunity
The real recipe for winning in ConTech
This framing – demand first, solutions second – inverts how most ConTech companies think about their market. Most founders lead with “Here’s a problem with construction processes” and try to build a global solution. That rarely works because construction processes vary wildly by region, project type, and client sophistication.
But when you start with “What is the construction market actually trying to standardize?” the question becomes answerable. Data center operators want repeatable build patterns. Utilities want standardized specs. Infrastructure investors want predictable timelines and cost structures. That’s where you build.
The founders winning right now aren’t the ones building “construction software.” They’re the ones building for specific demand patterns – robotics for repetitive assembly, materials tracking for standardized procurement, scheduling tools for mega-projects with locked timelines. The solutions emerge from the demand, not the other way around.
For corporate buyers, this is equally important. Instead of asking “Which software tool will make our contractors more efficient?” the better question is “What demand patterns are we standardizing, and what tooling supports that?” If you’re a developer building data centers, the tools that serve that specific demand – repetitive builds, known specs, aggressive timelines – will drive more ROI than generic productivity software.
Questions & Answers
The McKinsey chart shows construction productivity flat since 1950, but this doesn’t account for price inflation in materials, labor, and equipment. When you factor in the 2.5x increase in cement costs and 2x increase in steel since 2020, real productivity is actually declining, not stagnant. The chart creates a false narrative that process efficiency is the solution, when the actual constraint is input cost inflation and demand fragmentation. (Source: Contech Connect keynote, Patric Hellermann)
Demand standardization means the buyer knows exactly what they’re building and how they’re building it, so the specification doesn’t change mid-project. Data centers, utilities, and infrastructure projects have standardized specs – the operator knows the specs will be repeated across multiple sites, so they can optimize the process. Residential construction, by contrast, is customized per client and location, so demand doesn’t standardize. This is why infrastructure projects get better tools and why residential construction stays fragmented. (Source: Contech Connect keynote)
Infrastructure (roads, tunnels, utilities), data center construction, energy infrastructure (power plants, grid upgrades), and defense infrastructure all have the most standardized demand because the specs are locked in by regulatory or customer requirement. These sectors are growing at 5-6% annually and represent the bulk of the $15 trillion global capex market. Residential construction, which is highly customized, grows slower and generates less venture interest because demand doesn’t standardize. (Source: Contech Connect keynote)
Because materials and labor are the binding constraints right now, not process efficiency. Companies like Kingspan, Heidelberg Cement, and Saint-Gobain are profitable because they’re addressing a clear, standardized demand – the need for higher-quality, more expensive materials in an inflationary environment. Software that shaves 5% off labor in one phase of a project doesn’t move the needle when materials have doubled in cost. Building products companies have more defensible economics because demand for them is clear and growing. (Source: Contech Connect keynote)
The project economy includes construction, infrastructure, renovation, and any capex-based market where large projects are deployed at scale. Foundamental uses this framing because it shifts focus from “How do we optimize construction?” to “Where is capex being deployed, where is demand standardizing, and what solutions emerge from that?” This perspective is broader – it includes infrastructure, utilities, industrial builds, and energy projects – and helps investors see opportunities that don’t fit neatly into “construction tech” labels. (Source: Contech Connect keynote)
Start by identifying a capex market with locked-in specifications – data centers, utilities, infrastructure operators. These buyers know exactly what they’re building and have incentive to optimize that specific build pattern repeatedly. Then build solutions that serve that specific demand, not generic “construction productivity.” For example, robotics for repetitive assembly in standardized projects, materials tracking for procurement in utility builds, or scheduling tools for mega-infrastructure projects with fixed timelines. The key is solving for a specific, standardized buyer need, not trying to be a generic construction software platform. (Source: Contech Connect keynote)
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Contech Connect Paris Keynote. Patric Hellermann, Foundamental. February 2026. Full keynote covers market context, demand drivers, capital concentration, and the project economy framework.
McKinsey Productivity Research. Referenced in Hellermann’s critique of construction productivity assumptions. More context on productivity methodology available in Construction’s Productivity Problem: 75 Years of Data That Should Bother You.
ConTech Funding and Capital Trends. Weekly roundup tracking investment into infrastructure, data centers, energy, and construction technology. See Latest Construction Technology Funding Rounds for current market data.
Building Products Market Performance. Kingspan, Heidelberg Cement, Saint-Gobain stock and revenue data cited in keynote as example of capital flowing to materials rather than software.
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