At Innovation Endeavors, one of our most fundamental philosophies is that technology can transform labor. More specifically, the potential of technology to radically increase labor efficiency is one of the most important opportunities of our time. We see the domain of labor efficiency as having two primary levers: (1) augmenting human labor with better tools, such as robots and automation, and (2) increasing the productivity of humans themselves with better workflows, software, and incentives. In the former bucket, we have invested in about a dozen robotics companies over the last decade, and in the latter, we have made numerous investments in applied machine learning for traditional enterprise, vertical market software, and emergent generative AI applications. Our latest investment is in Trunk Tools, which is bringing together data, AI, and psychology to make construction work more productive, safer, and more rewarding.
The construction labor crunch limits growth
The scope of the opportunity to make labor better is exploding. In the largest pillars of our economy, the pain associated with the current labor shortage is reaching a fever pitch as our collective goals for building infrastructure, growing food, and manufacturing goods, continue to expand. As one example, the demand for U.S. factories has hit a remarkable inflection point (i.e., Ford announcing the largest ever DOE loan) with the tailwinds of the Inflation Reduction Act, reshoring, and global market shifts all coming together.
Achieving these goals will not be possible with our current labor paradigm. In construction, the single largest problem facing the industry is the lack of skilled labor. This bottleneck is very clear when listening to the challenges of large general contractors (GCs), engineering procurement and construction firms (EPCs), and skilled tradesmen. The labor shortage has been a major contributor to the fact that construction productivity has flatlined over the last 50 years and is driving up costs and creating massive delays across the majority of projects. According to Associated Builders and Contractors, the construction industry will need to attract an estimated 546,000 additional workers on top of the normal pace of hiring in 2023 to meet demand.
However, beyond just a labor shortage, construction faces a crisis of labor inefficiency. Productivity rates for workers are between 20–30% across the industry, and crews are conscious of not working too fast given that they are paid hourly (and to avoid needing to find a new job when finished), and will disrupt the pacing of other trades who follow behind them on the job site.
To try and boost productivity, like most industries, construction companies pay out bonuses; of the $1 trillion annual value of the U.S. construction industry, roughly 10% is paid in non-salary incentives. This is typically done in a manual, under-the-table way, usually as cash spot bonuses on-site or as year-end and project-based bonuses, which are often delayed and have little-to-no measurable impact on productivity. Overall, the bonuses are not well targeted and are a crude method of incenting productivity. Furthermore, there is no way to know if they actually move the needle on the overall project schedule, given the lack of high-integrity data on job sites.
In terms of how workers actually get paid, the industry is also in need of innovation. Industry experts estimate one-third of workers are unbanked, and many drive hours each day to the job site. Methods of paying bonuses, per diems, and earned wage access — i.e., getting paid daily instead of bi-weekly — are woefully inadequate or often nonexistent. When interviewing top 10 GCs, daily payouts are cited as one of the most requested perks they are hearing from tradesmen. Empowering labor with instant bonuses, per diems, and early wage access, is not only useful for productivity but has a massive impact on worker well-being and morale.
Inefficient project management persists
Beyond the worker perspective, there is a bigger opportunity to align incentives across an entire construction project. Incentives for workers tie directly to the project schedule — the single source of truth for construction management — because daily tasks ultimately roll up into a high-level plan across the multi-year life of the project. The schedule is a complex forecast of time and budget.
To break it down: Once a job is bid, the schedule begins at the six-month lookahead (this refers to the time horizon of the plan) and is typically maintained in tools like Primavera P6. The GC largely bases the budget on labor — the primary variable cost and 65% of total construction costs on average — and from these initial, high-level assumptions, the schedule is passed down from GC to project manager, to superintendent to foreman, and detail is added along the way. As the time window diminishes, it’s finally time for the four-week lookahead. This final step is the transition from the “office schedule” to the “field schedule” — in which plans go from theoretical to real — and demarcates a critical inefficiency in the industry. In innovative companies, the field schedule is created using a method called pull planning, in which sticky notes are used to create goals and a visual plan, with all the trades giving input. In the rest of the industry, these schedules are done manually on paper or in Excel.
There is essentially no digitization, record keeping, or optimization used when mapping out a field schedule. In other words, the edge of the project, where the actual crews do 100% of the work, is linked into the client → contractor → project manager → superintendent → subcontractor incentive and critical path chain only by best guesses, post-its, and cash bonuses. This is the problem Trunk Tools is addressing: aligning incentives from owners all the way down to crews to directly influence the critical path of a construction project. This alignment will facilitate a direct transfer of owner’s and client’s budgets into the pockets of tradesmen.
Technology can transform an analog industry
Trunk Tools is optimizing and digitizing this deeply flawed bonus, payout, and goal-setting process by unlocking task-based incentives powered by psychology, data science, and machine learning. Every project using the platform will provide Trunk Tools debit cards to each worker and set up simple, SMS-based goal notifications. This quick onboarding unlocks the ability to have a granular directive of the job site and break it down into its component parts.
Given there is little-to-no historical data of day-by-day, hour-by-hour tasks in the industry, Trunk Tools is building a unique, proprietary, and valuable data set. Today, Trunk Tools has three core products: 1) incentives and goals (for productivity, safety, and quality), 2) per diem payments, and 3) earned wage access. The goal-making process is similar to pull planning, but instead of post-its, the project engineer inputs the goals into Trunk Tools using a templatized format, with automated suggestions that prompt what kinds of goals might make sense for a given project at a given time — leveraging AI and trade-specific algorithms. Workers are alerted to these goals, can see their standing on a leaderboard, and receive payment instantly on the Trunk Tools debit cards as they complete goals. This feedback loop is a key value of Trunk Tools from a scheduling perspective. Training the goal-creation engine on historical data of incentives linked to specific tasks is the holy grail of cost accounting in the industry. It will allow construction executives to directly influence the critical path of a project in an algorithmic, optimized way, and provide workers more ownership, as well as increased satisfaction, safety, and retention.
Trunk Tools is gaining exciting traction in the construction industry. The platform has been rolled out on some of the largest factory projects in the U.S. Trunk Tools is focused on the largest construction companies in the U.S. in its initial go-to-market, but other massive industries like manufacturing and agriculture would also benefit immensely from their offering. The company is already operating in labor union markets and aims to develop alignment and secure endorsement from the largest unions.
The overlap between tech founder and experienced tradesmen is small, making the founder <> market fit of Trunk Tool’s CEO and founder, Dr. Sarah Buchner, all the more remarkable. Sarah did not have an ordinary path to building a startup. Growing up in rural Austria, she was trained as a carpenter beginning at 12 years old. Over the next decade, she worked her way up to project manager on large commercial job sites in Europe, overseeing 100+ person teams. She became the Group Lead of Digitization at Stragab, the largest construction company in Germany, where she developed several construction-tech products. During this period, she got a Ph.D. in Civil Engineering/Data Science.
She came to the U.S. to attend the Stanford Graduate School of Business (where our relationship with her began) and to realize her long-term goal of bringing technology to the U.S. construction industry. Her deep understanding of construction workers and her desire to improve their livelihood comes from decades of first-hand experience. If you have the opportunity to meet Sarah, her passion and drive are a joy to behold. We can’t wait to see what Trunk Tools can bring to the lives of construction workers and how aligning incentives can transform one of the world’s most important and foundational industries.
