How Hilti Is Shaping the Future of Tools, IoT, and Construction Tech | Work Done Right with Johannes Paefgen

Wes Edmiston:  

Johannes, thank you for joining us here today. Welcome to the show.  

Johannes Paefgen:  

It’s my pleasure.  

Wes Edmiston:  

Yes, so you tell us a little bit more about your background, how it is that you’ve gotten into working in construction technology and innovations as you do now?  

Johannes Paefgen:  

Sure. I joined Hilti ten years ago. Okay. I did a PhD in IoT without a specific construction context. So I was working on data analytics and more in the insurance domain. But I saw where Hilti was not far away.  

It was like an hour away from the place where I was working on that. When I heard Hilti was working, this was the very early days for Hilti to look at SaaS as a product category. And so back then, there was the idea that for tools, you can also…  

Hilly always was kind of bringing services to augment the tool business and we had the fleet management out there, which was this all -leasing program. But Hilly wanted to go further and there was a need for customers to track the tool park to get more visibility on maintenance schedules and so on.  

So back then Hilti had this new initiative, which was a very small team, it was like four or five people working on this. So when I saw this job opportunity, I was very intrigued and it seemed to be an industry that was in dire need of digitization and kind of going, starting and working on this journey to work manufacturing had been many years before.  

So I joined the company 10 years ago in that project which then became on track. And so in these 10 years I’ve been working with Hilti in many different roles around R &D product on the product side of things in Liechtenstein, which is Hilti’s headquarters.  

And so doing that for eight years, you see a lot of exciting stuff, but you always have this kind of internal lens, right? And you see technology and innovation from more Hilti’s vantage point, which is broad and interesting, but also it’s just more of many that are out there, right?  

And so when I came to know that Hilti has this venture initiative and was out there in the US and Tel Aviv and in other places looking for startups and building these partnerships, I became very interested in in 2021, I had the chance to relocate to the US to Boston and join the team here.  

And so leading kind of the the East Coast hub for Hilti’s venture team. And yeah, it turned out to be a really interesting role. And so I’m every day, you know, getting to know about new solutions, new topics, new innovations out there.  

Very much enjoy that.  

Wes Edmiston:  

Yeah. There’s there’s a lot that’s changing in the industry. I mean, honestly, seemingly every week, you know, we’re here at this at this Builtworlds America Summit and just some of the technologies that I’ve seen at like the demo day yesterday had no idea and really novel, interesting ideas, great opportunities for improvements in the industry.  

And like you were saying, there’s once you get exposed to a little bit of the construction industry, you identify you want you fall in love with it, right? That the people are great. There’s so much really interesting, exciting work that’s going on.  

But also you kind of sympathize for him like this is really how you’re doing things. So so it’s it’s one of those areas where we start saying a lot of a lot of room for opportunity and improvement. You know, one thing I’d like to bring up those is I think we don’t know Hilti, right? You can go to the store and you can you can buy Hilti tools. And everybody really knows Hilti as a tool provider. So whenever you hear things like Hilti purchased and acquired FieldWire back in 2021, and I think I think it’s what it was.  

Yeah, a lot of people might be kind of surprised by that. So could you could you describe a little bit about what the intent and vision is behind maybe the acquisition of a construction management software and Hilti’s portfolio and where you all are kind of taking that in the industry at large?  

Johannes Paefgen:  

Sure, kind of a big question. But I give it a shot. So as I mentioned before, this is how Hilti started offering a ZAR solution called on -track, which is very close to what we do on the hardware side, right?  

So if you will say a tool park to a customer, if certain services are on the digitizing part of these services, is kind of a very obvious step. So, but then once you’re in the market with this modeling construction, you learn and you understand that you were just tatering to a slice or actually niche of that landscape, that of the problems that our customers are facing, that could be solved, it could be addressed as digital solution.  

And so when I look at I think the core of our customer base or trade contractors that execute work on a day -to -day basis, I think we learn quickly that they need a lot more than just a good solution to manage their equipment.  

And so I think the story of Fieldwire, Fieldwire goes way back so actually when Hilti started the whole journey into construction ventures, Fieldwire was one of the first venture investments we did. And so that kind of formed the relationship, formed an understanding of this emerging opportunity and landscape out there.  

And so we’ve been working with the even Jarvitt for a while until then. And I think in 2021, there was the right timing. And the reddit is also a nilty to kind of make this a firmer commitment and do the acquisition there.  

And if you look at Fieldwire, it’s a much more comprehensive solution to what an average contractor is looking at when trying to coordinate tasks and people and project documentation. And so from there, we’ve just taken forward really, I think.  

So this year, we did another acquisition in Europe in the construction European space, which is then kind of adding the back office element. And that kind of forms, I mean, we’re not pro -core, we’re not Autodesk, and I think we’re also not trying to compete with these players.  

But I think if you look at it from a mid -sized contractor, we have actually a pretty comprehensive suite that is… that is out there and it continues to grow and evolve. And so now you can ask like, how does that fit to Hilti, right?  

And what’s our right to play in that space? So I think it actually makes a lot of sense if you go a little bit away from just the product technology piece. So if I look at, you know, what does it take to be a good partner for construction business to digitize, right?  

I think you need to have number one, I think a direct customer relationship and in terms of you can call it customer success. So you can call it support or, you know, there’s many terms, but I think, so there’s something Hilti has been doing that since, you know, the company was founded 80 years ago.  

We’ve been a business with a very close collaboration and partnership with our customers. Which sets us apart from any other players in the hardware space. But in software, I think it’s almost essential to have that close link and have customers on the journey to transform their businesses and become more productive.  

I think also the setup, and it is a very long -term oriented company, we are not driven by quarterly figures so much. And if you have a long -term perspective and you think in what happens under 2030 and beyond that, I think it’s just a very sensible thing to do.  

I think that a lot of the innovation will be in software and you will also, I think, see that the hardware and the software come closer together, right? That’s what you see in other industries. And so we are lucky to have an owner in the Hilly family that has this long -term orientation and investment horizon.  

So with our new company strategy that was launched this year, next to the two hardware business that we have, which is tools and fastening and fair store business, we have a third area that is construction software.  

And that’s where these things fall. So I’m very excited obviously about this and being an adventure team at Open, so completely new playing field for us. And I think we can be an essential part to kind of bring technologies into Hilly and establish partnerships that have us be a good partner for our customers.  

Wes Edmiston: 

 So it sounds like a lot of this was born just really from this idea of Hilti being a partner for these construction contractors through the projects. So it’s not just, hey, here are the tools you purchased for me, you dropped them in the lab.  

Really, just this whole idea of of kind of the services business of Hilti, you know, really strengthened like you were saying, that relationship with these different contractors, these different construction companies and just kind of exposed the need that the industry had.  

And it almost seems like Hilti kind of felt like they had an obligation to step in and try to help to move the industry in a way that would help to improve the projects just because, again, that kind of relationship that y ‘all had seen and built as a partner through these projects.  

So I think that’s an excellent, really mission and vision through the way that Hilti is operating in this space and what’s driving them to get more into the construction software space. One of the things that comes up a lot with, especially with you all being now more into the tech side of things, but also being a hardware company is IoT.  

It’s one of those, you know, one of those, I guess, buzzwords that will come up oftentimes and with you being, being, you know, centrally located to be able to see all of these new and emerging technologies that are coming.  

You know, I was hoping you could kind of tell us a little bit about what IoT is, kind of dissect what that is, and to see how that fits into a bit of the landscape for what it is that you’re looking at.  

Johannes Paefgen:  

Interesting. Yeah, I think so IoT, the definition is pretty straightforward, right? But I can give you actually a bit of a background there. So the, I think the original notion was, right, you, someone looked at like the internet as it was in, I don’t know, the late 90s or whatever, and then you see, okay, what’s the potential of the internet?  

And then you come as, you know, there’s kind of a ceiling with like what’s the population on planet Earth? If every human has a PC, that was how you were thinking back then, right? You could have this and this many participants or entities on the internet, right?  

And I think that was replaced or kind of extended by the idea that what evolved the things that surround us and a full leg of a better trend than we use things, right? I mean, it’s, but it’s cars and lights and, you know, different, lots of different industry specific objects.  

And then you obviously come to much large number, right? So now instead of, I don’t know, 10 billion human internet users, you talk about trillions and trillions of devices and sensors and things. And so that potential economically is huge, right?  

I mean, and that is a transformation that will probably go through a hundred year cycle and have all kinds of implications. But so what it really means from a business perspective is it gives you a higher resolution on your business, right?  

And when you look at other industries that are a bit maybe further down the road with that journey, I mean, automotive comes to mind and then more healthcare, you see that it you know, there’s this tagline you can only manage what you can measure, right?  

So this is so IOT gives you acuity, I’ve heard someone say it reduces the transaction costs between the physical world and the virtual world. So it gives you a lot more data, potentially, right, and what’s going on out there.  

And that in turn, if you manage that there right way, and that’s often, I think, an IoT, the critical piece to collect the right data at the right time. And then you can also manage your business, you know, contractor business, whatever it is, in a much, in a much better way.  

And I think for construction, that holds absolutely holds true. It’s a long journey. It’s no overnight innovation, right? With or without AI, take a long time to make it work. And because it’s also something where you talk about kind of the right platforms and underlying technologies, right, that have to be out there for the data to come back.  

And he launched a new cordless platform, last you called Neuron, that one part of what it does is it has a connectivity. built into it. So through the batteries record operating better from the tools.  

And then whenever you charge a battery, the charger uploads that to the cloud, which is a very like looking at power tools that we think is the best way to solve the problem versus putting a SIM card in every tool, which adds a lot of cost.  

But now if you look at our tool portfolio, that takes a time to adopt that. And that’s then only for our customers, the new tools that they buy. So of course, we would like it. And we have customers that are so excited that they exchange their entire tool part but still until every job site and every country has the installed base to really get all the data, it’ll be probably decades, right?  

If you look at everything that’s out there, it starts to start it with telematics, yellow iron, right, 10, 20 years back and now it’s trickling down. So I think the vision there would be that you have a full resolution of where are all my materials, where is all my equipment, where are all my people.  

And that allows you to streamline a lot of the things, you know, just seeing the transparency, intervening, you know, streamlining, making things more efficient. And yeah, I think that’s the vision.  

Wes Edmiston:  

Yeah, and that makes sense with the the vast array of tools that you’ll provide.  

And with integrating things like Neuron, with also getting into the construction management softwares and everything else in that whole vertical, you’re able to really put together a good picture of where you are on a project to capture that iterative work completion data and also build it into the big picture to actually to move forward and again capture that whole life cycle and be that be that partner from, from almost, you know, from ground break effectively to the point of turnover with with your customers, right?  

So you’re actually again in that partnership and builds that whole complete picture. With the positioning that you all have, you have a large presence in Europe especially, headquartered in Lichtenstein.  

What is the difference, I’m curious, in adoption that you’re seeing of new technologies in Europe versus maybe here in America, right? And with you being here in Boston with the Americas group, maybe you’re more biased towards seeing what we have here now, but I’m curious to hear kind of how the differences are between the two sides.  

Johannes Paefgen:  

Yes. I mean, there’s a reason, let’s start with effects and then maybe add a bit of an opinion to that, but there’s a reason why we are here in the US, right? Antonia and myself with this venture team.  

And this is already there, there’s kind of a bias. And I think if I look at at least the supply side and the technology, where technology emerges, I think North America has just… in the last 20, 30 years and will also continue to be, I think, for a while to come the most active venture capital ecosystem.  

I mean, I meet a lot of startups from Europe that are predominantly operating Europe, but if they go fundraising, they look at the US. They often have the major investors coming from Silicon Valley or the areas.  

So I think for me, it’s just been like in these two years in this role, it’s just been impressive to see and get into this US venture ecosystem, see the dynamic that’s there and the mindset that people have.  

I think then if you go specifically in our industry, construction obviously is not now the kind of always the most technology friendly, but on the other hand, you meet a lot of companies here that are very eager to try out new things and that embrace the opportunity and that kind of, you know, we’re very close with startups.  

And I think that’s still more here than in Europe, speaking in general terms. I think you see pockets. I mean, also the colleagues from Vonsea here and the large French contract that they have a huge startup program.  

I think there’s a lot of things in UK. I think overall, there’s no maybe more my opinion. So number one, Europe is not like one is not such a, you know, homogeneous market as North America. So I would be very cautious to say Europe is XYZ and kind of putting Norway and Italy and, you know, you can argue with Russia and Europe or not.  

And then you can find the one umbrella, right? So that’s a big question. I think in Europe, I would say it is a bit more kind of conservative, right? there are things like GDPR, which is a data protection framework that the European Union has put in place.  

I’m not going to say inhibits innovation, but it kind of frames technology in a certain way that for startups it takes a while, especially if they come from the US, right, to kind of accommodate that.  

And it’s also, you know, there’s many languages, there’s many national regulations, so it’s And I would also say the companies are maybe a bit more hesitant to work with very young, unproven solutions, at least the ones I’ve spoken to.  

But that’s, you know, there’s no general rule. I would actually say that if you would plot the, you know, the technology openness of contractors in Europe and the US, these curves would largely overlap.  

And you would, you can maybe argue that the median or the average is a bit You know more future oriented in the US versus Europe But but if you look you actually have to look at individual companies and you will find extremely forward thinking Contractors in Europe and I’ve also met companies in the US that are very Risk -averse and right you know very very kind of conservative on the technology side.  

Wes Edmiston: 

Yeah. Yeah, so so like you’re saying there’s I You know Europe or or you will say here in North America. It’s not a monolith in and of itself So there there’s some some similarities and some differences and the different regions.  

That’s interesting way of thinking about it So like you were saying though the the venture market is actually, you know, very very predominant here in the United States Especially, you know, San Francisco and Boston areas like that which are major tech hubs.  

That’s right So so what what have you been most surprised about or what is the biggest learning that you’ve had so far? Getting into the venture market like a like what? Obviously, it was a big change for you as well going from the industry They were working in predominantly before and into getting into the the venture side of things.  

So what have you learned out of that process?  

Johannes Paefgen: 

Yeah, I think That’s a that’s a good question. So I think the There is a mission there to kind of be Transport the excitement the enthusiasm and just the perception of opportunity that exists and this You know group of people that actually are very, you know, it’s a very open -minded crowd Very collaborative and also especially if you look at what we call construction tech, right?  

It’s it’s also very committed People that are really trying to make the industry better, right? It’s not I think sure There’s a bubble here or there’s kind of a you know, but there’s always some uncertainty but I think in general it’s it’s a very You know value -adding Effort that that’s that the construction venture community is undertaking and I think for me a key turning is that I want to be an ambassador and bring insights and awareness of what is happening and what opportunities are out there to all the companies that you know Hilly has been traditionally working with and also the colleagues even with N .Hilly that are maybe not so exposed right because there is a geographic element to it if you’re if you live in Boston, in San Francisco and I don’t know if you’re breathing the right air or whatever it is right but you kind of get infected with that excitement and I think Europe can use more of that mindset sometimes tends to be a bit government heavy and regulation heavy and for instance in Germany I think there’s a lot of discussion right now whether in the face of all this uncertainty do you want to have more government or less government and you can argue both sides but I think specifically for construction technology I believe it will come from startups, it will become from companies like Hilti also that work with startups and bring these technology to a broader audience.  

Yeah, so I think that is a need for everyone that he or she can contribute to bring the venture awareness of the venture ecosystem to people that are maybe not in touch with it on a daily basis.  

Wes Edmiston:  

Yeah, that makes sense.  

Then whenever you’re going forward and you’re looking for new technologies to potentially invest into or to bring into the fold with the Hilti group, what are you looking for? And maybe what are you also not looking for?  

As in what are some of the things that you’re frequently seeing from companies that maybe like turn you off to that company? What is it that a company is doing right and wrong in your opinion?  

Johannes Paefgen: 

I think since we are in an industry that is not why is construction slow or has long adoption cycles, not because the people are lazy or stupid.  

I think there is just some inherent challenges in the way how construction is done in a building project through all its stages from planning and execution operation. It’s just a very complex entity.  

So I think I prefer solutions or teams or founders that have this in mind. And you cannot come with a consumer VC or B2B SaaS standard format and say, okay, I’m going to scale in two years with these alumni milestones and I’m going to execute.  

And I’m sure you being on the criminal side and I’m sure you see very similar patterns and have made similar experiences. So it’s all about being persistent, listening to customers and over time, drive adoption.  

grow and Procore and others have shown that you can have success, but it will take a decade or two to really get to that scale and be one of the major technology companies in our industry. And yeah, I think there are companies where you feel it’s more of a shooting from the hip, kind of get a lot of venture money.  

Someone said it yesterday on a panel here, right? So you still, the core thing has to be whose problem are you solving and who’s paying for it, why? I’m really linking that to the challenges and the workflows that you have in construction, versus some kind of blueprint, generic VC kind of thing.  

Johannes Paefgen: 

ight, right. So even for you, whenever you’re approaching these potential, you know, technologies, solutions that are out there, you’re really looking, is the team out to solve a problem or is the team out to start a company, right?  

and you’re looking for people that are trying to solve problems.  

Wes Edmiston:  

Yeah, that’s a good… Solving problems and teams that can listen and teams that have a bit of, I think you need to have a certain humbleness if you want to bring innovation to construction.  

Yeah, I think, and then there’s also like the Hilti View, right? I think we also look, we are not a major aggressive VC player, right? We are a traditional central European technology company with a very global perspective and a global reach, but a set of values that is all about long -term sustainable value creation, right?  

And both for our customers and the employees and the company. So I think we also have a specific lens on what we think are partnerships. And I think the guidance has always been from our leadership, if we do one collaboration a year and we do it, that’s better than having like 20 POCs or investments and left and right and just a flurry of activity.  

So we try to really also towards the startups position ourselves as a partner that has a deep R &D expertise, right? Especially if hardware is involved, but increasingly also I think on software, we have a platform and an ecosystem that’s attractive.  

We have the market reach component that I mentioned earlier, right? We have not only in Europe or the US, I think it’s 100 or more countries where he has somehow a presence. And so that is something we bring into a startup relationship.  

And then we have this long -term orientation and the way how we work and invest and think about technology and product cycles. And so I think we look for startups to whom that is also an attractive value proposition and that want to work with us with these kind of benefits in mind.  

People that aren’t looking for how can we have a big win here real fast? They’re looking for long -term benefits. long -term how we can scale and grow and help you. Yeah, and solving the really tough problems, right?  

So if you look at the things we are doing, I mean, robotics is one of these areas. I think also that, yeah, again, contractors, software, ZARS, B2B space, is not gonna be like many of these platforms, ZARS products that are out there in other industries where you saw within, and just, yeah, Uber was mentioned yesterday, where within a few years you went from zero to 100 billion or whatever.  

And so, yeah, so that’s also on software, it’s gonna be different. It’s things like, a lot of things like what you said before, Wes, right? A lot of things where hardware and software have to go and think, and that also has a certain, comes with certain dependencies and applications.  

So there’s a lot of complexity and being steady and working through this complexity.  

Wes Edmiston:  

Yeah, and I think there’s a lot of, a lot that people can really hear from that and in respect to think, am I doing these things?  

and maybe even some of these technology providers, if they’re having trouble raising VC money, maybe they should listen to this and think, well, am I actually out here to solve a problem? Or am I just trying to make the next Uber?  

So no, that’s great.