How Contractors Can Unlock the Potential of the Digital Transformation

While the construction industry has embraced the use of some forms of digital technology, like mobile devices and project management software, many construction companies are struggling to integrate digital solutions into their operations, and to fully realize the potential benefits of digitizing and automating their processes, recent research has suggested.

The results of a survey of engineering and construction companies (E&C) released by Ernst & Young in 2018 found that 98% of respondents agreed that digital solutions will be critical to the future viability of their company, but just 28% indicated that they currently have a digital strategy and agenda in place, and 67% reported spending less than 1% on research and development in digital as a percentage of turnover.

When asked which digitally enhanced technologies and products they think add the most value to their growth and profitability strategy, the top responses were enterprise research management software, cloud solutions, building information modeling (BIM), drones, analytics, and handheld technology. Researchers observed that the integration of these systems is key to optimizing available data and setting proper analytics, but pointed out that only 14% of respondents reported that their back-end systems are fully integrated, with 68% of respondents indicating that they are working toward full integration, but are currently only somewhat integrated.

According to the survey, the main challenges construction industry leaders face in achieving a digital transformation include not just a lack of integration between digital systems, but a lack of trained staff to implement and operate digital technologies, difficulties obtaining buy-in and adoption around technologies, the mentality that technology is not effective in the construction environment, and clients’ unwillingness to pay for system implementation or the associated costs.

A report by McKinsey & Co. published in August 2019 also looked at the question of why some E&C companies fail in their efforts to digitize their operations, and, in particular, to integrate their digital tools with their business processes. The study cited previous research showing that out of 21 sectors analyzed, the construction industry has the second lowest level of digitization, with only the agriculture and hunting sector lagging further behind. But researchers also observed that digital transformation can result in productivity gains of 15% and cost reductions of up to 6%.

Among the challenges construction companies face in trying to digitize, the report said, is that many contractors are small, and thus have limited budgets for IT and research and development. In addition, construction companies typically work with multiple layers of subcontractors and suppliers that may have little incentive to embrace new methods and coordinate the implementation of digital solutions during the short periods they are working jointly on a project. As each construction project has unique conditions that require bespoke design and delivery approaches, construction companies may find it difficult to develop tools and processes they can use repeatedly. To make matters worse, researchers noted, construction jobsites are often harsh environments that are not well suited to using hardware and software developed for an office setting, or for training workers to use advanced technology.

The report identified several practices that have helped construction firms tackle these challenges and unlock the full value of digital technologies, despite the industry’s fragmentation. These practices include focusing on fixing concrete problems rather than installing the latest IT solutions, reskilling and restructuring engineering design teams, adjusting project baselines to capture bottom-line benefits, and consolidating data from multiple projects to realize the impact across the enterprise. Researchers also recommended identifying operational changes that will improve performance, defining digital use cases that will enable those operational changes, and then looking for opportunities for improvement after these initial use cases are in place.

“We often see E&C companies deploy cutting edge technology tools before they have figured out whether and how those tools can improve their operations,” the report warned. “This tech-first approach can lead to digital ‘organ rejection,’ whereby a solution fails to deliver visible benefits, and the workforce, noticing this, does not adopt it.”

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