Digital Transformation in the least digitalized industry

As I’m sitting in my living room, a brand-new construction site is taking place right outside my window. Boring, you would say; however, what impresses me is the speed at which this project is being delivered. 

Last week, we discussed how the construction industry is slow to adopt digital transformation and new technologies; however, looking at the construction outside my apartment, I wonder whether anything is changing in this industry that allows projects to be delivered faster.  

Historically, construction is one of the world’s least digitized sectors. For this reason, I decided to look into recent technological advancements and understand what some digital tools used in construction are and how those are reshaping the way we see this industry. Digital transformation integrates digital technology into all facets of a business’s operations. For construction, that means implementing digital tools and technology that harness the power of data to make processes more efficient, productive, and safe.

Here is what I found: 

Implement digital to promote collaboration

Construction companies usually avoid working across multiple organizations in the value chain as it increases complexity and costs. However, this usually means they miss out on a valuable opportunity, stemming from significant efficiency losses that can occur because the information isn’t transmitted effectively during handoffs between trades and functions.

It is essential to implement digital solutions that promote support and collaboration because site workers don’t send feedback to a supplier on all defects in the elements that the supplier is making. When they send feedback, it is anecdotal, unstructured, and difficult to understand. If defects persist, workers need to either fix defective products or wait for replacements. This unplanned rework increases labor costs and causes delays.

Today there is an opportunity to correct the problem by improving the mechanism for passing feedback between the site team and the supplier. The site team can use a mobile app to tag defects against specific elements for information about the project. The supplier can then monitor defect reports and run root-cause analyses with its factory team to diagnose and reduce blemishes. The results are a reduction in rework hours at the contractor’s job site and a demonstration of the benefit of smoothing communication between these previously disconnected organizations.

Reskill and redesign the team of engineers 

Digital technologies have an increased impact on engineering. In this case, generative design tools, which automatically propose a range of design options, can radically reduce the time to develop plans. The ability to examine and optimize a generative design product is arguably becoming as crucial as the ability to conceive an original design.

Applying these new techniques requires designers to learn technical skills and design in new ways. Construction companies with internal design functions should equip themselves with new technical skills, such as building libraries of design elements to automate certain parts of the design process. In addition to adding new skills, engineers will have to utilize new materials and methods of the future. This is not easy as designers will have to adopt a new mindset, using their experience to validate model results and look for opportunities for standardization and repetition. This new way of working will create the capacity for designers to focus on more intellectually challenging problems.

Adjust project to capture value

Often construction executives say their companies have seen some productivity gains from digitization but little impact on the bottom line. One of the main problems is that the savings from added productivity don’t justify introducing new software and systems. Managers must reduce unproductive time and generate value to realize the full benefit from digital.

Collaboration across organizations working on a specific project is fundamental because it will allow managers to increase productivity by shortening on-site schedules, reducing nonessential resources, and restricting overtime. This sounds easy; however, it is crucial to effectively communicate with new workers about the project track and delivery across the value chain. Leading construction companies take on additional project duties, partnering with internal teams and subcontractors to meet client needs. These innovative teams use connected apps and software that enable: 

  • Real-time collaboration 
  • Improved quality control 
  • Collecting digital signatures 

This new digital collaboration and mobility will shift projects to paperless, allowing project managers to be on site more frequently and avoid time at the office.

Connect projects across the enterprise

Leaders in the construction space need to understand the enterprise-wide use that could unlock a whole new wave of value as the company standardizes its digital tools and platforms across its various business units and shares more data from projects. 

On-site workers need to take and share notes, and agile construction teams use their work execution platforms mobile apps to streamline processes to improve real-time communication such as: 

  • Updates from field workers
  • Automated tasks and actions
  • Track data and financials 

With the help of advanced analytics, this infusion of data can improve asset management and decision-making across the organization.

Most construction companies have embraced the idea of implementing digital technologies and are determined to see their efforts bear fruit. But despite good intentions and persistent efforts to embed digital technologies in operations, construction companies are some of the least digitized businesses. For this reason, adopting the practices described in this blog increases the chances of a successful digital shift with tangible benefits. In the above picture, one can see the potential of the construction industry if paired with digital transformation, and I’m excited to see what the next 5-10 of digital transformation will bring to this space.

11 comments

  1. The construction industry, like you said, is ripe for disruption. While construction companies have embraced the idea of implementing digital technologies, most companies aren’t will to invest time into its potential benefits. McKinsey Consulting noted that R&D spending in construction runs well behind that of other industries: less than 1 percent of revenues, versus 3.5 to 4.5 percent for the auto and aerospace sectors. However, construction isn’t going to get any easier in the near future (esp. with the growing demand for environmentally sensitive construction), so getting an early start to digital transformation is key for these businesses.

  2. This is such a great example of an untapped market for digital transformation. My brother is a safety officer for a pretty major construction company in Southeast Mass, and never stops complaining about how archaic their systems are. From his experiences that I’ve heard about, you are exactly right that there needs to be a deeper connection between projects and sites for a single company. Half of his job is just relaying news to other sites or re-lecturing the team on a safety standard… With where a lot of other industries are technologically, there is no reason that cost-effective and easy-to-use programs and tools could be developed specifically for construction site and project management.

    1. As I was reading the blog, I kept thinking that safety in the workplace is probably among the most left-behind processes in terms of digital technology, so I’m glad we’re on the same wavelength. I wonder if this would come in the form of guidance or standards from OSHA who need to push the envelop and enable more digital transformation. Or if this will spur more organically from new companies that identify the specific needs and develop solutions that take over the industry.

  3. Great blog, Yana! I live in the Seaport area, and right next to my house, I have three active construction sites, so I can relate to how you decided to talk about digitalization in this industry. It is fascinating how they can create these enormous buildings in a couple of months with a rudimentary and manual process even in today’s era. I know most of the construction jobs are unionized, so I think that had contributed to this slow adoption of digital advantages. Also, I like Shanon’s point that R&D doesn’t sound appealing in this industry based on the return, but I believe we will see some changes in the upcoming years. Great job tackling this industry!

  4. Yana after reading your blog post I was wondering “why?”, why was the construction industry so slow to transform. I found the following: “The construction industry has a workforce that skews older, and as more baby boomers head toward retirement, the industry faces a labor shortage that’s poised to get worse. According to the U.S. Bureau of Labor Statistics, there were about 300,000 construction job vacancies in June 2019, and the industry is expected to need 747,000 more workers by 2026. While the demand for skilled craftspeople has continually increased, fewer young people are entering the industry.”

    To me it was a little bit of the chicken vs the egg scenario. Will the young people come and transformation happen or will the transformation happen for the young people to come? I don’t think construction will go away any time soon so time will tell.

    Source: https://www.bdo.com/insights/industries/real-estate/building-the-future-of-construction-with-digital-t

    1. I was just thinking this! Also, its not a very appealing industry to the young people. I have a engineer friend who works for the state in the construction side and he mentioned the lack of use of technology and even just investment into digitization. When working with government budgets, I would imagine its hard to be digitized – just like the rest of government controlled areas.

    2. Great point Allie. Something I’ve also wondered about. I’ve got 5 uncles as well as my Dad that worked in a trade. Skip ahead one generation to their offspring which includes myself and not one of us is working in a trade. Part of that has to do with it not being pushed on us. My Dad in particular pushed college on my siblings and I because he believed long term it would be better for us. At 31 I would say he is already right but issue then becomes how many other families out there were just like mine. The country isn’t shrinking so we need folks to work in these industries. I agree with Yana’s opinion here that adopting digital technologies could be a useful way to attract talent to the construction industry.

    3. Thats a very good point you make there Allie! My dads friend is in the construction business and none of this children wanted to join it – they all ended up with professional/doctorate degrees instead. I think a lot of it has to do with its being so dated and due to the lack of digitization – perhaps its something companies will start to look into soon!

  5. Great post Yana! I didn’t realize how much transformation is happening in the construction space. It seems like a lot of the things you mentioned could definitely make construction easier and that would make everyone’s life easier as well.

  6. As someone who works in the construction industry, and who will becoming a lawyer with specialization in the industry, this post is right up my alley. Thank you, Yana! I want to touch on a few points in your blog as well as some of the comments. It is true that construction is slow to adopt new technologies and is facing a labor shortage. In my opinion, the reasons for that are largely (1) budget constraints and (2) lack of education.

    First, budget constraints. As I mentioned during our discussion of 3D printed houses, construction budgets are largely dependent on a project-by-project basis. If a project owner is unwilling to pay for a more technological advancement (and, why would they want to pay more than a peer for this one project?), then the contractor has no incentive (or really a budget) for such innovation. Kanal mentioned government budgets in terms of intra-government innovations. That spans to construction too: governments fund the majority of construction projects and most of those projects are won via competitive bidding process whereby the lowest-priced contractor wins. Unless a construction company is prepared to eat costs for several years before the technology (maybe) proves successful, the innovation will need to be specifically funded by project owners, like the government (which, as taxpayers, means we will be funding this).

    Next, lack of education. It’s funny to read in the comments how getting out of the trades and into college is perceived as being more successful. When I was working in the field, one of the crane operations on the job had THREE maseratis!!! Trade workers are paid incredibly well with laborers starting out around $80/hour on public construction jobs in Boston. Granted, Massachusetts’ union-mandated labor rates are among the highest in the country, but it’s definitely nothing to disregard. I think this need for a college degree is so silly and such a waste of money. People should be educated to NOT get a college degree, in many instances. Maybe not a popular opinion in a group of people who are all getting secondary degrees, but maybe if you did your own cost-benefit analysis knowing how much tradespeople are paid, you would have reconsidered.

  7. Very Interesting post – You are discussing an industry that I do not know much about but it is great to hear your perspective! I think a lot of what you discuss is relevant to many other industries. I work in the higher education industry and many of your points are transferable to my industry as well. I believe that digital transformation in “old fashioned” industries helps support employees to work more directly at their job functions rather than ancillary tasks that can be supported by digitization

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