The Rough Road to Innovation and Digitization in Construction Is Becoming Smoother
When it comes to adopting technology, the construction industry is known for being late to the party. It’s a reality that’s often chalked up to the people in construction collectively being “technology averse” or “old school.” While such characterizations may be partially true, the overall picture is significantly more complex.
The construction industry has indeed adopted technology over the years, dating back to when computers came on the scene. Technology for accounting, ERP, estimating, scheduling and project management has been utilized for some time now—perhaps not as much as in other industries, but there are reasons for the phenomenon. When measured as a percentage of revenue, statistics show construction industry technology spend is the lowest of any sector, at approximately 1.5%. However, that number is potentially misleading, because the cost of goods sold is heavily weighted by construction materials that can represent more than 65% of all construction costs.
Regardless of how the low level of technology spend is interpreted, a digitization and innovation revolution is happening in the construction industry right now. So why did it take so long? There are several reasons.
Complexity and Disconnection
Digitization in the construction industry is a bit different from other industries because it involves many moving parts, multiple parties and the fact that construction projects typically are massive undertakings. Additionally, every project is different, from the design to the location to the parties involved. No two projects have all that much in common, which makes adopting a systemic approach difficult.
As a result, while construction companies have utilized technology to help with run-the-business functions, they have been most challenged to add digitization where the bulk of money is spent: on the projects themselves. Project management systems have been around for quite some time, but they haven’t necessarily been as effective as they could have been if mobile and cloud technologies were utilized.
For the construction industry to truly innovate and reach operational efficiencies at the project level, mobile and cloud-based technologies are necessary. Without them, construction sites are fairly disconnected from the corporate office. Site teams loosely manage to a set of protocols developed by the corporation, but they have no real accountability other than to get the project done on time and on budget—which happens less than 30% of the time.
Thin Profit Margins
Advancements in cloud, mobile and internet technology have made it possible to bring noticeable positive change to the construction industry. But even if the cost of materials is removed from the equation, construction companies still invest in IT less than average, as compared with all other major industries. This is most likely driven by the competitive-bid world that the construction industry occupies.
Construction is known to have some of the lowest profit margins of any other industry, which is usually due to the concessions made in pricing during the bidding process. The result is an industry that manages reactively instead of proactively. In turn, this leads to a low level of technology investment, because it’s a challenge to develop a large enough budget for it. Yet the industry is beginning to see material value being obtained through new and innovative technologies, so the pendulum is starting to swing. However, given that construction firms need to be selective in their technology investment decisions, they typically seek out “sure things.” This, too, has made it difficult to innovate.
Mandatory Buy-in, Difficult Change Management
Even though more technology is becoming available and companies are beginning to loosen their purse strings for technology investment, it’s still a challenge to get to a purchasing decision, let alone implement the technology.
Adoption is important when rolling out any software. But by its nature, construction presents unique challenges in obtaining companywide acceptance—especially with project management applications. For example, every project site team is unique and does things differently, with little systematization, so finding a one-size-fits-all technology is a challenge. Additionally, implementation of technology products in the middle of the project is not acceptable to most site teams. This makes it difficult for a company to embrace a technology across the enterprise in a short amount of time.
Furthermore, change management, which is difficult to navigate in any industry, is more complex in construction—even if products are implemented one project at a time. Workers are often far away from the corporate office and have varying levels of tolerance for new ways of doing things. Plus, most site teams work exceptionally long hours and never really seem to have enough time to get everything done as it is, let alone learn a new technology.
With all the challenges that have plagued the digitization of the construction industry, tremendous opportunities and upsides exist. Technology streamlining and efficiency are becoming greater realities and will not slow down anytime soon. Technology companies continue to grow and learn about the challenges the industry faces relating to digitization and innovation, and they improve their products in response. Technologies that succeed in the marketplace will be cloud and mobile based, easily accessible from a job site and affordable. In addition, they will provide clear, immediate value, be intuitive and automated enough to obtain both decision maker and site buy-in, and be capable of being rolled out on projects midstream, with very little change management effort necessary.
It’s a big task in an industry that’s known for creating big results.