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By Procore Editorial staff
October 3, 2016
Michael Oster knows technology, construction, and the intersection of the two as few people do. Oster oversaw IT in several capacities for beverage giant Anheuser-Busch for 14 years from 1984 – 1998; arguably the foundational first wave of adoptive corporate IT. He then moved to McCarthy Building Companies, where he spent 17 years positioning the 152-year-old construction giant as an award-winning technology leader in that industry. Today Oster is Founder and CEO of Gemba Technologies, an IT consultancy.
The Jobsite sat down with Michael Oster to get his thoughts on what more we can expect to see at the intersection of tech and construction going forward, and on how to pitch the tech spend to a hesitant CFO.
JS: There’s lots of commotion these days about technology in the construction sector, as if it’s a brand new phenomenon in the industry. You spent nearly 18 years with a firm, McCarthy Building Companies, that won numerous awards for its leveraging of tech in the industry. Do such recent high-profile tech newsmakers as 3D printing and augmented reality suggest a tech renaissance of some kind in construction, or just icing on an established cake?
MO: I certainly think that it's way more than just icing on the cake. There are a number of opportunities within the industry that could turn the industry on its head. When you look at virtual design and construction software, the technology has been around for 10+ years, but most contractors have not exploited its capability to the fullest. I think this is due in part to not making it a strategic focus, but a “Me too” spend. VDC/BIM still has great potential to change the paradigm of the general contractor community, but companies need to have someone at the executive committee level driving for this process change.
Typically, the GC takes the designs from the architect and in turn, recreates the drawings for constructability. With these virtual design tools, the GC is taking more ownership of the risk and also putting a lot of data inside that model. There is no reason these days that a GC can't move from a “build” or “design-build” focus to a “design, build, operate” model. The reason is because of the richness of the data inside the model. In other words, the data and processes we apply to VDC/BIM tools can drive revenue and streamline productivity.
JS: So there are some legacy tech innovations in construction that are just now coming into their own?
MO: Right. Methodologies like Lean, Business Process Reengineering, and Kaizen have been around for years. All those practices can drive great improvements in efficiency and productivity. Then you enhance those processes with technology. While technology may be enabling somewhat of a renaissance, the challenge is what you do with the technology, not the technology itself. Sometimes, construction companies underestimate the effort and management commitment necessary to exploit the technology to its fullest. There are factors that prevent companies from adopting new methods or technologies. I think the biggest barrier and conversely the biggest contributor to exploiting new solutions is company culture. It can either pave the way to success or get in the way. You sometimes have to fight the "That's the way we've always done it," mentality.
JS: It sounds like that attitude can be a challenge for the tech promoters and enthusiasts within a company.
MO: It can be frustrating for the CIO who should lead the charge as a change agent. Likewise, it can also be frustrating for the young people within the company who have grown up with technology to not have modern tools and processes. You're trying to hire these young people! You're trying to retain these young people. So that establishment culture is something that can't be sustained.
JS: Do you feel technology’s bottom-line value to construction is something the industry increasingly understands today?
MO: There are so many opportunities out there. However, our industry is such a low margin industry that the CIO is constantly fighting for that discretionary dollar. If the CIO didn't budget for the spend, then they're fighting an uphill battle trying to convince management to spend additional funds on a new technology. Real value has to be communicated better. That's up to the CIO and the business units to help to do that. We have to figure out a way to demonstrate value to obtain that spend. It’s up to the CIOs and functional areas to communicate that.
Because it is such a low margin industry, the CFO is, understandably, focused on short-term costs. "Are we going to make our profit goals for the year?" I am certainly not suggesting we spend money without profit. However, technology improvements and process change are investments, like an asset, not an expense. Investments can often take time to reach the intended value. This needs to be well understood by the management team.
With all the new technologies knocking on our industry door, it is going to be an even greater challenge for the CIO and Operations to communicate business value and an increased investment in process change and tools. Without this increased investment, our industry will continue to languish in doing business the way we always have with margins as low as any industry. The new technology has the potential to drive new business units, grow revenue and margins and increase productivity.
JS: Do you think the CIO’s pitch to the accounting team is becoming more or less difficult?
MO: I do think the pitch is easier than it used to be. There's just so much press out there that demonstrates that technology is providing value. Up until about the last ten years, IT was a back office function in the industry. I think mobile and cloud helped to move technology into the field. So construction companies are seeing these documented examples where, thanks to technology, the project is faster, safer, and more cost efficient. It's a higher-quality solution.
The owners are seeing that in the industry, as well. When an owner selects a general contractor, they want to make sure the contractor they're picking isn't just the low cost solution. They want to make sure that the company is focused on a number of fronts, cost still being the biggest area, but also safety, quality, and recognition that the company is using leading-edge technology.
JS: So this idea that tech is just a sort of interesting but non-essential addition to the mix; that perspective is generally changing, all the way up to the owner?
MO: The CEO or the COO mustn't think of IT as just another corporate function, which ten years ago was the case, and still is at some companies. If the IT group is now doing things besides back office support, and more focus is being placed on field solutions, it's time for the company, the industry, really, to wake up on their investment strategy. They need to ensure the CIO has a seat at that executive-level table. Technology is helping propel the industry forward, but it's not an IT thing. It's a business thing. Your business strategy has got to be tied into your IT.
JS: What I’m hearing is that the only thing that stands in the way of an outright broad-based tech revolution in construction is…mindset?
MO: Right! I was talking to the CIO of a construction company the other day. He understands the value proposition––the need to communicate value when they're trying to sell. But at the same time, there is some frustration, primarily because the CIO’s budget is not growing at the same pace that technology demands are. Technology investments can have hard-dollar ROI or they can be “soft.” For instance, a new analytics solution has the opportunity to improve decision support. Now, improved decision support is not a very good answer when selling the investment to management. Long term value for the company must be better communicated for this to be a transformative era and get past short term thinking on how to get the jobs to pay for it.
Other industries have R&D groups and focus on process improvement and on long-term investments. Our industry has got to start thinking long-term of where we’re going. I believe for our industry to look back at this time as a transformative era, we need to challenge every process we have and increase the level of investments. Our industry continues to be at the bottom of the barrel in terms of improved productivity. New times, new procedures, new technologies, and the new generation; these can be the catalyst for great change. Old ways have to “get out of the way.”
JS: To some extent it’s a matter of seeing the handwriting on the wall. Is that a fair statement?
MO: To be honest, if a company doesn't get it, the people in those C-suites may not be the right people. Because I do think that if they ignore how technology can change our industry and they ignore the need to invest, they could rapidly get overtaken by someone who is much more nimble. Someone who gets it.
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