Developing Effective Community Engagement Programs
Transforming the Way We Think About Workplace Safety
Engineered Timber: The Way of the Future
Rodine Shows What Best Practice Looks Like on Live Sites
Australia’s Biggest Solar Farm Nearly Complete
New Infrastructure is the Big Winner in 2018 Budget
3 Steps to Saving Big on Construction Projects
Ensuring the Safety of Construction Workers on the Road
By Paul Wilkinson
October 16, 2017
Fragmented, diverse, and inefficient
For a start, the construction is incredibly fragmented. Statistics on US Businesses show two-thirds of the nation’s 650,000 construction businesses employ under five people; less than 1,000 employ more than 500 people. And similar fragmentation is seen in the construction sectors of most other developed economies across the world.
Construction is also extremely diverse. In the consultancy sector, for example, there are major multi-disciplinary firms with expertise spanning all the major architectural and engineering disciplines, and tens of thousands more that focus on niche disciplines or local markets. In the contracting and project management sectors, some companies will be nationwide, even international players, with experience extending to multiple customer industries; thousands more, though, will service specialist vertical markets and/or focus just on customers in their home state or county area.
And in addition to the construction businesses, there are thousands more in related sectors supplying raw materials, manufacturing components, and providing repair and maintenance services to occupants and owners/operators of built assets.
Construction is also hugely inefficient. According to the McKinsey Group, industry productivity has barely changed since the 1960s (over the same period manufacturing has doubled productivity); 98 per cent of mega-projects suffer cost overruns of more than 30 percent, and 77 per cent are at least 40 per cent late.
Cautious, conservative, and cost-conscious
Construction is necessarily a cautious and conservative industry. It designs, delivers, and maintains facilities upon which lives often depend. So, the logic suggests, its businesses and people must take a responsible and pragmatic approach to the risks involved (though there are some commentators who say it is damagingly over-conservative).
However, this careful approach seems to present opportunities for existing technology vendors. Construction businesses tend to seek tools that are specific to the industry, reflecting its vocabulary and established working methods. They like proven solutions which have been successfully deployed elsewhere by their peers.
The conservative mindset is also often coupled with a highly contractual, and frequently adversarial, industry culture in which work is often won on lowest price. As a result, many construction businesses work on very thin profit margins, and the industry’s players are often the first to feel the effects when economies take a downturn. This also makes them very cost-conscious when it comes to investing in technology. Thus, it is little wonder that it lags behind others when it comes to digitization.
The US construction industry, for example, ranks only above agriculture and hunting in the McKinsey Global Institute’s digitization index. According to Gartner, it spends less than any other industry on IT (averaging just 1.2 per cent of revenue – about a third of the average in other sectors). And construction also under-invests in R&D (see a previous post, Disrupt or Be Disrupted).
Partners in disruption?
As someone at the interface between technology and construction, Alain Waha, Head of Digital Transformation at international design firm BuroHappold Engineering, is frustrated that many technology businesses serving the sector are just as conservative as their construction industry customers. “Most technologies simply help us make the same mistakes faster. Where are the technology providers who will help us deliver higher-performing built assets?” he asks.
“To win in construction at the moment, you essentially have to bid well, manage contracts better than others, and not let the build get out of control,” he continues. “The contractual culture does not really promote collaboration or, better still, innovation. As a result, construction businesses are rarely rewarded for delivering better buildings – and nor are their IT suppliers.”
Ahead of a presentation at the Institution of Civil Engineers’ ‘Shaping a Digital World’ conference in London, Waha said technology providers, like construction businesses, are too document-centric and too focused on supporting existing industry business models and processes:
“We need more owners challenging and incentivizing their supply chains to innovate. UK water company Anglian Water, for example, challenged its delivery partners to achieve 40 per cent ‘stretch’ targets (with the promise of gain-sharing rewards if they did). Knowing they had to collaborate to succeed over the course of the five-year framework, supply chains became more integrated, with fewer interfaces; teams became more creative in sharing and using data; and they optimised the use of offsite fabrication, and replaced outdated processes and behaviours.” (The Anglian Water example is included in an ICE guide to best practice in ‘alliancing’.)
“Technology providers should be partners in this process too,” says Waha, talking about construction becoming more open, connected and data-centric rather than closed, fragmented, and document-centric (echoing Procore’s ‘Construction Operating System’ philosophy). “By helping us exploit the cloud, through open data exchange, artificial intelligence, and machine learning, IT firms can help us deliver better business outcomes for our clients.”
In short, understanding how the industry currently works is critical for technology businesses. Armed with this understanding and working with sufficient forward-thinking clients and their supply chains, innovators in the tech sector can share in the rewards that come from eliminating waste, improving productivity, and delivering a better built environment for the customers of the industry currently known as construction.
If you liked this article, here are a few more you may enjoy:
Construction Software Buyer's Guide
Construction Software's Next Big Thing: The Platform
How Construction Technology is Saving Time, Money, and Jobs
Using Tech to Win More Business
Those in the construction industry know that projects often encounter obstacles everyday. Sometimes there are ways to sidestep them and other times that is not quite the case. Click through to chec... Read More
Hear Brad Hyatt, Associate Professor at California State University Fresno, discuss what students are learning in school to prepare them for const... Read More
Budget. Schedule. Quality. The trifecta of a project. But balancing that trifecta isn't easy to do. Our webinar, led by construction industry exper... Read More
Tim Kelly, S&P Technical Services Manager, looked at numerous document management systems, including EADOC and "probably 10 other systems." What bo... Read More
Each year the Occupational Safety and Health Administration releases the Top 10 Most Cited Violations of safety and health standards. OSHA 5 top of... Read More
Augmented reality and virtual reality have combined revenue projections of $61 billion by 2021 and are on their way to widespread use. For construc... Read More
May 14, 2018
Digging tunnels is an engineering marvel that has come a long way since tunneling projects required huge teams of workers armed with picks and shov... Read More
April 22, 2018