“Big Incentive” for Change in the Construction Industry

construction-industry-techology-advancesWe’ve all seen the warning signs. Large projects are taking longer to complete and huge cost overruns are common.

McKinsey & Company have run the numbers and tell us: “Large projects across asset classes typically take 20% longer to finish than scheduled and are up to 80% over budget.”1  This comes at a time when the average project size is growing, the complexity is becoming harder to manage, and the need for sustainability and good business practices is greater than ever.

The bottom line: these problems won’t fix themselves. Action is called for, and yet the industry has been slow to invest in its future. Construction industry R&D severely lags R&D in other industries. Less than 1% of construction revenues are allotted for R&D, versus 3.5–4.5% for automotive and aerospace.2 “The construction industry is ripe for disruption,” McKinsey say, and The Boston Consulting Group (BCG) agree. BCG add engineering to the mix and say, “Unlike other industries, E&C has been slow to adopt new technologies and has never undergone a major transformation.”3

Change on the Way: BIM & the Digitization of the ECS Ecosystem

In looking for change agents, the industry could do worse than choose digitization. Analysts agree the greatest opportunities for value creation within the engineering, construction, and services (ECS) ecosystem will be found in the development and deployment of digital technologies and processes: “Construction will soon be characterised by connected systems of sensors, intelligent machines, mobile devices, and new software applications—all integrated on a central platform of building information modelling (BIM).”4

The big picture around BIM is the key.

Likened to a “digital twin” of a planned built asset, BIM can offer a digital representation of a project’s physical, functional, and planning characteristics. The futuristic five-dimensional representation takes into account a project’s cost and schedule, in addition to the standard 3-D spatial design parameters. A digital twin in the cloud enables stakeholders to share detailed data in real time as well as integrate and coordinate activities. This leads to fewer errors, greater efficiency and ultimately an industry with significantly greater profitability.5

To fully benefit from BIM technology, project owners and contractors are incorporating it into the project right from the design stage. Its adoption can reduce a typical project’s life-cycle costs by almost 20% and substantially improve completion time, quality, and safety.6

BIM is already familiar within the UK market. From April 2016, BIM Level 2 compliance became a prerequisite for bidding on centrally procured public projects. It is currently gaining traction in many other countries as well, notably Germany and France. “Substantial change is on the way,” BCG say, and in fact it’s already happening.

By the time we’re through, digital technology will lead to annual cost savings of US$700 billion to US$1.2 trillion within the ECS industry.7 The analysts caution this will only hold true if digital technologies become the industry norm, and will require a conscious decision to move forward with their application. Some of the varied applications and uses for these digital technologies include:

  • Real-time data sharing, integration, and coordination through the cloud
  • Data-driven construction planning and lean execution
  • New fabrication methods, including 3D printing
  • Automated and autonomous construction
  • Rigorous construction monitoring and surveillance8

Effecting True Transformation in the ECS Industry

So this becomes the challenge now – reducing project completion times and large life-cycle cost overruns while adhering to good business practices. It’s not only possible; it’s become mandatory.

The newfound prominence of BIM within the ECS industry isn’t an accident, but a harbinger. To operate and thrive within the new digital environment, companies will have to adapt and even restructure their organisations and their processes.

As always, first movers reap the lion’s share of rewards. And the rewards are substantial.

McKinsey Global Institute estimate that the world will need to spend US$57 trillion on infrastructure by 2030 to keep up with global GDP growth. Without hyperbole they say, “This is a massive incentive for players in the construction industry to identify solutions to transform productivity and project delivery through new technologies and improved practices.”9

1 Imagining Construction’s Digital Future, June 2016, McKinsey & Company, page 2
2 Ibid.
3 Digital in Engineering and Construction: The Transformative Power of Building Information
Modelling, March 2016, The Boston Consulting Group, pages 2-3
4 Ibid.
5 Ibid., page 7
6 Ibid., page 2
7 2016 ECS Value Creators Report: Building Endurance, October 2016, The Boston Consulting Group, page 21
8 Ibid.
9 Imagining Construction’s Digital Future, June 2016, McKinsey & Company, page 3

Note: Reports cited in this post include Imagining Construction’s Digital Future, June 2016, McKinsey & Company; 2016 ECS Value Creators Report: Building Endurance, October 2016, The Boston Consulting Group; and Digital in Engineering and Construction: The Transformative Power of Building Information Modelling, March 2016, The Boston Consulting Group

Steve Cooper

Steve Cooper

General Manager UK & Ireland at Oracle's Aconex
Steve Cooper is General Manager UK & Ireland at Oracle's Aconex, a leading collaborative construction and engineering management software.
Steve Cooper