3 Days of Digitalization
3 Days of Digitalization
The construction industry has experienced many changes over the past decades. Digitalization has accelerated, and many of the countries that have relied mainly on traditional solutions, such as floor plans, e-mails and phone calls are slowly moving to more technologically advanced solutions.
There are country and cultural differences in the speed of this development as in other technological adaptation. Francis Fukuyama, writing about cultures in general, wrote in his famous book “End of History and the Last Man” (1988): The wagons are all similar to one another: while they are painted different colors and are constructed of varied materials, each has four wheels and is drawn by horses, while inside sits a family hoping and praying that their journey will be a safe one. The apparent differences in the situations of the wagons will not be seen as reflecting permanent and necessary differences between the people riding in the wagons, but simply a product of their different positions along the road.
This process by which the construction industry is digitalizing its operations can be divided into three phases, or days, if you will. We start from the day one, when the various technological solutions have just been adopted, and they are mainly used within silos. In the second phase the technological solutions have already been largely implemented, but as is the often the case, new solutions bring new and often unpredictable problems, different in nature. The third day, the one we should aim for, and which many, especially the Nordic construction culture, have already moved to, is where the silos are connected, and where the information management has been directed under the same umbrella so that marketing, sales, construction itself (and the customer) collaborate in a common language on the same platform solution.
This is the roadmap to get there.
The purpose of digitalization is to make life easier, not more complicated.
This is how it starts. On the desk stands a fat grey monitor that runs the numbers, fax and copy machines make their noises, and there is always a phono ringing. People gather around the water cooler to talk about latest movie based on Michael Crichton novel, and someone in their office cubicle says: it’s got to be here somewhere, don’t worry, we just need to find it first.
At the beginning, digitalization is about needs of different silos. In our industry this usually means that the Sales & marketing needs better tools for more life-like pictures for pre-sales purposes, the building site needs excels which are up to date instead of writing everything down on a piece of paper, and the customer service needs a better software for invoicing and for handling all the material choices.
So, let’s get to it. Every construction company has their own processes, their own way of doing things, and each department needs tailored solutions, something to solve their own pain points. There are numerous tools, expensive of course, with 300-page manuals and a time-consuming learning curve.
But at least there is some satisfaction when the problem gets solved. The invoicing brings clarity and the digital tools used in planning bring more accuracy. The software used for managing expenses and paying wages, as well as the programs used in budgeting and accounting, create a solid foundation in the first phase of digital evolution.
But when all this is said and done, when all the applications and all the software’s are in use, are we closer to solve the core problem?
What is the core problem?
Construction is the largest industry in the global economy, and yet, it is not performing well. According to Data from McKinsey & Company (2020) it represents 13 percent of global GDP, but has seen growth of only 1 percent annually for the past two decades. Time and cost overruns are still the norm, and overall earnings before interest and taxes (EBIT) are only around 5 percent despite the presence of significant risk in the industry.
Construction industry is also among the least digitized industries. According to the same McKinsey & Company (2020) report, in Europe, the leading sectors in investing in information and communication technology are banking and insurance, information and communications technologies industries and manufacturing industries. The construction industry is the last on the list, just before the hotels and restaurants sector. In the United States, construction is the least digitalized sector while the financial industry and business services show the highest levels of digitization.
Traditionally, the construction industry has operated reactively, which means that new solutions are sought only when there is a genuine need for them. In addition, the construction industry is very fragmented and culturally diverse; there are more ways to build in Europe than spoken languages, and if you add the country-specific rules and regulations, and we begin to understand why the construction industry has not digitized its operations faster and more comprehensively.
Grounded in the built, physical world, construction feels like a last bastion of purely analogue world, but nevertheless, we are going through the same digitization process as all other industries, it's just happening at a much slower pace. Slow innovation and digitalization have been the main reasons for construction industry to drag along with its profitability.
Here we still are, it’s the first day of digitalization. The problem with point solutions is this: They are too specific to work with each other properly. By implementing one specific solution here, one solution there, we are fixing the roof by bringing in more buckets. And even though problems seem to have a solution tailored to them and just for them, new problems and contradictions emerge as more individual solutions and applications are taken up by different areas of a large-scale project. The solution to one problem can raise new problems elsewhere, and the company's digitalization can look like a confused and dysfunctional chaos. There are still errors and scheduling problems. Struggle with site reports, snag lists, and site management in general continues. For some reason, the wrong tiles appear on the walls. Perhaps the customer service gave incorrect information? Or maybe the subcontractor was not informed?
Let’s get more of those little point solutions into the mix; let’s play Whack-A-Mole.
Or maybe there is a better way of handling these things? Less complicated. Less expensive? Less error prone?
The purpose of digitalization is to connect the silos and build trust between stakeholders.
The modern construction site looks a lot like a construction site from the past. Steel and concrete are still basic raw materials, building crew starts the day like it has for the past hundred years, putting their work gloves on. But today building is a much more complicated process. The entire workflow is easily plagued with unreliable data being communicated at the wrong time. Siloed information can be as useful as contaminated water.
We are here to solve the age-old problem of efficient construction.
So, are we there yet?
Are we there yet?
Well, here’s the problem. Every silo is now fully digitalized, but they are not connected. No one sees the problems that the other silos might have until they spill over to the other side. Information is alive and well, and it lives its life independently in each silo. And as you can imagine, soon the trouble starts. There is an information gap between the sales team and the building site. The customer sends an email asking if it is still possible to change the tiles for the bathroom wall, and the customer service keeps saying we need to call you back on that to the phone.
An enormous amount of data is gathered during the planning, the marketing, and the building phase. This data is still not standardised. The information cannot flow seamlessly and in real time between stakeholders. This causes delays and misunderstandings. Scattered information is prone to cause costly errors. It leads to friction with suppliers and subcontractors. The customer does not have a clear vision of the process either. It is difficult to influence things like material options - you still need to travel to the construction company's office to see the materials, the drawings, and the brochures. Low customer satisfaction and regular time and budget overruns often leaves customers dissatisfied, resulting in complex and time-consuming claims processes.
So here we go again. Something does not add up here. The papers keep piling up and the phones keep ringing. Manual work and mistakes have not decreased as was the whole plan at the dawn of digitalization. Cost and time overruns are still the industry norm, almost what is expected from any given project. No one has a proper overall picture of the process.
Maybe we are doing it wrong? Maybe we are still not treating the real problem, only the symptoms?
According to McKinsey & Company (2020) executive survey, more than 75 percent of respondents agree that the great shift in digitalization is likely to occur, and more than 60 percent believe that it will likely to occur within the next five years.
The most significant benefits to be derived from digitalization in the industry includes timesaving in construction projects delivery, increase productivity, increase speed of work, increase document quality, speeding up of response time, and simpler working methods, improvement in process quality, clients and participants’ satisfaction, increased responsiveness and productivity and better cost control.
Several industries have already realized the benefits of digitalization and are opening to the future using it as a new approach to ensure competitive advantage and efficiency, but the construction industry lacks behind, and we are still mainly glued to time consuming manual methods, and conduct the enormous, siloed data with Word, Excels and PowerPoint presentations.
The main reason for this is the fragmentation of the industry – planners, designers, architects, construction managers, developers, contractors, facility managers, etc. all work on their own platforms, using the language of their own. This makes the value chain a challenging environment for digital tools and processes and getting everyone involved to create dynamic cooperation too often fails.
According to McKinsey, companies will need to act on the nine shifts that are ahead in order to reinvent themselves and redefine their strategies and business and operating models. These are: product-based approach, specialization, value-chain control and integration with industrial-grade supply chains, customer-centricity and branding, consolidation, investment in technology and facilities, investment in human resources, internationalisation, and sustainability.
It is a tall order, for sure. And the question remains: but how?
So, the answer for the backseat is this: no, we are not there yet.
As the Day 3 dawns on us, we are finally waking up to the fact that the silo level digitalization is not the answer. Using digital tools should improve on-site collaboration instead of bringing more confusion and frustration to the table. To make operations more efficient, we need to look at the problem more holistically. The industry needs to understand the value of structured data. In a truly optimized digitalized environment, this data no longer resides in silos — it’s available for all stakeholders. To harmonize our digital processes even further, we need to have all our silos working together under the same umbrella.
The purpose of digitalization is value creation – it helps the company to expand.
Not that long ago, BIM was considered as a specialised tool, today most of the big companies rely on it. The increased use of artificial intelligence (AI) and virtual reality (VR) to collect and read data is something many companies have already switched over to. With silos connected, all stakeholders can share data in real-time, and the point solutions are replaced by a more holistic, BIM enhanced solutions with API integration and data standards.
What is needed, how much is needed, and when is it needed - BIM is the best way to gain a deeper understanding on any given project. It is a smarter way of working together with aligned interests in perfect sync. It improves coordination and communication with materials and component suppliers and allows early design and planning improvements. The use of large-scale data offered by BIM also affects the business strategy. It can be used to study, analyze, and optimise the performance. It helps predict market trends and prepare for the next project.
This is a great way for the customer service to excel with the customer success. It also solves the age-old problem that culminates in the following quote from an anonymous source: It always starts so nice: we are all working happily in our cozy little silos, minding our own business, whistling away: the sales team is selling, and the construction unit is building. And in comes the customer and the headache starts.
A real digital customer journey with BIM-based dynamic 3D-visualisations and material options enables virtual viewings of every room in every apartment in a project. Customers can make faster and better-informed purchasing decisions and have the freedom to express their own creativity after purchase – as they are already accustomed to in other areas of life – without having to visit the office and filling out the forms.
The customer service can keep its promises, and the building site can operate with up-to-date information and stay on schedule. There is transparency with the material options and pricing, and all stakeholders have clear understanding of the processes. The needed information is maintained in the same place. The data is no longer fragmented, it doesn't get lost. And what is more important: it can be trusted. It drives value for all stakeholders from the planning and marketing trough the building phase, up until the handover and aftercare.
So, there we have it, we have finally arrived. We are now facing the world where the possibilities are virtually limitless. The entire value chain of the construction process has now been digitalized, starting from urban and land use planning, and ending up with management of built environment. Integrating and centralizing all functions from the ground up has created a strong foundation for the whole unit to function dynamically, in a streamlined manner. Using the same platform makes the process of planning and constructing smoother and more efficient, and is now the primary interface between builders, suppliers, and customers. We now have the needed up-to-date information about material modifications and alternations at hand for every stakeholder, agreements are default, and requirements are based on solving the entire building process. With a common language now in use, the company thrives and expands as a highly functional unit.
Let’s end this with quote from McKinsey: Fast-moving and adaptable companies that understand the necessity of digital integration will grow and succeed in the near future for obvious reasons: thanks to cost efficiency and customer satisfaction, their market share will increase compared to their competitors. Only those operators who are willing to react to these challenges will survive.