Engineering and construction companies are considered some of the least digitized businesses due to fragmentation, countless project variations, and limited R&D budgets. That being said, the AEC industry is ripe for disruption. In this research project, the GLCM team dives deep into digital transformation in the construction industry and identifies key technological trends that unlock benefits and value to these companies. We outline the drivers, enablers, benefits, and challenges of digital transformation, and map out a digital transformation strategy to assist AEC firms in enhancing their business models. Our research approach and process include a synthesis of consulting reports, articles, case studies, and interviews with industry professionals. In addition to our research, we conducted our analysis on the information gathered to identify digital deadlocks, common pitfalls, a digital solution journey, and a 6-step process for digital transformation.
Existing Challenges Within Construction
Despite the benefits that digital transformation can provide for a company, many opt to not pursue it because they are uncertain if their current business model would be able to support a digital transformation opportunity. Part of this doubt stems from the abundance of existing problems companies have that they are trying to solve. Therefore, they are reluctant to bring on more potential challenges, costs, and organizational restructuring that may come along with digital transformation.
Construction firms deal with both internal and external challenges. Internal challenges are any pain points within the company. Regardless of the challenges’ perceived tangibility, issues in this category are under the control of the company. Such challenges may include planning (anticipating the requirements and obstacles that will arise during the future); management (having the right leader for a strategic initiative); productivity/profitability (finding the best places to increase productivity and then implementing the right resources for that area); and labor (responding to imminent labor shortage).
External challenges are difficulties that come from an environment outside of a specific firm and are under no control of the company. These challenges may include the economy (understanding and accurately predicting supply and demand as it heavily dictates which projects are built); political/legal (politicians are also able to create, modify, and even eliminate legislation that directly affects our industry); social/cultural (leveraging strengths appropriately and assessing any threats from competitors); and natural (weather and health risks that provide great threats to unprepared firms).
There are several common digital deadlocks firms typically encounter that eventually lead them to abandon the transformation process despite the progress that’s already been made. By performing early detection of these issues, firms can plan to resolve them before they snowball and hinder any potential success.
Many firms have difficulty integrating across the ecosystem because of the poor interoperability between operation-critical platforms. Firms also struggle with standardizing complex and asymmetric processes across projects to ensure that obsolete and ineffectual systems are left behind. Even when successful workflows are established, a company can be underprepared for the level of talent development required to maintain the transformation. This is an important variable in securing digital adoption because when the workforce is doubtful and reluctant, adoption and value realization slow to a crawl or fail outright. Lastly, organizations also find it difficult to measure and communicate the benefits gained from their large digital investments.
6-Step Process for Digital Transformation
The six-step process for digital transformation outlined here is derived from the information published by multiple, top-tier consulting firms. While each firm attempts to put their own spin on the topic and introduce their own buzzwords, many of the underlying concepts are the same. Our intent was to consolidate the ideas and information published by these firms into one well-defined process with a minimal number of steps.
In very broad terms, the process to digital transformation is to:
Identify what problem you are trying to solve and what opportunities exist to improve/enhance existing processes
Analyze and address where your organization is at compared to where it needs to be as well as the tools and capabilities needed for success.
Respond by executing a small scale rollout of easy, attainable process enhancements to earn small wins and gain momentum
Repeat steps 1-3 for an enterprise rollout by identifying areas for improvement or replication, analyzing, and reassessing processes and baselines to capture value
Throughout the entire process, be transparent and communicate. Make sure you are clear with your intent and seek counsel from experts (e.g. CTO, managers, partner companies who have attempted digital transformation). Continuous communication and engagement with leaders in both your industry and digital technologies enforces your intent and generates buy-in or investment.
Relevant literature from major consulting firms echoed a central set of pitfalls for organizations pursuing digital transformation; however, Bain & Company provided the most concise, straightforward explanation. Each of these pitfalls are then paired (and mitigated by) one of the six steps to digital transformation outlined in the previous section.
Digital Solution Journey
To link digital transformation to the operation of the company itself, the team developed a 5 step cyclical framework that an AEC firm can use to navigate any future technology journey.
The 1st step is to clarify objectives and define what the company hopes to achieve. The 2nd step is to determine the approach the firm wants to use to achieve its target and finding the one that would be the best fit. These program options may include one-off events (competitions such as hackathons); sharing resources (free trials vs paid demo); business support (accelerators; incubators); partnerships (product co-development; procurement from startups); investments (corporate venturing); and acquisitions (buying startups). The 3rd step is to choose the right internal champions to push the technology by selecting the right teams of people and pilot projects to see successful results along with dedicated leaders responsible for driving the initiative from start to finish. The 4th step is to use key performance indicators to see if the objectives determined in step 1 were achieved by comparing results to the baseline scenario. Lastly, the 5th step is to create and build on successful instances of use so that employees and clients will have buy-in on the new technology solution.
To summarize the findings above, when an organization desires to pursue digital transformation, they must pay attention to three critical pillars: technology, people, and processes. The pillars represent the three categories of needs for a successful digital transformation.
For the tech pillar, leaders need to understand that the technologies selected need to make sense for your projects and company. Tech is built around a “right tool for the right job” philosophy and not by chasing fads. However, new technologies are imperfect tools and will likely need to be refined and matured. The tools need to be integrated into projects long enough to get there.
For the people pillar, as we've highlighted before, employee buy in is a linchpin for any successful digital transformation. One way to drive buy in is to frame digital transformation as a conversation. Involve your leaders in the identification and procurement of desired technologies, solicit feedback from your project level engineers and associates to improve and define the use cases for your tools, and finally make sure you have training programs that provide the necessary technical knowledge to everyone so they can participate in the conversation.
Finally, for the process pillar, leaders need to remember that digital transformation is about augmenting existing strengths. Operational workflows need to be designed around your tech to leverage the full capabilities. Nevertheless, new processes should not burden the project.
Digital transformation is an iterative process that will fail without a clear understanding of the objective and communication between stakeholders.
Leaders need to recognize the power of digital transformation and champion an innovation based culture. To enforce this new way of thinking, the company will need to undergo a change in the management model and that will help effectively transform the core organization.
Digital transformation is a continuous round-the-clock business improvement process. The organization needs to dedicate resources towards this cause regularly. This can happen only when a company as a whole learns and thinks out of the box. This will allow all the employees to look at problems in a different light and innovate.
Digital transformation is an evolution of human interfaces and any deployment needs to reflect that. Successful tools will be designed around mutually beneficial interactions and should be accessible to all stakeholders regardless of technological acumen.
A company-wide digital transformation needs to be a collaborative inside job. Employees should discuss their needs, outline their priorities, identify the gaps they intend to fill, and draw a roadmap together. Makes DT more of a long-term journey than a short-term project.