A long overdue disruption in The Construction Industry
“In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.” – Eric Hoffer
The construction industry is famously inefficient, plagued by a declining productivity index and what Thomas Kuhn might call a “puzzle-solving” approach. Contractors, like the research scientists Kuhn describes in The Structure of Scientific Revolutions, are essentially conservative: they merely implement existing methods within the existing paradigm. While construction companies have been able to operate profitably in such a way, recently, digitization has been revolutionizing this sector and eliminating current business practices. In our digital world, we require a new business model to effectively serve our clients.
Digitization is changing every aspect of how we do business. It enhances efficiency by reducing costs and maximizing productivity at every stage of the construction process. Broad Group USA, for example, has done so by using digitization to develop the components of an entire building in its warehouse which can then be easily assembled in days as opposed to over a year1. Furthermore, digitization facilitates knowledge transfer within and among different stakeholders involved in building a project1. Recent studies by McKinsey show that the construction industry has failed to achieve any productivity gains in the past few years2 (Figure 1).
In an era of rising global investment forecast to amount to $13 trillion by 2030, such information sharing can allow firms to successfully implement mega projects by avoiding costly delays, adhering to budgets and complying with client’s construction criteria2.
Consolidated Contractors Company (CCC), one of the largest construction companies in the Middle East, has been using Building Information Modelling (BIM) technology for the past twenty years5. BIM is a computer program that helps improve productivity as projects progress by helping planners avoid design clashes by making relevant information on design accessible in a single location3. While BIM has enabled CCC to enhance its design phase and cost reduction of projects, the program presents a challenge: it operates as its own silo. BIM does not integrate information of a project’s indirect costs. Therefore, CCC has established its own platform for the three major processes that account for these costs: Requests for Information (RFI), Field Change Documents (FCD), and Nonconformance Reports (NCR) 5. CCC has instated a department of automation engineers within the company that acts as a proxy for Headquarters, project staff and all other key stakeholders involved. They have developed an enterprise application platform that combines all information and data on collaborations that occur on a project in real time on one interface that can be accessed by everyone involved in the project though a phone or tablet. Thus far, this new system has reduced the cycle time of obtaining and responding to RFIs FCDs and NCRs by 60%5.
Implementing this system on all projects requires an extensive amount of training. CCC currently uses this new digital platform exclusively on megaprojects since tracking and managing such large amounts of information is tremendously complicated, time consuming and costly without the use of a digitized platform5.
The immediate goal of CCC is to continue training its employees to effectively and efficiently utilize this platform in order to reduce the projects’ costs associated with changes and errors in execution that occur during projects5. This will require a cultural change within the company: one that accepts new technologies and works to adapt them into their active roles.
In the long run, however, CCC is taking a drastically different approach. The company is exploring digitization in all of its building processes in other ways such as 3D Printing (a method to fabricate buildings or its components using various technologies), as well as operational solutions such as utilizing drones to track progress on projects5. The challenge CCC is facing with these novel innovative ways of building is determining whether these processes are viable and feasible5.
I would recommend that CCC form temporary partnerships with companies that already use innovative building systems in order to to gain hands on experience and knowledge of these processes. CCC has already established joint ventures with other construction companies on a variety of projects. Partnering with companies such as Broad Group or Komatsu (Japanese construction machinery company)4 for example, can allow CCC to better gauge the feasibility of certain modern building practices. I would also consider exploring other forms of digitization in project tracking methods such as robotics, aerial, laser, and radar technology to improve both surveying and building productivity3.
Finally, it is important to note that innovation cannot be implemented without a company culture that develops matching standardized operational processes as well4. Thus it would be in CCC’s best interest to capitalize on its existing knowledge management platform available to its employees by including educational resources on the technologies and building practices that the company wishes to adopt. Coupled with this is preparing its workforce by conducting live demonstrations of the implementation of such practices.
- Digitalist Magazine. “How Digitization Is Disrupting Construction: Strategies Forward”, http://www.digitalistmag.com/iot/2016/08/25/digitization-disrupting-construction-strategies-forward-04417204 , accessed November 12,2017.
- McKinsey&Co., “The Construction Productivity Imperative” , https://www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/the-construction-productivity-imperative , accessed November 12,2017.
- “Tomorrow’s Buildings: Construction industry goes robotic” , http://www.bbc.com/news/technology-35746648 , accessed November 12,2017.
- Novade Solutions, “can the construction industry catch up on digitization?”, http://www.novade.net/construction-industry-digitization/ , accessed November 12,2017.
- Interview with Mr. Aref Boualwan, Manager M.I.S. & Business Process Re-Engineering at Consolidated Contractors International Company, November 11, 2017.
- 2017. Image. https://www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/the-construction-productivity-imperative.
- 2017. Image. https://www.mckinsey.com/~/media/McKinsey/Industries/Capital%20Projects%20and%20Infrastructure/Our%20Insights/The%20new%20age%20of%20engineering%20and%20construction%20technology/New%20age%20engineering_1536x1536_100_Standard.ashx?mw=1536&car=72:35&cq=50&tco=100.
Student comments on A long overdue disruption in The Construction Industry
It is novel that the construction industry is adapting to the digital movement but very unclear to me why it has been such a slow process. The 3D printing and robotic possibilities in construction are extremely interesting to me since there will continue to be a shortage of qualified labor to build ever more complex projects.
Great article! I was wondering if you had any perspective on smaller construction companies and whether they are able to incorporate some of this technology into their operating systems. I imagine if companies like CCC are just scratching the surface in terms of technological and productivity advancements, then smaller developers all over the world are still living in the stone age. One roadblock I see to widespread adoption of more advanced technology in construction is the old school nature of the general contractors. In a booming construction market, these contractors are very much in demand and don’t necessarily need to change their ways – they are still getting all the business they can handle. What is the incentive for general contractors to adopt these technologies? Are there realizable cost savings that can make their bids more competitive? Is it worth it for contractors to go through the trouble of implementing the technology if they are doing fine as is?
Thanks for providing insights on an often overlooked industry when it comes to digtilization.
I think BIM (5D and in the future also 7D) will become much more prevalent in the construction industry. However, I believe there is one critical player you haven’t mentioned: the government. BIM can heavily reduce not only construction cost and time but overall cost over the lifetime of a building. It can help increase efficiencies for all players involved in the construction industry. However, as you have mentioned it does require a high initial investment, especially in training people adequately. And as DM pointed out, smaller contractors are not necessarily incentivized to adapt to those new systems, even though they will likely benefit from savings in the long term. This is where I believe the government can play a crucial role. In 2014, for example, the EU issued the European Union Public Procurement Directive that allows all member states to encourage, specify or mandate the adoption of BIM for publicly funded building projects. Several countries, including the UK and the Netherlands and a handful of others, already require the usage of BIM. I believe that it takes some sort of incentive system like that to really accelerate the digitization of the construction industry.