Although in 2022 the industry remains heavily reliant on a decades-old business model, transformations that construction is undergoing are now able to change the state of things. The ice has been broken. Among the emerging disruptions is the digitalization of products and processes, along with a shift toward more data-driven decision-making, industrialization, and new entrants.
The next normal in construction by McKinsey&Company
For instance, 81% of the industry representatives believe that digitalization will improve the productivity of the construction sector. Mostly because none of the challenges the industry faces will work themselves out – projects aren’t becoming smaller and easier to operate, the need for skilled labor, environmentally sensitive construction, and improved communication requires changes in traditional practices. Above that, the pressure for change is also coming from:
- evolving client expectations;
- new technological capabilities;
- a new generation of more tech-savvy craftsmen and professionals;
- the booming construction start-up environment; and
- supportive legal frameworks.
Here at MindK, we help construction companies overcome challenges by means of digitalization – we develop software to streamline construction processes, automate workflows, improve connections between the parties, and much more. Based on our experience, we see that implementing digital technologies throughout the construction lifecycle results not only in doing the same things better and faster (which is true, for sure) but quite often results in changing the way the business is done.
So, before you move on to implementing construction digital transformation, it’s important to clear up two key questions. First, WHAT is still preventing the construction industry from speedy adoption of technologies. This may help you reveal what challenges your company has, in particular. Second, HOW the digital transformation can address challenges in each part of the value chain. This may help you discover new opportunities for future growth. Let’s dive deeper to clear up these concerns.
WHAT holds the construction behind the digitalization boom: 5 barriers detected
The digital transformation itself is not an easy task and we’ve already talked about the common challenges connected with digitalization. Digitalization of such a conservative industry as construction is a double burden – it faces many industry-specific challenges.
The McKinsey report highlights four main challenges – fragmentation, lack of replication, transience, and decentralization. We would also add the fifth one – complex inter-relationships and interactions. This challenge is one of the consequences of fragmentation and decentralization, however, we believe, it’s worth particular attention.
- High fragmentation. The construction industry is commonly recognized as one of the least productive sectors with project delays, cost overruns, conflicts, poor safety, low satisfaction, and many more.
For example, several years ago spending on construction projects in the United States exceeded $1.4 trillion. 30% of this money was wasted as a result of delays, duplicative work, unplanned changes, loss of materials, and so on.
Many of these problems have a strong connection with the fragmented nature of construction. The construction project involves many parties, professionals like architects or engineers and organizations in the building project. Many of them are involved in different steps in the value chain. It’s an ultimate illustration of “too many cooks in the kitchen.”
A simple example: builders are usually not involved during the planning stage when members discuss design and materials. So, if there’s a mistake in the instructions the builders receive, there is no possibility to reveal it before construction is already underway. Careful coordination is therefore paramount in order to implement digital collaboration between all parties involved in a project.
- Unique nature of the building projects. The key characteristic of the construction industry is its “one-off”‘ nature. Each construction project is vastly different from the others, which makes the construction industry a real endeavor when it comes to implementing digital construction solutions.
Even if you need to build two identical bridges at two different sites, the site characteristics, soil and subsoil qualities will bring significant changes, causing each project to be very different from the other.
- Decentralization. Coordination is a problem both for individual building firms and for large organizations. Often such companies are strongly federated, have a number of different departments and business units that follow their own processes rather than standardized ones or even operate independently and autonomously.
In such a case, first, bringing all departments under one standardized digital workflow is problematic. Second, building projects are frequently carried out at locations far away from the company headquarters. And few workplaces are able to educate employees on how to work in new ways by means of digital solutions.
- Transience. It is a common situation in construction when a group of constructors is gathered to work on a building project and disbands when the project is over. Such transience both on the company and project levels makes it difficult for construction companies and subcontractors to set up new ways of working and build capabilities that can be transferred from one project to the next.
Moreover, because of the high degree of personnel turnover, workers have less time to adapt to the organization’s specialized processes.
- Complex inter-relationships and interactions. As already mentioned, the construction project involves a conglomerate of contractors and subcontractors. Apart from the construction companies themselves, the project usually involves additional companies providing inspection services, project management firms, plumbing, heating, central air-conditioning, electrical wiring, lighting equipment, elevators, escalators, and much more.
The inter-relationships between these stakeholders are contractual. As a result, there is no supreme authority over all interacting stakeholders on the construction project site. Instead, there is simply relative power and reliance between different contracting companies. They have an impact on the overall quality and productivity of the site, but are not accountable to anyone.
All these characteristics of the construction industry make the development of digital solutions and overall digitalization of the workflows a hard nut to crack. However, that doesn’t mean it’s impossible.
In July 2021, after engineering and construction companies experienced a large stock price decline because of COVID-19, the total construction spending recovered and peaked at $1.57 trillion. It’s a record high for the series and 12% higher than 2019 average levels.
According to McKinsey’s report, now the NEED for change and technology adoption in construction has never been greater- the pandemic simply added urgency to the pre-existing productivity and data-visibility issues construction organizations have been facing for years.
But what is behind this, apart from everyone talking about the NEED? How is it actually implemented, and what are the real results? To answer this question, it’s important to review how technology can address challenges in each part of the construction value chain.
HOW digital technology in construction industry can address challenges every step of the way
The construction lifecycle can be divided into five phases, namely:
- Design and engineering;
- Construction; and
Apart from these phases, the need in supporting construction and management operations is the guiding spirit across the whole construction workflow.
Key goals: Project conception is the very start of the building process. Conception is the stage in which ideas are most flexible, yet it also (perhaps paradoxically) lays the foundation for the construction process. Among the key goals of the project conception is to determine the project vision and raise funds to bring this vision to life.
For project vision, it’s necessary to start the collaborative work of designers, contractors, and trade partners as soon as possible. Gathering input from all project stakeholders early on will result in better alignment on cost, scope, duration, and quality. For a fundraising project, asset owners and developers, as a rule, create site proposals and collaborate with lenders to handle project funding.
Challenges: Among the main challenges in the conception phase is the complex nature of the loan draw process – processes for managing construction loans are challenging and time-consuming.
Solution: Digitalization can help to face these and a number of other challenges – digital tools available on the market already offer convenient solutions. For example, design software like Spacemaker AI covers the whole site planning workflow as well as assists developers in creating site proposals, while construction loan financing tools like Rabbet, Land Corrilla assist lenders and developers in simplifying every step of the construction loan process.
Rabbet, for instance, automates managing construction loans, payment disbursements and tracking, project schedules, document management, approvals, and, of course, transparency for all stakeholders, from lenders to borrowers to contractors.
Design and engineering
Key goals: The design process entails creating everything, from the project’s initial concept to comprehensive drawings that display the final design. In general, the key goals of this phase are conceptualizing the vision and creating construction documents. Design goes from rough sketches to finished drawings and specifications, but each iteration should match the project’s needs while keeping the timetable and expenses in mind.
Challenges: We have to acknowledge that among elements of the construction process, the design and engineering process itself is the most technologically sophisticated today.
However, this stage still has its challenges.
One of them is a high demand for a more connected approach to design and engineering teams. As far as designers and engineers are frequently siloed from contractors, making it difficult for them to understand the real-time impact of their decisions on the overall cost or timeline of the project. This may lead to coordination issues, which in turn may result in time-consuming and costly changes.
A great example is Qetaifan Island North project in Qatar, a recent project from Atkins, one of the world’s most respected design, engineering, and project management consultancies. The project was a four-year undertaking involving 200+ design team members from all over the world. Given that it is common for large projects to have 10-15 disciplines and delivery teams coordinating structural, civil, and environmental engineers, master planners, architects, specialists, and others, the way everyone communicates must be clearly defined from the start to avoid confusion.
Opportunities: Many construction companies have turned to building information modeling (BIM) which is a faster and more transparent technique that captures every data point of a construction design.
Today BIM is not only about 3D modeling but it also helps with planning, design, construction, cooperation, and other aspects. In such a light, BIM is an effective collaboration tool in general because of its capacity to communicate data with all project participants.
Take, for example, Revizto, a popular BIM solution, that has an Integrated Collaboration Platform which allows architects to easily perform design reviews, drawing checks, coordination, and model QA exercises. It has a real-time dashboard with issues tracking and task assigning. It also brings together the data like reality capture data and BIM data, teams can have a complete, integrated look at the situation at hand.
Issue tracking for improved collaboration in Revizto
Applying a digitalized approach to construction team collaboration minimizes inaccurate information exchanges by eliminating manual reports and the possibility of human error, resulting in streamlined communication.
Key goals: Whereas the previous phases focus on general building planning, the purpose of this step is to develop a construction plan that is in line with project goals and vision. This plan deals with a myriad of things like budgets, estimating, timelines, bidding, risk management, procurement, and other aspects that are critical to starting the construction.
Challenges: Pre-construction presupposes a huge number of tasks, the process being highly complex. Given that the primary outcomes of pre-construction are the scope, the schedule, and the estimated cost of the project, among the key challenges is construction project management which provides effective management of these tasks.
Great attention is also devoted to bidding management as it enables gathering of the best team of professionals, and procurement to ensure there are all the materials and equipment needed for construction to start. These factors are all-important because they directly influence scope, cost, and schedule.
Solution: Technology, in particular project management solutions, is assisting project managers in better planning, working smarter, and being more adaptable during the project. It enables changes to be made on the fly without jeopardizing ultimate goals. We’ve already explained in our other article on how contractor management systems can improve safety and streamline the construction process.
CoConstruct Software, for example, a construction project management software, covers a number of tasks such as scheduling, communication, client and subcontractor management, file management, pricing management, project costs tracking, contractor invoicing, proposal generation, and more.
Construction project estimating in CoConstruct
If you think that construction project management is greatly digitalized and there is little to no room for improvement, you’re wrong. There are a number of startups today that are focused on digitalizing this stage of construction. For example, digital construction management platform Remato, which enables field contractors to plan and manage budgets, labor, materials and equipment in one app, raised $1.7 million last year. Construction tech startup Ambar, which aims to make civil construction planning process more efficient, raised $36 million. This demonstrates that there is much to be enhanced.
Procurement involves sourcing, purchasing, and transporting the materials and services needed to complete a project, and is another challenge that is solved by digitalization. Now the procurement technologies are advancing rapidly, moving through a regular cycle from emerging to maturing, until widely adopted.
According to Deloitte, digital procurement “enables strategic sourcing (or S2C) to become predictive, transactional procurement (Procure-to-Pay or P2P) to become automated, and supplier risk management (SRM) to become proactive”.
The characteristics of digital procurement
Optimizing the procurement strategy on these three fronts is able to lay a solid basis for digital transformation across your entire business. In a fast-paced global market, centralized data management, clear and actionable insights, as well as accurate reporting, budgeting, and forecasting are critical to gaining a competitive advantage.
Here at MindK we know firsthand the challenges that the construction industry faces, particularly in procurement. One of the big projects from the construction industry we have is dedicated to digitalizing the procurement process.
Our team developed a cloud-based feature-rich platform CINX for managing the supply chain for contractors, manufacturers, and distributors. It is a centralized location of quality and up-to-date information on the products required by everyone in the construction process. The platform shows that improving data flow between internal departments and the firm’s external supply partners could easily reduce their annual material expenses from 3 to 5%.
Key goals: The construction phase is when the project finally moves from “paper” (now very often CAD drawings) to the physical world. As a rule, the construction team is on-site to manage the subcontractors, guarantee the quality and safety of work, as well as deadlines.
Challenges: In spite of the fact that the construction team and subcontractors at this stage bear the responsibility, all other members of the construction project still have to be involved. For example, the design team should perform quality inspections to make sure that the work done matches their initial design and answer RFIs (requests for information) if they occur.
Contractors struggle to gain a sense of real-time progress. Decision-making is generally reactive rather than proactive, and it is difficult for contractors to examine the full downstream consequences of each decision. That is why the key challenge here is communication between all parties. It’s essential to keep the project on track to ensure work is done according to specifications. Furthermore, there is an extreme need for financial controls, change order management, and on-site incident tracking.
Solution: Some years ago communication and on-site management could be a major hurdle for teams. Technology is now making it easier than ever to convey important information on a regular basis to the people who need it.
There are software-led approaches to managing the execution complexity that involves field management tools, on-site safety management software, and site-visualization tools.
Take, for example, field management tool Rhumbix. The app gives real-time updates to contractors in the field, allowing them to track construction labor expenses, drive output, and make more confident decisions. The entire construction team has access to detailed construction reports for better visibility into critical project data. By the way, the company has experienced more than 100% growth in 2021 by doubling the number of construction projects utilizing the platform. This shows a growing interest of construction companies in digital solutions for the construction phase.
In addition to field management tools, safety management systems (SMS), like SafeSite, Fluix, and others, are a new trend in workplace technology that enable foremen, managers, and other key individuals to bring crucial forms, reports, and other operational information straight to the jobsite in digital format. These tools streamline safety inspections, checklists, and audits.
Site-visualization tools like Openspace, OnSiteIQ or Smartvid.io also are able to eliminate the challenges in the construction phase. OpenSpace, for example, invented automated 360 video jobsite capture and mapping. This allows online progress tracking and even comparisons with the actual conditions of the site with BIM right in the browser.
Key goals: Post-construction refers to all of the activities that must be performed before the building can be handed over to the building owner. This comprises finishing all punch list items, including a final walkthrough, training, and other activities.
Challenges: The process involves preparing tons of forms, “as built” drawings, warranty documents, O&M manuals, and other paperwork. The document management, reporting, and handover turn out to be a time-consuming process and requires coordination among all parties involved in the construction.
Solution: Quite often project management tools offer an in-built module focused on managing the closeout process. However, there are a number of stand-alone tools dedicated solely to digitizing the closeout process.
For example, Buildr, a post-construction platform, focuses on the project closeout procedure. It enables people to input all of their required closeout documents and convert them into an easily accessible, highly interactive PDF document that contractors can provide to the owner.
It also allows adding the documents after the project is finished and reminds subcontractors who have not provided the required documentation, thus saving the general contractor the time and effort of constantly following up.
Platforms like Buildr not only make the closeout process less painful and time-consuming, but also add a significant amount of value to the project owner. All the documents with most crucial information that the owner or facility manager may require are stored in one place and are always immediately available.
Embrace digitalization in construction to put the process on the right track
The opportunities opened up by digital transformation provide all the players in the construction sector a ton of new ways to increase their productivity and solve key challenges. A look at other industries and a number of digital solutions we’ve reviewed in this article reveals that new approaches and digital solutions have a significant impact on every step in the value chain.
Although, a construction transformation can’t be done overnight. First of all, it’s necessary to develop a vision of the digitalization for your company, taking into account all the characteristics. Then start small and develop a solution for a smaller set of overall scope required. Only after doing this can you scale further.
Whichever of these stages you are currently in, MindK can help you channel digital transformation in the right direction. We’ve built a number of projects that help companies in the real estate and construction industries digitalize their operations and serve their customers better. With the experience and best practices gained from our projects, we can develop a tailored solution that addresses the unique challenges of your company. Just check our Construction& Real Estate Software Development Services to find out more about our work and contact us if you have any questions – our digital construction consultant will get back to you as soon as possible.