Five constraining factors construction companies must fix

In our experience – reinforced by a recent construction industry roundtable discussion – there are five factors constraining Australian and New Zealand construction businesses in their performance and ability to innovate.

Poor performance in any of these areas – visibility of project performance, the ability to collect data on-site, double handling of information, delayed project actuals and forecasts and management of people, safety and compliance – should serve as a warning that your information technology (IT) systems are holding you back.

THE TIME TO TRANSFORM YOUR BUSINESS IS NOW

Last year, global consulting firm McKinsey & Company ranked construction second last out of 22 industries in its digital technology uptake, ahead only of agriculture. While they were U.S. rankings, the local industry also has a history of low technology investment.

With digital technology set to transform construction, low technology investment is a risk to the business. Technologies like Building Information Modelling (BIM), the Internet of Things (IoT), drones, robots, 3D printing and Blockchain will disrupt the industry. Innovative companies will grow rapidly and those that don’t adapt will fall by the wayside.

For many construction companies, it could be a perfect storm. The Australian Construction Industry Forum has predicted that the industry will also lose around 166,000 jobs and 14 percent of its revenues over the next three years as both the engineering and residential markets cool.

BRIDGING THE TECHNOLOGY GAP

To better understand the issues they face digitising their businesses and meeting the challenges ahead, IFS recently hosted a roundtable discussion with leading construction companies. The participants agreed there was a large gap between current IT capabilities and what their businesses required. However, they also identified barriers to investing in new technology.

Despite BIM’s reputation as a leading driver of digitisation, participants said it only benefited architectural, engineering, and facilities management firms which could be rewarded for reducing the total lifetime cost of an asset. Current industry practices which minimise upfront build costs provided little incentive for construction companies to adopt BIM, they said.

While not seen as an immediate driver for digitisation, the use of robots in construction and the replacement of traditional ‘man and machine’ jobs, on the other hand, was seen as inevitable as technology advances.

And smart contracts underpinned by blockchain technology had huge potential to make contract management more efficient. Participants said there were many repeated processes and duplication of paperwork throughout the tender, selection and contract award phases that smart contracts could address.

ARE CONSTRUCTION COMPANIES READY?

While acknowledging that disruptive technologies will bring many changes to construction, roundtable participants said their main IT focus was on becoming more digitally connected and efficient to compete in the current operating environment.

Unfortunately, many construction companies have already fallen behind. Participants admitted that subcontractors were often more advanced in their use of digital technology than they were. Companies needed to do more, they said, to connect subcontractors to their systems so real-time information is visible to everyone across the value chain to drive collaboration and efficiencies.

The ability to collaborate with partners in real time is a great example of the value of digitisation, but it is just the tip of the iceberg. Far greater benefits would flow from addressing all five factors constraining construction businesses.

In our view, most companies could improve their competitiveness and efficiency with modern, integrated enterprise software providing a single, centralised system to connect business, people and processes. This would not only remove current business constraints but also set companies up to adopt disruptive technologies in the future.

The five constraining factors to fix

1. Visibility of project performance

The systems we see at most construction companies are characterised by silos of disconnected systems including financial and project management software, and Microsoft Office documents containing asset management, HR and other information. Combining these within a single enterprise system would vastly improve the visibility of project performance across the business.

2. Ability to collect data on-site

Roundtable participants told us that enabling field staff to access and enter information in real time using mobile devices was a priority. In combination with a centralised enterprise system, this would allow companies to get a live snapshot of projects.

3. Delayed project actuals and forecasts

The move to real-time data collection into a single enterprise system would support dynamic, timely decision making, rather than waiting for the consolidation of weekly or monthly reports. Forecasts could be constantly recalculated, not just updated once a month.

4. Double handling of information

Inefficiencies due to the double handling of information by construction companies is not confined to contract management. With an integrated system, information is entered once, and taken forward from one process to the next. Not only is this more efficient, but data is preserved and available for future reference or analysis.

5. Management of people, safety and compliance

Roundtable participants told IFS that the onboarding of staff was a major business bottleneck, with poor capabilities in HR, training and compliance systems across the industry. Integrated workforce management solutions address these constraints. One of our construction industry customers has seen average staff onboarding costs fall from nearly $1,000 to under $100, and achieved significant improvements in staff retention rates.

BUILD A BETTER FUTURE

The bottom line is that construction companies do not have to be at the “bleeding edge” of innovation to survive in a digital world. But with the pace of technological change increasing, they cannot afford to remain technology laggards either.

For more on these five constraining factors, view the infographic, “Are these 5 factors constraining your construction business?”

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