The challenges in today’s construction landscape are well documented, from supply chain issues and rising inflation to workforce shortages and a potential economic slowdown. Digital transformation is an essential catalyst to counterbalance these challenges and provide the construction industry with opportunities to increase efficiency, productivity, and design. However, adopting new technology alone will not solve our problems. Contractors must leverage a multi-functional digital transformation strategy focusing on innovation and organizational change to improve business value and solve their most challenging problems.
The main goal of digital transformation is to streamline business operations, increase productivity, and reduce costs while providing a safer jobsite for all and quality projects for clients.
Gartner defines digital transformation as anything from IT modernization (for example, cloud computing), to digital optimization, to the invention of new digital business models. However, to advance digital transformation in construction, we must expand that definition to include leveraging innovative solutions that improve the industry’s efficiency and effectiveness. The approach needs to involve changes in the way construction companies operate and interact with stakeholders, such as clients, suppliers, and regulatory bodies and include the implementation of digital communication tools, such as project management software, and the adoption of collaborative processes, such as integrated project delivery (IPD) and lean construction. For examples, research from McKinsey shows that collaborative contractual relationships result in an 8% to 9% improvement in productivity and a 6% to 7% improvement in cost savings.
According to the McKinsey Global Institute, digital innovation and transformation can significantly improve productivity (about 15%) and reduce costs (around 6%). While the construction industry has made significant strides in digital transformation, industry fragmentation, the complexity of projects, and lack of standardization are a few factors that are contributing to slower adoption. However, advancing digital transformation is imperative to stay competitive in today's fast-paced, technology-driven world. By embracing technology and optimizing operations, construction companies can reduce costs, improve productivity, and deliver better project outcomes.
People, process, and technology are the three key pillars that are critical for a successful digital transformation.
People: The people component of digital transformation focuses on the skills, knowledge, and culture required to adopt new technology and processes. Digital transformation requires a shift in mindset, and people are at the center of this change. Companies must invest in training and development programs to upskill employees and ensure they have the necessary skills to adopt and use new technology effectively.
Process: The process component of digital transformation focuses on optimizing workflows and business processes to increase efficiency, reduce errors, and improve outcomes. Companies must review their existing processes to identify inefficiencies and areas where technology can improve productivity. Adopting digital technology requires redesigning current processes to take full advantage of the technology's capabilities.
Technology: The technology component of digital transformation focuses on the tools and platforms required to achieve the desired outcomes. Companies must identify the right technology solutions that align with their business objectives and provide the most significant value. Once the technology is selected, companies must ensure they have the necessary infrastructure and support to implement and maintain the technology effectively.
Overall, people, process, and technology are interdependent and must work together to achieve a successful digital transformation. Digital transformation is not just about adopting new technology; it's about creating a culture of innovation and continuous improvement that leverages technology to drive business outcomes. A successful digital transformation requires a holistic approach that considers all three elements. Companies that embrace these three pillars will be well-positioned to succeed in the rapidly evolving digital landscape.
Digital transformation in construction is essential for companies that want to remain competitive. Construction companies can achieve a successful digital transformation by defining the objectives and goals of the transformation, identifying appropriate technology solutions, building an innovative culture, collaborating with partners and stakeholders, and having a rollout plan when implementing the technology solutions. By taking a holistic approach to digital transformation, construction companies can ensure a successful future in using digital tools.