Digital transformation is a huge opportunity for an engineering and construction industry that has struggled for decades with low productivity and low profitability. Fully embedding digital tools into business as usual offers a way out of this trap, unlocking new, profitable business models based on greater collaboration and a deep, data driven insight into how to deliver value to its clients. However, the results of this report suggest that progress remains slow. Many companies are struggling to make the most of existing products and few are on top of the possibilities created by emerging technologies.
What can engineering and construction firms do?
1) Focus on digital leadership
Our survey suggests the industry is caught in a bind. It is not making the most of the technology available because of unawareness about what it can do. At the same time, we found that when technology is deployed it can fail to deliver its potential because of a lack of fit with existing processes and ways of working – or its effectiveness is undermined by the existence of out of date legacy IT systems.
Chief technology officers or chief digital officers are an increasing presence in engineering and construction firms, fulfilling some of the functions at the higher end of the CITB framework. One or two senior posts are of course not a complete solution. This trend does however point to the industry acknowledging that digital transformation is both an organisational change issue and a technology issue. These roles also put someone in the boardroom who can explain how the organisation can exploit new technology and who can fight for the resources needed for their successful roll-out. Now is the time for more organisations to consider if they have the personnel in place to deliver digital leadership.
2) Take the lead on training and competency development
The clearest message from the survey is that a lack of training and competence is holding back digital transformation. This message is not new but has the industry been quick enough to respond? Training and competency development carry a cost but is anyone willing to meet it?
Engineering and construction are not unique in this. A recent cross- sector survey by Deloitte found a stark difference of opinion between millennial employees and senior executives about who should pick up the tab for preparing employees for Industry 4.0. The latter seeing it as a responsibility for individuals and governments, while the former putting the ball squarely in their employer’s courts.
Where construction is different is that it is already falling behind much of the economy in its productivity. It is also facing a fierce war for talent with high reward/high status sectors such as financial services and tech competing to attract many of the same people.
Now may be the time for firms to act in their own self-interest and invest heavily in workforce training and development.
What can be done at the industry level?
1) Use technology to develop new business model and escape the low investment and low productivity trap
We have already seen that E&C firms typically struggle with low margins. This inevitably reduces the appetite to invest in technology and the human capabilities needed to exploit them. Their clients, in turn increasingly see engineering design as a commodity and are driving down fees.
Digital transformation does, however, point to a way out of this trap. Digital tools combined with increased volumes of data mean consultants and contractors know more about the assets they design and build than ever before. This insight can be the basis for new business models in which engineering and construction firms are rewarded for the value they deliver to their clients, rather than the inputs they put into projects.
Is now the time for the industry to unite around value-based business models?
2) Establish industry standards and improve interoperability to improve collaboration and data sharing
Many survey respondents pointed to volumes of data generated in different formats via a multiplicity of incompatible systems as a barrier to unlocking the benefits of digital transformation. One size will never fit all but as more than a quarter of respondents suggest, establishing industry standards and improving interoperability – the ability to share and manipulate data and convert it from information into insight – would be a big step forward.
If industry players can agree to a basic framework, opportunities to develop scalable products and services could be huge.
Is now the time to put aside short term commercial interests and agree on standards that can unlock a much bigger market?
Read the full report for more insights and questions to start conversations.