4 Steps to Implement Construction Technology Most Profitably

McKinsey Global research reveals three reasons likely to limit contractors’ success with digital tools and four elements key to getting maximum return from new technologies

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McKinsey & Co. asserts the engineering and construction (E&C) industry is at the cusp of a new era, with technology start-ups creating new applications and tools that are changing how companies design, plan, and execute projects.

Many E&C companies have begun incorporating new construction technologies into their daily activities, but most of their efforts have focused on software tools for digital collaboration. The reasons for this narrow focus vary, but some players hesitate to expand into any other area because they have traditionally struggled to deploy new tools at scale, limiting their impact. Modest returns make these companies reluctant to explore adding productivity-enhancing technologies, especially those requiring substantial investment.

Review of data from McKinsey Global Institute’s Construction Productivity Survey revealed that three factors may be responsible for poor implementation:

  1. Insufficient commitment. Many E&C companies feel pressured to adopt digital solutions, especially if their competitors deploy them, to demonstrate commitment to innovation. Leaders often see lower-than-expected returns from their digital investments once they are past the excitement of the launch stage because their attention and resources are pulled in many different directions.
  2. Difficulties with company-wide rollout. E&C companies generally evaluate construction tools in pilot projects, determining their impact and identifying glitches before investing in large-scale integration., Even after a smooth pilot project, companies often encounter obstacles when rolling out digital tools company-wide because the tools are introduced into work flows without proper explanation of the benefits or sufficient training. People on sites then see the new tools as headquarters-driven impositions that complicate their jobs.
  3. Lack of compatibility with legacy systems. New technologies deliver the greatest value when they seamlessly integrate with existing enterprise systems. For example, field-data-collection applications that automatically connect to cost systems can provide real-time visibility into productivity, allowing managers to make immediate adjustments.

A few E&C players are addressing these challenges. For instance, Bechtel established a firmwide process for testing new technologies, integrating new solutions into work flows, and encouraging innovation. Such efforts are the exception, however, since many E&C players simply introduce new digital tools without educating workers about their benefits or altering organizational structures. The lack of support may explain why technology efforts often score early gains but quickly lose momentum.

To get past these common challenges, McKinsey recommends companies follow a next-generation operating model that incorporates four key elements:

1. Create a focused digital strategy and organization

A strategic approach to construction technology starts with establishing a performance baseline, benchmarking yourself against companies in relevant industries, segments, or projects to identify the most important areas for improvement—for instance, engineering activities, construction productivity, or indirect costs.

After benchmarking, companies should identify improvement levers by considering some basic but frequently overlooked issues, such as the bottom-line performance improvements they hope to achieve. They should also quantify the benefit associated with each lever and prioritize those that deliver the greatest improvement. Finally, companies must consolidate their findings into an implementation plan with a realistic timeline to stay on track.

All company functions must be involved in deployment, from the front line to top management. Leaders need to realistically assess their organizations’ capacity and skills to implement new tools. They must also incorporate digital solutions into their internal processes, since employees might otherwise stick with familiar routines. Similarly, leaders must examine their current IT systems, determine whether new tools can be integrated smoothly, and make any necessary changes before a program begins.

Throughout implementation, top managers must clearly demonstrate and emphasize their support for new initiatives. For instance, CEOs should ensure that specific teams and leaders are responsible for implementing the digital strategy, monitoring results, and ensuring that initiatives achieve scale and maintain momentum.

E&C companies with strong digital skills might have an advantage when implementing complex solutions across their organization. Other players might find digital initiatives more challenging and should consider implementing individual solutions in sequence, rather than undertaking a more comprehensive digital transformation.

2. Turn projects into test labs

The best E&C companies view every project as an opportunity to test and refine new digital solutions in partnership with clients and contractors. If frontline workers identify a problem in the field, for example, they should discuss possible digital solutions with E&C leadership and then pilot them during the project. To monitor results, project teams must establish key performance indicators and share them periodically with the leaders who oversee digital programs. If a tool produces lackluster results or fails to hit the mark, leaders should work with the team involved to identify and resolve problems while the pilot is still under way.

Later, leaders should publicize successful results, encourage widespread rollout, and advise other teams deploying the tools. These efforts will help overcome company-wide communication gaps and may generate enthusiasm among other staff. Some companies have appointed chief innovation officers or chief digital officers to lead these large-scale programs. In some cases, this is a new role. For instance, Atkins recently appointed its first chief digital officer to lead the development and integration of new and emerging technologies across the company. The appointment of chief innovation officers and chief digital officers should address one of the most important obstacles that executives noted in the McKinsey Construction Productivity Survey: a lack of internal processes to support innovation.

3. Let data lead the way

Many of the best construction-technology tools incorporate data from both past and ongoing projects into their decision-making algorithms. As these tools become more prominent, E&C firms ensure that they incorporate analytics into their daily work flows by collecting targeted data sets and investing in the capabilities needed to glean insights from them. Since analytics solutions also require specific skills, such as those related to data science, E&C firms must expand their recruitment base to attract such employees, who are in short supply. Several major E&C players have already begun hiring chief digital officers and additional data scientists.

4. Increase investment in digital solutions

Construction technology is advancing rapidly, compressing development schedules for new tools and significantly increasing their cost. Unless E&C firms back their commitment to innovation with a substantial investment, they are unlikely to stay on the cutting edge. Since every digital initiative carries some degree of financial risk, E&C companies should approach owners, developers, subcontractors, and technology providers, asking about partnerships or co-investment opportunities. Bechtel, for instance, recently entered into a partnership with the software company Rhumbix to improve its field-supervision platform for large construction projects.

To identify the best prospects, E&C companies should establish “listening posts” within the industry—a network of experts who can advise them about the most promising solutions. Finally, companies should consider mergers and acquisitions with technology partners to bring digital skills in-house, since this will give them a role in driving innovation.

McKinsey: The New Age of Engineering and Construction Technology

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