The Impact of Digital Transformation in the Construction Industry

Author: Anusha Kumar Date: 03 August, 2021

‘Digital transformation’, the buzz word, a 2.39 trillion dollar market space (by 2024), which has been disrupting the way companies work, marks a fundamental change in how companies make use of technology, people and business models to bring more value to their customers.

The term digital transformation comprises two parts, 'digital' and 'transformation'. Most organisations tend to focus more on the ‘digital’ part. Perhaps, other terms such as AI, Business Intelligence, Machine Learning, Cloud technology, ERP, CRM etc possess a certain wow factor that can entice organisations to know more about them. Although, it is the ‘transformation’ part, which is the most crucial step that requires a shift in the process, people’s mindset and the company business model.

Through this blog post, we will explain the meaning of digital transformation, ways to incorporate it and how industries, specifically the construction industry can embrace the transformation and benefit from it.

What is digital transformation?

According to a survey conducted by McKinsey, nearly 64% of the companies say that they need to build new digital business models that are economically viable through 2023, while only 11% of the companies say otherwise.

McKinsey

Source: McKinsey

So what exactly is digital transformation?. Gartner states “digital transformation can refer to anything from IT modernization (for example, cloud computing), to digital optimization, to the invention of new digital business models”.

Digital transformation transcends the way different departments operate. These departments include sales, marketing, customer service, project management etc.

As companies move from papers to spreadsheets to softwares and smart applications, the business process becomes more effective and customer oriented. This helps the business to improve their overall productivity and customer retention rate.

The term digital transformation can be rooted back to 1940, where Claude Shannon, the father of Information theory talks about ‘digitisation’ in his article, ‘A Mathematical Theory of Communication'.

Since then, companies have adapted to new digital technologies which have helped them in numerous ways and their customers.

In the next part of this blog post, we will discuss the impact of digital transformation specifically on the construction industry.

Business challenges faced by the construction industry and their lack of technology usage

Software solutions aid companies to boost their productivity and maximise their efficiency. Several industries have understood the importance of digital transformation through software solutions and are increasingly investing in them.

Despite this fact, compared to other industrial sectors, the construction industry is heavily dependent on manual processes and spreadsheets to carry out most of their business operations. A survey from the JBKnowledge Construction report says that major departments of a construction company such as estimating, accounting, project management etc rely on spreadsheets instead of using software solutions.

Another study conducted by SelectHub reports that only 4% of the construction industry is investing in business software solutions such as ERP.

SelectHub

Source: SelectHub

Business challenges faced by the construction industry

Why is the construction industry less digitised?

Digitised

Source: McKinsey Global Institute industry digitization index

Another study conducted by McKinsey Global Institute industry digitization index reports that among the major industrial sectors, the construction industry is the least digitised.

There are no absolute deductions on why the construction industry is less digitised. Yet, we can observe a few characteristics and traits that can explain this trend.

Benefits of digital transformation for the construction industry

Benefits of Digital Transformation

Research by the McKinsey Global Institute shows that digital transformation in the construction industry can result in productivity gains of 14 to 15% and cost reductions of 4 to 6%. Let’s go through a few benefits of the digital transformation in the construction industry

Other technology solutions such as drones and robots provide enhanced worker safety. These devices are operated in hazardous workplaces which can be risky for the workers.

How to incorporate the transformation in the construction industry?

Transformation in construction industry
  1. Define the problem statement and set the goal

    Before implementing any type of digital solution into your business, you need to define the existing problems, set the goal and decide how implementing the particular solution can help solve the problems. The next step is to align the goals with the business outcomes that the company is trying to achieve. Only then a successful digital transformation can be achieved.
  2. Research and invest in technology solutions that can benefit the company

    Multiple digital solutions are easily available on the market. You might get prompted to learn more about the different technical solutions used by your competitors and peers. While it is good to learn about your competitor's strategies, the solutions that suit their business goals may not be the best fit for your business. Thus, you need to research thoroughly the best technical solutions that match your company vision before implementing them into your business.
  3. Ensure the decision-makers are on-board

    Investing in new technological solutions can be expensive and a time-consuming process. The company must consult the technical and strategic decision-making teams and decide whether investing in new technology is feasible. You need to know the compatibility of the new technology system with legacy software systems. To map these things, the IT decision-makers and stakeholders must be on the same page and work concurrently to ensure a smooth digital transformation.

Final thoughts

Implementing digital solutions into your construction business might sound like a simple task. As a construction business owner or a project manager, you need to ensure that the whole organisation adapts to this new transformation and embraces it. Only then can digital transformation be successful. If you are looking to digitally transform your construction business by implementing ERP and CRM systems, then reach out to us!

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