4 Reasons Why Construction is stuck in the analog era

4 Reasons Why Construction is stuck in the analog era

Outside individual major projects, few Construction companies have fully digitized their operations. They aren’t alone. Companies in all industries report that digital transformations often fall short of expectations. In one McKinsey survey, just 16 percent of respondents said their organizations’ digital transformations had delivered sustainable performance improvements. Common challenges include unclear definitions of what digital means, an indistinct idea about what the transformation should accomplish, and poor integration of digital tools with business processes

But these factors don’t explain entirely why digital transformation in the Construction industry is so hard. The following characteristics of the Construction industry make digital transformation particularly challenging:

Fragmentation. Construction projects are typically fragmented along the value chain, with specialists generally operating in one or a small number of disciplines. And each step in the value chain involves multiple layers of contractors and subcontractors. Implementing digital solutions across a project thus requires coordinating changes among organizations—a task that is especially hard, given the short-term and often adversarial nature of Construction contracts.

Lack of replication. Construction projects are nearly always one-of-a-kind endeavors, with unique requirements that necessitate bespoke design and delivery approaches. Since these approaches are seldom repeated, it is harder to introduce changes across numerous projects, as full-scale transformation requires. The exceptions are multiyear major projects, on which companies can establish processes and reinforce them over time.

Transience. Ordinarily, a new Construction project will involve a new set of organizations working together. Project teams, too, are rarely consistent. Contractors face similar challenges at the enterprise level, at which workforce turnover is high. Transience at the project and company levels makes it difficult for Construction companies and their subconsultants and subcontractors to establish new ways of working and build capabilities that carry over from one project to the next.

Decentralization. Large Construction companies tend to be highly federated, with business units and divisions following their own processes rather than standardized ones, not least because many have grown by acquiring smaller firms. Individual projects take place at sites that are far from a company office. And few sites are conducive to teaching workers how to work in new ways or use advanced technology.

These characteristics of the Construction industry make it harder for companies to develop digital solutions that they can apply to multiple projects. More commonly, individual teams and business units will develop their own digital solutions, without coordinating with others. The result is a proliferation of subscale, often competing tools within a single company.

Source: Mckinsey

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