Did you know that few companies fully digitized their operations the traditional processes and procedures that have evolved over the history of the deeply fragmented, risk-averse building industry. The following characteristics of the building industry make digital transformation particularly challenging:
- Fragmentation: The building industry is characterized by a highly fragmented value chain. Each step in the chain involves a multitude of independent contractors, subcontractors, and suppliers. Further, these players often find themselves at odds with each other due to the short-term and adversarial nature of construction contracts. This set of conditions hinders the seamless data flows and integrated systems that robust digitization requires.
- Lack of Standardization: Construction projects are nearly always one-off endeavors, with unique requirements that demand customized design and delivery methods. As these methods are rarely repeated, it is difficult to introduce changes and establish new ways of working across multiple projects.
- Transience: Workforce turnover in the building industry is high. Each construction project typically involves a brand new set of stakeholders, organizations, and project teams. These groups have little incentive to embrace new technologies or work processes during the brief period of time when they are working together on a project.
- Decentralization: Large companies often consist of multiple business units that tend to follow their own processes and procedures. Individual construction projects take place at sites that are far away from the company office. Many sites are located in harsh or remote environments. Few sites are conducive to teaching workers how to work in new ways or master new technology.
- Silos in project management. The building world is filled with walled off silos of knowledge. Companies are often rewarded for zealously guarding their project data—even if this secrecy is detrimental to the overall project.In reality, the obfuscation of knowledge often offers a competitive advantage over transparency. What is more, individual teams and business units will often develop their own digital solutions without coordinating with others.
- Minimal investment in R&D: Research and development is vital for the renewal of any industry. Yet building companies invest much less in R&D than their peers in other industries (less than 1 %of revenues, versus 3.5%-4.5%for the auto and aerospace sectors). The benefits of R&D are long-term, the costs short-term. This is an unappealing trade-off for project-driven companies confronting shrinking profit margins and stagnant productivity.
- Conservative Culture: The building industry retains a conservative culture which does not nurture progressive thinking. Too often, the industry mindset is oriented toward the past, not the future. Since companies often have established processes for dealing with perennial problems, they may have difficulty adopting more innovative solutions.
- Workforce Talent: Finding digital talent is a primary concern for executives across the building industry. However, a negative perception of the industry, along with a lack of programs for up skilling the current workforce, makes it difficult to attract the required talent and close a significant talent gap.