Why Construction Firms Don't Digitize - Myth #2

Stephanie Patterson, Rhumbix InsiderMay 19, 2017 • 4 min read

Part 2 of a series on the most common reasons construction firms don’t adopt digital solutions

Something our team hears regularly in conversations with construction professionals—across all trades—is that new technology is important to them, but it’s not the first thing on their to-do list. This bring us to the second myth in our series on why construction firms are not adopting new technology:

Myth #2: “We know this is important, but it’s not urgent.”

Creating a sense of urgency is an inevitable variable companies need to be prepared to face any time they want to do something new or different. All of us have dealt with this in our personal lives, but we call it by a different name: procrastination. The hidden belief that drives this behavior is that whatever we’re being asked to change feels additive—or optional—rather than necessary.

Steven Covey, author of the Seven Habits of Highly Effective People, popularized the idea of the Covey Time Management Matrix as a method followed by productive people for getting their work done quickly. The chart is a simple 4-quadrant approach to prioritizing tasks that helps people properly allocate their time and overcome procrastination.

Source: Stephen Covey, “The Seven Habits of Highly Effective People

For most construction firms, adopting new technology is in the upper-right hand column, Quadrant II, because while technology is important, it’s not urgent. They’re putting off adopting new technology because they see it as additive versus necessary.

But if we step back and look at industry-wide trends, the data tells a different story.

Technology and the Future of Construction

According to PwC’s 2016 report on digitization in construction and engineering, firms have now moved from talking about digitization to fully embracing it. Of the 2,000 participants they surveyed across 26 countries, 69% expect a high level of digitization industry-wide in the next five years.

Digitization has finally found its place on the company balance sheet, with firms planning to invest 5% of their revenue annually on digital solutions.

They’re doing this because they see the dual potential of increased profits and cost savings. On average, firms anticipate a revenue gain of 2.7% and cost savings of 3.4% annually. Those numbers may sound small, but in an industry like construction that runs on a 1-3% profit margin, a gain of just a few percentage points goes a long way.

What’s more, the growth of the global construction industry is expected to outpace global GDP by over one percentage point for the next 14 years. The combined outcome of digitization and industry expansion is a massive opportunity for those who embrace and prioritize technology…

…and a devastating risk for those who don’t.

“If even half of the expectations outlined above are realized, some companies may find it difficult to compete. In an increasingly cost-competitive market, no engineering and construction company can afford to lose out in operational efficiency against their market peers. The next two to three years will be crucial for companies looking to catch up.”

-PwC 2016 Global Industry 4.0 Survey 

. . .and Speaking of Playing Catching Up

For those that continue to operate without a sense of urgency, we don’t have to look far to see the potential risks.

Recent history provides plenty of cautionary tales of companies who chose to procrastinate when facing technological change, from Kodak and the digital camera to K-mart’s downward spiral in the world of big box retailers. And while Walmart finally jumped on the e-commerce bandwagon, they’ve been playing catch-up with Amazon for years.

Data is Driving the Future of Every Industry

But there is also great evidence of the reward for those that stay ahead. Last year, GE announced development of Predix, a cloud-based operating system for industrial applications.

The platform will collect and analyze data from equipment such as jet engines, gas turbines and MRI scanners and use the results to make them run better. They have invested heavily in the platform, and recently broke ground to build their new corporate headquarters in Boston, citing the innovation ecosystem and talent pool of the city as a major factor in their move. GE is now the industrial company that’s also a data company, and the investment is paying off. Their software and services business did $6 billion in revenue in 2016.

Don’t Be Left Behind

The construction industry is at a turning point and in the next five years, we’re going to see a massive shift in the necessity of construction firms to have a digital strategy.

It’s time for construction firms to act with a sense of urgency and properly allocate the time and resources necessary to move forward, from Quadrant II to Quadrant I, where it’s important AND urgent.

A great first step is to form an innovation team at your company with representatives from the executive team, IT, finance and the field. Have them work together to identify the most immediate challenges that can be addressed using technology, and create a road map for researching, testing, and ultimately purchasing the appropriate solutions. 

Other posts in this series:
Myth #1: “Built in-house is better.”
Myth #3: “The field won’t like it.”
Myth #4: “It won’t integrate.”