Digitizing the Construction Sector Part 1: The 4 Keys to Digitizing the Construction Industry.

Digitizing the Construction Sector Part 1: The 4 Keys to Digitizing the Construction Industry.

Technology is everywhere. It’s in both your trouser pockets, it has secured a fixed place on everyone’s desk, its on food packaging, its underground and so far above the ground it even appears as a star in the sky. It has gone from something that helps us do the same things faster to doing new things altogether. In the music industry for example, as of June 2016, 46% of all sales are achieved via digital offerings.

Technology as we know has not only taken over the music industry but finds itself active in all sectors and areas of business. This, however, does not mean that all sectors are equally digitized.

There are certain technical challenges specific to the construction sector that play a role in the slow adoption of digitization. Inserting digital solutions in construction sites for multiple sectors, that are more often than not, geographically dispersed, is no easy task.

The way things are headed, this will only become more and more difficult. Construction sites and projects are only getting more complex and larger. The growing demand for environmentally conscious construction means traditional practices must change.

This along with the shortage of skilled labor and supervisory staff will only make it that much more difficult. Innovation in this sector requires new ways of thinking and working in order to tackle aspects in a very wide array of processes. The sector is slow to adopt and is prone to making incremental improvements. Many state that every project is unique and that it is not always possible to scale up new ideas, and that embracing new technologies is impractical and cause many upfront delays and costs.

Such hesitant implementation is all the more surprising when one considers the trend in productivity in the construction industry. Since 1995 the average labor productivity of the construction sector is significantly lower than that of the total economy. If we take Germany for example the productivity has gone up by a meager 4.1% in the last 10 years. By comparison across the whole german economy the productivity has gone up by 11% in that same period. The gap between construction and industry is particularly wide: manufacturing has seen productivity rise by 34.1% on average over the past decade, against a gain of 27.1% for the whole of the secondary sector.

Now, as we like to say here at Bao, every problem is an opportunity. A problem as large as the slacking level of digitization in one of the largest sectors means that there are many areas calling for disruption and innovation.

Digital transformation can be divided into 4 main areas;

  1. Digital Data
    The electronic collection and analysis of data to gain fresh insights into every link in the value chain and then put these insights to good use.
  2. Digital Access
    The potential afforded by mobile access to the internet and internal networks.
  3. Automation
    Technologies that create autonomous or self organizing systems.
  4. Connectivity
    Explores the possibilities to link up and synchronize separate activities.

A crucial factor regarding these 4 aspects of digital transformation is that they can be applied at every level of the value chain. These levels being:

>Logistics: Flow of goods, storage and transportation

>Procurement: Purchasing, supplier management and supplier evaluation

>Production/construction: Production and quality management

> Marketing/sales: Sales/dealer management

>After sales/end-customer marketing: Pull marketing, user support and services

According to a survey conducted by Roland Berger, a multinational management consultant, the opinions of 40 large players in the construction sector concluded with the results below.

The degree of across-the-board implementation in the corporate community is correspondingly low. Respondent firms were unable to name any division or department in which digitization has already been extensively implemented. Even “moderate” implementation currently only applies for connectivity (in the context of procurement) and digital data (in production). An example of this would be Cloud computing solutions for collaborative production processes. At all other links in the value chain, however, respondents indicated that implementation is currently low, very low or non-existent.

The opinions of those active in the sector is without a doubt the most reliable source for this sort of question. This last figure coupled with the level of digitization a couple of scrolls upwards looks like objective proof that the demand for digital offerings in the construction sector is very, very high.

What we like to do with each of these blog posts is talk a bit about certain aspects of the construction sector that may apply to what we are trying to achieve with our company. With bao it was the intent from the get-go that we wanted to build a forward thinking company that took full advantage of current and upcoming technologies in order to provide a superior product and accompanying service.

To a certain extent we will be confronted with challenges on all levels of the value chain. For those who don’t know, we are developing a prefabricated module system that houses a kitchen, bathroom and the 5 necessary living utilities. We will sell this module to project developers that construct apartments or care homes. The processes we will have to put in place in order to get our product from design to manufacture to delivery touches upon many levels of the value chain. With this in mind it is a great challenge for us to make sure that the systems we put in place are at the forefront of what is available.

According the experienced players in the sector, all levels of the value chain are currently underutilizing digital solutions. From what I have read and experienced on the matter it seems like we are really going to have our work cut out for us.