Digitizing the Construction Sector Part 2: how digital solutions are disrupting the sector.

Digitizing the Construction Sector Part 2: how digital solutions are disrupting the sector.

The construction industry is ripe for disruption. It has been for a while now. Large projects across asset classes typically take 20 percent longer to finish than scheduled and are up to 80 percent over budget. Construction productivity has actually declined in some markets since the 1990s; financial returns for contractors are often relatively low — and volatile. The digital solutions who are currently on the market and who are being developed could be the solution to a lot of these problems. But the industry must first learn to embrace change…

The construction sector has been slow to adopt processes and technological innovations. The R&D spending runs well behind that of other industries: less than 1% of revenues, versus 3.5 to 4.5 % for the auto and aerospace sectors. This is also true for spending on information technology,which accounts for less than 1% of revenues for construction.

One of the current explanations for this phenomenon is the high complexity of the industry. Rolling out new solutions across construction sites for multiple different sectors that are all geographically dispersed is not an easy task. On top of this there is the varying sophistication levels of smaller construction firms that often serve as subcontractors. This hinders the development and roll-out of new innovations at scale even more.

However, none of this is going to get any easier:

  • Projects are becoming more and more complex and larger in scale as time goes by.
  • The growing demand for environmentally sensitive construction means traditional practices must change.
  • There is an existing shortage of skilled labor and supervisory staff and the research indicates this will only get worse.


These are some deep issues that require new ways of thinking and working. Traditionally, the sector has tended to focus on making incremental improvements, in part because many believe that each project is unique, that it is not possible to scale up new ideas, and that embracing new technologies is impractical. However, this kind of reasoning will not suffice in the future.

The McKinsey Global Institute estimates that the world will need to spend $57 trillion on infrastructure by 2030 to keep up with global GDP growth.1This figure should provide a big enough incentive for players in the industry to leave the old ways of thinking behind and identify solutions to transform productivity and project delivery through new technologies and improved practices.

Here below we will go through 3 technologies with the most potential of disrupting the sector.


BIM has been a promising technology for years now. It’s market implementation has been growing steadily. However, it is still far from being generally accepted. As the below graph shows the majority of the market still never uses it nor do they have the intention to do so. Legislation is becoming more and more fierce though and BIM will soon be the standard for everyone on the building site.

A 2014 EU directive recommends the use of BIM as one of the criteria for the award of public contracts. In Germany the use of BIM is compulsory for public infrastructure projects as of 2020. Similar rules already apply in the UK, the Netherlands, Denmark, Finland and Norway.

The next step for this technology is already in development and shows even more cost saving potential. 4D BIM, which incorporates time as an additional planning dimension, is currently however only used by 6% of players, while 7% plan to introduce it.

Redesign should take place on the computer, not on the construction site. — Sir John Egan

Clearly, the industry has not yet recognized the potential of BIM. The big advantage of this method is that a digital simulation of the project is created before the first brick is laid. BIM thus minimizes planning errors, permits fast calculations, quantifies extra costs and shows alternatives. A lack of BIM expertise could therefore become a serious competitive drawback in the near future.

As more and more planning is based on BIM, this will probably lead to a shift in decision-making structures on the building site. Up to now, construction companies and craftsmen have sourced building materials from manufacturers of their choice in line with specifications drawn up by planners and architects. Soon, however, the planners and architects will also decide quality issues and choose manufacturers. The result will be unheard-of costing accuracy. Construction firms will evolve further in the direction of pure-play contractors.

BIM could also shift construction activity from the building site to industry. Building suppliers will seek to raise their profile in BIM databases by providing end-to-end offerings and system solutions. Accordingly, questions are even being asked about the traditional three-tiered nature of the construction market itself. It is likely that BIM will drive building suppliers direct sales activities onto the building site.

One study found that 75 percent of those that adopted BIM reported a positive return on their investment. They also reported shorter project life cycles and savings on paperwork and material costs.

The above mentioned is only the start of the BIM revolution. 5-D BIM is already being developed. This is five-dimensional representation of the physical and functional characteristics of any project. It considers a project’s cost and schedule in addition to the standard spatial design parameters in 3-D. It also includes such details such as geometry, specifications, aesthetics, thermal, and acoustic properties. This all will be further enhanced through augmented-reality technology via wearable devices. This will completely transform construction, maintenance, and operations.

All experts conclude the same: BIM will drastically reform the industry throughout the coming years and the sooner a company embrace this change the bigger the competitive advantages it will end up with.


Process digitization means moving away from paper and toward online, real-time sharing of information to ensure transparency and collaboration, timely progress and risk assessment, quality control, and, eventually, better and more reliable outcomes.

One reason for the industry’s poor productivity record is that it still mainly relies on paper to manage its processes and deliverables. Due to the lack of digitization, information sharing is delayed and may not be universal. Owners and contractors therefore often work from different versions of reality. The use of paper makes it difficult to capture and analyze data.

Mismanaged paper trails also routinely spur disagreements between owners and contractors on such matters as construction progress, change orders, and claims management. Finally, paper trails simply take more time. The solution? Digital, cloud based collaboration and mobility.

One case, a $5 billion rail project saved more than $110 million and boosted productivity by using automated work flows for reviews and approvals.

The technology behind this type of solutions is also developing at a relentless pace. The digital-collaboration and mobility-solutions segment has attracted close to 60 percent (!) of all venture funding in the construction-technology sector. One start-up has developed apps for tablets and smartphones that allow changes in construction blueprints and plans to be relayed in real time to on-site crews; site photos can be hyperlinked to construction plans.

The potential for cost saving by implementing these solutions is massive. Research show that construction workers devote only about 30% of their working time to their principal activity. The remaining 70% is taken up by running errands, transporting materials, cleaning up, rearranging the building site and looking for materials and equipment. By implementing clearer, digital, mobile based communication solutions figures of this magnitude can be a something from the past.


New building materials, such as self-healing concrete, aerogels, and nano materials, as well as innovative construction approaches, such as 3-D printing and preassembled modules, can lower costs and speed up construction while improving quality and safety.

Building materials represent a $1 trillion global industry; materials usually account for more than half the total cost of projects. Traditional materials such as concrete, cement, and asphalt make up most of this demand. But new and better construction materials are also required due to several trends:

  • Green construction. There is an immense push to adopt materials and technologies with lower carbon footprints.
  • Cost efficiency. Given substantial cost pressures, there is a need for structural change in the choice of materials, in addition to incremental lean efforts.
  • Supply-chain agility. Transporting heavy materials and equipment has massive implications on supply-chain costs and time, especially because many new projects are located in remote or dense areas.
  • Improved durability and strength. With capital costs rising and land growing scarce in many markets, owners are insisting that projects have longer commercial lives.
  • Off-site construction. Assembling lighter, easier-to-handle materials off-site can improve project efficiency, address on-site space constraints, lower on site errors and create the conditions for crews to improve their skills.

There is a lot of research and development being done in all these different trends. In this article however we are going to focus on one of them: off-site construction.

About 80 percent of all construction work is still done on-site, but many project developers and contractors are deploying new off-site approaches that help them improve predictability, consistency, and repeatability. This is especially critical given the realities of shrinking work space, labor shortages, and more exacting safety and environmental standards. The industry needs to move beyond pre-casting and prefabricating structures to the next generation of techniques. Several techniques show potential:

Relatively simple structures, such as factories and covered yards, can use in-factory or in-yard assembly for a complete building envelope. This technique can also be adapted for modular buildings, such as hotels and budget condominiums. Complete submodules of a larger building are put together in a factory or nearby yard before final assembly at the construction site. The result: greater efficiency, less waste, and improved safety. In addition, materials such as cross-laminated timber (CLT) are emerging in response to the need for greener construction options. In the United Kingdom, an 80-story timber skyscraper recently received preliminary approval.

3-D printing.
Printing submodules or complete concrete structures before assembly and internal work could transform the industry with respect to design, cost, and time. However, 3-D printing is still in the early stages of its development and cannot yet be deployed at the scale and speed required for large projects.

Robot-assembled construction.
Construction projects are inherently unstructured and often unpredictable; they can also be sited in difficult terrains and environments. For these reasons, the use of robots has been limited so far. However, robots are now being selectively used for repetitive and predictable activities, such as tiling, bricklaying, welding and spool fabrication, demolition, and concrete recycling.

Companies that have successfully implemented these approaches have had to dramatically change their internal planning, design, procurement, and construction processes. They will also need to invest in automation and an effective supply-chain backbone to ensure smooth and on-time transportation of materials from factory to site to use. Finally, companies that decide to vertically integrate their supply chains will need to plan for manufacturing-related investments.

In the end however companies that have embraced these techniques ended up with higher higher profit margins and an organization that is 21st century proof.


The profound impact of digitization will be felt throughout the entire construction industry. Whichever angle you take — the competitive situation or productivity considerations — companies have no choice but to tackle this vital issue. Those companies that move early to develop and implement their own digitization strategy will be the winners as the construction industry goes digital. The “construction firms of the future” will use digital tools to have materials supplied just in time, thereby cutting the cost of storage and transportation and increasing efficiency. They will source materials with electronic portals and, in so doing, optimize not only their prices but also their collaboration with suppliers. In production, building suppliers will deploy smart machinery and applications that forge networks in which all production processes are planned in advance and operated with optimal efficiency.

Those companies that accept and embrace the radical changes these digital solutions bring will be the winners of tomorrow.

Other industries have shown that first movers can build a sustainable competitive advantage. In the construction sector, this is also likely to be the case. Over the next decade, these winners of tomorrow will take the lead in technology innovation and digitization. Resisting change is no longer an option.