The Skinny
- Construction has lagged in digital transformation over the last decade, but COVID-19 has accelerated the transformation — forcing many firms to start investing in digitally-transformative technology.
- The "new normal" of construction will involve a healthy dose of IoT, predictive analytics, and safety.
- Construction is set to grow by 15% in 2021. Firms that embrace digital transformation will take the lion's share.
The construction industry suffered in 2020. Facing the most disruptive black swan event in decades, financial indexes for construction looked bleak throughout the majority of the year. But, with the vaccine rollout in full-steam-ahead mode, many construction companies are resuming critical projects and rallying together to get "back on path." But what if the race to resume normality was the wrong path forward? What if the construction industry took hold of this black swan and built its own path forward — leaving behind the archaic relics that have held it back for so many years?
In 2021, the new normal is better-than-normal, and construction companies that embrace change are well-positioned to take advantage of this year's measurable gains.
Avoiding Digital Extinction
When we look beyond the context of COVID-19, we see an industry that has historically struggled to adopt new technology. A mere 13 percent of construction companies have achieved a sustainable level of digitization. However, due to the implications of COVID, a good 72 percent admit that digital transformation is now a "priority" for their firms. In a way, the black swan was a white knight. For years, construction has put digital transformation on the back-burner. Many leaders feared high upfront costs and long-term paybacks, while others lacked the technical experience to execute digital transformation — and instead chose to focus on other projects when quarterly budget cycles hit.
Last year, we were forced to evolve. This year, we'll want to evolve. With the construction industry set to grow 15% in 2021, there's a significant amount of market share up for grabs. How your firm reacts to this growth in light of last year's decline will define you over the coming decade. And the strongest tool in your arsenal is an unfamiliar one: it's cutting-edge technology.
Beyond "Normal"
McKinsey defines three pillars of digitally-driven construction. They are:
- Collaboration
- Forecasting
- Safety
Collaboration involves digital conferencing tools, scheduling tools, and various messaging platforms. Technically, McKinsey calls this a "digital control tower," but it mostly discusses digital tools and meeting types. We won’t focus on this one too much, because most mid-market construction firms already have digital collaboration tools — especially after 2020. The second point, and possibly the most impactful one, is forecasting.
Forecasting eliminates gut feelings and replaces them with informed, data-driven decision-making. To be clear, construction forecasting is wholly-transformative, and it penetrates nearly every layer of modern construction architecture. From budgeting and bids to constructability, execution, and safety, forecasting uses past and incoming data to inform and draw meaningful conclusions.
Finally, we have safety — which is a convergence of multiple technologies. It's no big secret that safety is top-of-mind for construction firms. In fact, we would say that safety is the pinnacle of construction digitization. It's the holy grail. To achieve better safety standards and chase the elusive "injury-free workplace," construction leaders will combine IoT sensors and cutting-edge safety equipment with predictive forecasting platforms to identify safety issues and rectify them before they become safety emergencies.
Finding Unparalleled Success After Unprecedented Chaos
Forecasting, IoT, AI, machine learning, and all the other technologies in the digital toolbox aren't just mid-horizon solutions aimed at long-term growth. They're immediately impactful, and they bring tangible value to the table in the short-term.
This year, don't fall back into "normal." Go above and beyond. McKinsey's benchmarking unit estimates that digital transformation will bring $1.6 trillion a year in value to the construction industry, improving productivity and gains by nearly 60 percent across-the-board.
Thirty-nine percent of contractors have admitted that they have "no plans" to make transformative changes to their business after COVID-19. This is an enormous mistake that could jeopardize businesses, minimize revenue, and increase haphazard working conditions. This year isn't just another blip on the construction radar. It's a year of immense change. Construction needs to transform, and many firms aren't sitting around and waiting for it to happen. Acceleration is the name of the game, and there will be winners, losers, and (worst of all) non-participants.
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