As the Federal Reserve announces a fourth interest rate increase in as nearly as many months, could the U.S. construction industry’s worst nightmare—economic stagnation or, worse, a recession—become a reality? And if so, how can a concerted effort to ensure digital transformation is human-centric help capital project owners keep one step ahead?
This sustained period of inflation, runaway material costs, supply chain constraints and labor shortages are beginning to make an indelible mark. The Fed’s latest Beige Book notes “growing signs of a slowdown in demand” in several districts coupled with “concerns over an increased risk of a recession” in five districts. In tandem, the most recent data from Associated Builders and Contractors reveals the first decrease in the construction backlog since the beginning of the year, while the outlook for profit margins has also taken a tumble.
With such strong headwinds, now more than ever the construction industry must focus on setting realistic expectations while proactively seeking out and mitigating sources of risk. In fact, this year’s Global Capital Projects Outlook found unmanaged or unexpected risk (e.g., supply chain constraints, labor shortages and safety concerns) to be the leading impact on whether a project completes on-time and on-budget.
The same survey found that less than half of capital projects in North America are completed on-time and on-budget, leaving vast room for improvement to the tune of millions of dollars and thousands of hours. Despite labor shortages, closing the gap is not simply about executing faster and working harder. The greater opportunity lies in digital transformation. Organizations with a clear digital transformation strategy typically incur less scope creep and overspend less compared to those without a formal approach to digitalization.
Devising and implementing a digital transformation strategy is a good next step for any construction organization seeking to use technology to mitigate some of the more obvious operational risks. However, as projects become more complex and data ubiquitous, even greater leaps forward can be made by placing interoperable systems, connected data and integrated project delivery models at the heart of digital transformation.
By creating a connected data environment and integrating data solutions, organizations make space for true collaboration and improved transparency between stakeholders. At the same time, the ability to compare project work enhances insights and benchmarking, ultimately supercharging project certainty—now and in the future. The question is, what is stopping us?
Keeping one step ahead
Financial considerations aside, progress toward establishing a connected, interoperable and integrated capital project environment comes down to a question of change management—an element of technology implementation that is so often hurried or overlooked.
Lack of technically skilled talent and the difficulty of integrating and implementing new technologies with old technologies can slow progress. However, it’s not just about the technical nuts and bolts of digital transformation, there is a lot to be gained by taking a human-centric approach, where the impact on the end user is carefully considered. Failure to take such an approach may lead to a disconnect over the perceived value of the transformation and increase resistance to change. While the new technology may deliver impressive results regardless, the end user must be bought in to achieve maximum return on investment.
In practical terms, that means ensuring any technology investment is adequately resourced to allow for training and user adoption initiatives, and proactively communicating the value of the changes being made. The latter is especially important as the construction industry’s focus shifts from simply finding ways to work faster to, instead, making better decisions. Digital transformation is never without its pain points, but they are more palatable when the bigger picture is understood.
Timing is also important. Too much at once can leave employees feeling burnt out, so technologies need to be prioritized and timetabled for rollout at an appropriate pace.
End users are already cautiously optimistic about the potential for construction technology to help smooth some of the challenges they face day to day. Many have hopes for more automation, more control and greater insights. But it could unlock much more than that, empowering employees to follow their intuition, explore data through analysis and have deeper conversations with stakeholders to create connections that add strategic value.
By ensuring digital transformation is human-centric, not only will new technology implementation be more successful, but owners also stand to make the most out of their intangible assets too. With the power to deploy its workforce creatively, those owners will always be one step ahead.
