Digitalisation must be top priority for construction companies

A recently published EU working document states: “Digitalisation is a means, an enabler to achieve a better built environment for the planet and people”. In this article, we focus on how digitalisation can fuel contractors to improve the building process. (Technologies that give buildings extra user options – smart buildings – are out of scope.) To explain what digital construction exactly is and how it can help construction companies to be more efficient, we distinguish three phases:

Digitisation converts information into a digital form. For example, construction drawings are digitised (known as BIM: Building Information Modeling), photos of building issues are saved digitally, and the use of sensors makes information digital. Digitised information is exchanged via WhatsApp, email, SharePoints and (video) calling, but using computers doesn't lead to new applications during this phase (see box below). The efficiency gains are therefore still limited. Construction drawings, for example, are digital but not everyone has the latest version automatically at their disposal (SSOT: Single Source of Truth). In this phase, staff have all kinds of digital information, but must examine the data themselves.

In the next phase of digitalisation, digitised information is used to make business processes more efficient. Digital information (from sensors, drones, photos and construction drawings) is converted into data. This (big) data can be processed digitally by, for example, artificial intelligence. Staff don't have to inspect all the information anymore because it will be done automatically, and it can create a single platform with SSOT, so all the participants have the same up-to-date information, including construction drawings.

Digital transformation goes a step further than digitalisation. It's about new business models and how to improve the client experience. Think about marketplaces (e.g. 12Build, HomeAdvisor and Instapro) or software suppliers such as Autodesk and Trimble. Also, front-running construction companies in digitalisation could start to offer their digital platform or other ICT services to other companies. In this case, they can change their business model from “contractor” to ICT-service provider. Digital transformation is an option for construction firms if they have any outstanding IT solutions, however, this is definitely not a step every contractor has to make to be successful in digitalisation.

Digital construction offers a lot of advantages compared to non-digital building:

• Increases the efficiency: The main goal for construction companies for digitalisation is to increase efficiency. The information provided during the building process can be improved enormously. Managing the most up-to-date information flow to colleagues, subcontractors, and suppliers goes automatically. So, all involved parties are directly informed of the latest adjustments. This makes it possible to prevent errors. Finally, there will only be one digital source of information (SSOT) keeping everyone informed of the latest adjustments to the digital (3D) design and different steps in the building process. In this way, all involved parties are aware of the real-time situation of the construction process
• The first step towards industrialisation: Digitalisation is also a prelude to efficiency gains through industrialisation in which machines, 3D printers and robots are controlled by the digital construction process. See our article: industrialisation in construction
• Business decisions based on more sophisticated data instead of gut feeling: Digitalisation not only improves construction processes. Companies can also improve their strategic decisions to base them on facts from the data that becomes available through digitalisation. Furthermore, the sales department can also benefit. Where are the biggest sales opportunities and what options are chosen in offered sales packages by clients? With virtual reality, traditional drawings of new construction buildings can also be made more “tangible” and appealing to potential buyers

However, digitalisation does not just happen. There are also obstacles for building companies, such as:

• Not all contractors see digitalisation as a necessity: Things are currently going well for many European construction companies (despite the Covid-19 crisis). Order books are full and a (modest) profit is made. So, why spend a lot of money on digitalisation? They also prefer not to make a risky investment in digitalisation. Digital developments are also moving fast. If you invest now, there is a good chance that within a few years you will be stuck with outdated digital technology. Waiting until any teething troubles have been resolved could pay off. Our opinion, however, is that there is a big chance that these companies could lag behind on digitalisation and ultimately it will be impossible for them to make up for it
• Shortages of skilled staff: Skilled staff shortages are hampering construction companies to digitalise (further). The pool of employees with a combination of sufficient ICT knowledge and experience in the construction sector is small
• Data silos: Many construction companies that have embraced digitalisation have used a large number of different systems over the years. This makes it difficult to connect those and integrate them into one IT platform (due to so-called legacy systems). In different parts of the building process, different software from different suppliers is used. This means that data can’t be properly distributed inside and outside the company. The next step is to link those IT systems together and unlock the data. In this way, data silos can be avoided where large amounts of data are not fully used. However, pairing different IT systems is often a difficult step.

The construction sector lags behind when it comes to digitalisation

Compared to other sectors, the construction sector lags behind in digitalisation. An EU construction employee has approximately €1,300 of software at his disposal. Yet, other EU workers have software at the value of €3,800, and manufacturing workers have €5,200. This limited amount of software in the construction sector reduces productivity. An increasing amount can improve productivity.

Despite digitalisation in the construction sector lagging behind other sectors, the growth rate has been higher in the last 25 years. The value of software has more than quadrupled during this period. In all sectors, the digitalisation pace was lower and “only” tripled in that same timeframe. The main reason for this catch-up effect is that the internet became mobile during this time. All kinds of hand devices (tablets and mobile phones) in combination with wireless networks (2G, 3G, 4G and the start of 5G) have made it possible for digital information to be accessed from the construction site. This is key for construction companies; a computer at the office doesn’t have a lot of value for contractors as most of the building process is outside and at a different place for every single project.

The Dutch construction sector is a frontrunner in digitalisation. In the Netherlands, almost 75% of construction employees are using a device with internet access, while in Belgium, Austria, Spain and France this figure is just below 50%. In Turkey, a little more than 10% of the construction workforce has a work device with internet. (This is a pity, as it means that almost 9 out of 10 Turkish construction employees aren’t able to read this fabulous article about digital construction.) The most ERP-systems (Enterprise Resource Planning is the integrated management of main business processes by software) are being used in Belgium and The Netherlands.

The Dutch construction sector is leading in digital construction, but its pace of further digitalisation is declining. Other digitalising firms from other countries have to be wary that the same doesn't happen to them. Dutch companies have invested in software as the value per Dutch construction employee increased enormously in the period between 2010-15. In this way, they have picked the low hanging fruit of the first phase of digitalisation. As a result, construction drawings are often digitised (BIM) and information is often being exchanged via digital networks, as the high percentage of employees with a device with internet access indicates. Many building companies in other countries still have to make this transition.

The development of the value of software per German construction employee is remarkable. It has more than doubled in the last 25 years but still lags far behind other countries. Other data also shows that German construction firms are falling behind, but this relatively slow growth could also be due to a slightly different statistical method that is used in Germany.

The second phase of digitalisation is more difficult. Different software systems have to be connected to create a Single Source of Truth and make other applications possible. This could hinder the pace of construction firms to further digitalisation. However, this is necessary to fully profit from digital construction and applications such as parametric design, configure to order, digital twins and predictive maintenance. The current booming Dutch construction market could also be a reason that the speed of digitalisation is lower at the moment. There is more than enough work for every contractor and the necessity to excel through digitalisation is therefore lower. This also counts for many other construction markets in Europe. However, many contractors in these markets are still able to take large steps in the first phase of digitalisation (digitising) but should be wary that after that, the next phase is more difficult.

Digitalisation needs to be a top priority for construction companies. It makes the building process more cost-effective, it helps to take steps to industrialisation and it delivers all kinds of data. With this data, the building process can be optimised and strategic decisions can be made. However, digitalisation is still not the top priority for every building company. At the moment they don’t always see the necessity because order books are often well filled. Yet, it is important to stay cost-competitive in the long run and digitalisation can help to achieve that. Digitalisation can also help to reduce demand for labour and therefore decrease staff shortages. Investing in digitalisation is, therefore, a must for every building company.