The digital push is accelerating and even if construction industry players are still confused and hesitant about the change and new technologies, the time has come for them to develop a real digital strategy. Many players have created innovation labs and launched “proof of concept” (POC) explorations, often through local business unit initiatives, to test possible options and to remain open to possibilities without investing too heavily. Those local experiences are not sufficient anymore to ensure success in the future and to be on top of the wave for the years to come. It is important to note that while the necessary digital evolution can be a threat if not approached properly, it is mainly a land of opportunities both regarding cost efficiency, as well as regarding top-line client experience improvement and offer differentiation. Market player positions and values will be deeply impacted if today’s leading players don’t catch the ball in time.
The truth is that digitalization in the construction industry has been a growing trend for many years, however, now it’s speed is accelerating.
The Construction Industry is reshaping itself, albeit slowly but certainly faster than previously. Pressure for change is coming from several complementary directions:
Evolving client expectations
Clients, influenced by other rapidly changing markets (such as B2C with platforms that have triggered new relationships, tailored products and powerful service levels), now expect also the same from their homes, offices, commercial buildings and infrastructures to make their “connected lives” even more a reality. Constructions need to be more and more individualized, modular, connected to the Internet of Things (IoT) and allow for specific performance tracking, optimization of energy and improved security and health parameters for instance. Client demands are quickly rising and become more and more complex with expectations increasingly on the “usage” more than on the product itself. (See Exhibit 1.)
New technological capabilities
Sensors and various hardware as well as software have seen cost drop and efficiency rise over the past few years opening the path to new possibilities. Technologies available on the market are more numerous than ever before (such as virtual and augmented reality, drones, robotics and additive printing) making it urgent to separate the more valuable ones from mere novelties.
New generation of craftsmen and professionals
Tech savviness is spreading in the construction industry, which traditionally has been, resistant to change, accelerating the adoption of digital tools. Innovative university curricula are training the younger generations for emerging tech-related jobs. Many new jobs, not yet known, will be created in the years to come with the adoption of new tools and processes. Booming start-up environment Startups have taken advantage of the market opportunities induced by some of these trends to fill newly created added-value gaps. Oliver Wyman has identified nearly 1,200 startups worldwide since 2010 in real estate and construction. These startups have received around US$19.4 billion in funding over the period, half of it in 2017.
Supportive legal frameworks
Governments, particularly in the Nordic countries and the UK, are increasing their CO2 and energy efficiency regulations and raising their targets. Digitalization provides a great opportunity to reduce the environmental impact of construction projects. There will also be heightened requirements on data usage and cyber security in buildings and infrastructures.
All players in the industry,whether they are promoters, engineering companies, builders, suppliers of equipment, materials, or distributors will be impacted by digital pressures. Each one will experience this differently, of course, but there is no doubt that significant change is coming. The outlined trends put pressure on incumbents (both equipment and traditional construction and service players) by producing a more complex and dynamic competitive landscape and the progressive disruption of traditional channels in the battle for customer access and control.
Overall, it’s now “less about the product and more about the service”. Players of the industry need to become flexible, distance themselves from the old fashioned and not always transparent “brick and mortar” way of working. Now the clients want more a “product + services package”, performance tracking and guarantees on various indicators (energy related as #1 but also many others related to health, environment and security for instance), support in financing, in legal tasks. All options are open for creativity. More generally speaking, clients want their needs to be prioritized. It’s not about pushing a project to market anymore but it’s about partnering with the client and integrating his constantly evolving expectations. Going forward, “top-line” client needs have to take their rightful place as key inputs for the digital strategy. This is a necessary change of paradigm given that the competition will also, now more than ever, take place in this area.