The new age of engineering and construction technology

The engineering and construction (E&C) industry is at the cusp of a new era, with technology start-ups creating new applications and tools that are changing how companies design, plan, and execute projects. By providing advanced software, construction-focused hardware, and analytics capabilities, these innovative start-ups are eliminating many of the problems that have dogged the E&C sector for decades, including difficulties compiling and sharing project information. Such improvements could not come at a better time, since construction projects are becoming increasingly complex and expensive, putting managers under greater pressure to improve costs, timelines, and efficiency.

The technological transformation at engineering and construction firms

Construction-technology firms have garnered $10 billion in investment funding from 2011 through early 2017. To gain a more detailed view of this strong market and its evolution, we first identified all tools and solutions that construction technology start-ups have developed. We then determined how each tool addressed or eliminated problems throughout the course of E&C projects looking at both the phase in which they are used and the particular problem they solve.

Construction technologies that are gaining momentum

From 2011 through 2016, construction-technology players received the greatest amount of investment for document-management use cases ($1.7 billion), followed by equipment management ($1.4 billion) and enterprise-resource-planning systems. But when we restricted our analysis to new companies those founded over the past five years we discovered that the most popular use cases involved performance management and field productivity, with 29 % of companies developing tools for one or both of these areas. Only 8 % were developing document-management tools, and few focused solely on this application.

Creating a focused digital strategy and organization

Rather than deploying numerous tools at once, companies should take a more reasoned and strategic approach to construction technology. We suggest that they first establish a performance baseline, benchmarking themselves against companies in relevant industries, segments, or projects to identify the most important areas for improvement for instance, engineering activities, construction productivity, or indirect costs.

After the benchmarking exercise, companies should identify improvement levers by considering some basic but frequently overlooked issues, such as the bottom-line performance improvements they hope to achieve. They should also quantify the commercial benefit associated with each lever and prioritize those that deliver the greatest improvement. Finally, companies must consolidate their findings into an implementation plan with a realistic timeline to stay on track.

As companies deploy solutions, all functions must be involved, from the front line to top management. That means leaders will need to assess their organizations realistically, determining whether they have the capacity and skills needed to implement new tools. They must also incorporate digital solutions into their internal processes, since employees might otherwise stick with their familiar routines. Similarly, leaders must examine their current IT systems, determine whether new tools can be integrated smoothly, and make any necessary upgrades or changes before a program begins.

Throughout implementation, top managers must clearly demonstrate and emphasize their support for new initiatives. For instance, CEOs should ensure that specific teams and leaders are responsible for implementing the digital strategy, monitoring results, and ensuring that initiatives achieve scale and maintain momentum.

E&C companies with strong digital skills might have an advantage when implementing complex solutions across their organization. Other players might find digital initiatives more challenging and should consider implementing individual solutions in sequence, rather than undertaking a more comprehensive digital transformation.

Turning projects into test labs

The best E&C companies view every project as an opportunity to test and refine new digital solutions in partnership with clients and contractors. If frontline workers identify a problem in the field, for example, they should discuss possible digital solutions with E&C leadership and then pilot them during the project. To monitor results, project teams must establish key performance indicators and share them periodically with the leaders who oversee digital programs. If a tool produces lackluster results or fails to hit the mark, leaders should work with the team involved to identify and resolve problems while the pilot is still under way.

Later, leaders should publicize successful results, encourage widespread rollout, and advise other teams deploying the tools. These efforts will help overcome company-wide communication gaps and may generate enthusiasm among other staff. Some companies have appointed chief innovation officers or chief digital officers to lead these large-scale programs. In some cases, this is a new role. For instance, Atkins recently appointed its first chief digital officer to lead the development and integration of new and emerging technologies across the company. The appointment of chief innovation officers and chief digital officers should address one of the most important obstacles that executives noted in the McKinsey Construction Productivity Survey: a lack of internal processes to support innovation.

Letting data lead the way

Many of the best construction-technology tools incorporate data from both past and ongoing projects into their decision-making algorithms. As these tools become more prominent, E&C firms ensure that they incorporate analytics into their daily work flows by collecting targeted data sets and investing in the capabilities needed to glean insights from them. Since analytics solutions also require specific skills, such as those related to data science, E&C firms must expand their recruitment base to attract such employees, who are in short supply. Several major E&C players have already begun hiring chief digital officers and additional data scientists.