With construction projects challenged as a result of the pandemic, many companies are reimagining their business models to secure their future.
While how to increase productivity remains one of the major hurdles that the industry needs to overcome, construction and engineering companies must also look to servitization to attract new business. Even if it may appear to some as a question of identity, the provision of service will in reality be a question of survival for many businesses.
Even though the outlook is uncertain, there is evidence that many companies are using the current lull to arm themselves with tools that will enable them to hit the ground running when the tide turns. In fact, a recent IFS study revealed that 70 per cent of businesses have increased or maintained digital transformation spend, despite the COVID-19 pandemic. In the engineering, construction and infrastructure sector, this figure is more than 75 per cent.
Given the unpredictability of 2020, we are facing a new year whose challenges and opportunities are equally difficult to pin down. However, below are a few trends for 2021 and beyond:
Service turns cornerstone as builders approach total asset lifecycle responsibility
As a result of the disruptions of 2020, the construction industry is intensifying its focus on securing stable and robust revenue streams. This has led many companies to transform themselves from traditional construction companies to asset lifecycle service providers, able to provide through-life service, facilities management, and maintenance to their clients.
The upshot is a strengthened emphasis on total lifecycle cost rather than the traditional, one-and-done build cost. One of the major implications is the profound shift in focus among the companies building the assets. As they will be increasingly expected to assume cradle-to-grave service responsibility for each asset they build, they will need to focus on asset quality, longevity, and ease of maintenance. Put more provocatively, now that the asset is the construction company’s problem, it will need to be designed for quick and easy repair and maintenance.
The effect on companies’ business models will be profound as they will need to extend their planning horizons significantly to ensure long-term profitability. Even if they have competent staff to attempt this transformation, it is likely many construction companies will initially struggle to establish best-practice in service processes that will ensure delivery of new-to-them concepts such as customer engagement, service-level agreements (SLAs), and field service scheduling and optimization. One of the ways companies will solve this is to look at enterprise software designed to power the transformational journey from construction-only to through-life service provision.
Offsite construction drives need to standardize materials and processes
Offisite construction or prefabrication is a trend s a trend that has been gaining momentum across the industry. Whereas construction companies used to build a house using materials shipped to the site, many companies are today moving the actual construction to factory-like, indoor environments where tradespeople and contractors build components or modules that are shipped to and assembled on the building site.
As companies are tasked to manage increasingly complex logistics for each build, we will see a significant uptick in companies focusing on implementing supply chain management best practices. The vast majority of traditional construction companies will admit to having very little experience in working with things like parts numbers and inventory. The supply chain-centric work processes of a company like Amazon will not reflect the current reality of their businesses. Yet, this is the vocabulary they will need to learn (very quickly) in order to effectively and profitably manage the logistics challenge of getting hundreds or even thousands of prefabricated components to one or more construction sites—at the right time and in the right order.
The construction industry will see accelerated investments in business software capable of imposing order on a supply chain-driven transformation. Companies will increasingly turn to a manufacturing ethos as they get used to the idea of building standardized components with serialized part numbers that can be used in multiple projects, as opposed to costly, customized solutions.
Offsite construction will compel traditional construction companies to evolve and adapt to the need for standardization, both in terms of materials and work processes.
5D BIM comes of age as early movers eye 6D
By now, most people with an interest in the construction and engineering sector know what BIM is and what its major benefits are. As a standalone technology for 3D design, it has had a huge impact on how complex assets are being developed and built. Many industry stakeholders are currently talking about 4D BIM, which also takes the time and scheduling aspect into account, basically giving companies a video simulation of how and in what order an asset should be constructed.
What is not a very mature concept, however, is the combination of BIM with enterprise resource planning (ERP) software, which is arguably where most crucial business data is stored. This lack of sophistication is odd, given the enormous potential in connecting the two. What I am referring to is what is being hailed as 5D BIM.
With the fifth dimension being money, the challenges of 2020 will provide added incentive for companies looking to bridge the gap between BIM and ERP. The question an increasing number of companies will ask is how to take a BIM model and turn it into a cost estimate and then track the actual costs back to the BIM objects.
As 5D BIM comes to the fore, construction companies will start demanding automated tools for transferring BIM models straight into the estimate module of their ERP software. Companies will expect standard integrations that will enable a free flow of data between the different systems. What will be needed are integrations that let the bid teams sort and structure the data by type of component, separate them into packages of work, and automatically price each package.
Onwards and upwards
Even under ideal market conditions, construction is a demanding industry in which complex networks of projects and project delivery must be navigated effectively. One of the best ways to ensure business value and resilience is the long-term investment in sensible technology.
For all its unpredictability, 2021 will be a year of opportunity in the construction, engineering and infrastructure sectors. But just as luck favours the bold, capitalizing on these opportunities will require strategic fortitude and a clear vision of how servitization and technology could and should coalesce into new and more intelligent ways of working.
Kenny Ingram is IFS vice president, engineering, construction & infrastructure. He has been with IFS for 20 years and has worked in the business systems marketplace for over 25 years.