Global construction sector is wrestling with technological complexity

09 November 2016 Consultancy.uk

New technology within the construction sector remains a quagmire for companies, offering considerable disruptive potential as well as risks related to increasing complexity. A new survey highlights that mid-sized companies are leading the industry in adoption, while around 20% of companies surveyed are aggressively investing in innovation with good results.

Technologies affecting the construction sector are on the rise, as innovation adds additional tools to monitor construction and inspection of infrastructure, while process and workflow technologies are being developed to transform the management side of the construction sector.

To explore in how far technology has penetrated the heart of construction, KPMG conducted a study (‘Global Construction Survey 2016: Building a technology advantage’) among around 220 senior executives in the industry. 

Technology usage across the lifecycle of a project

New technologies

The report notes that a range of technologies are currently being used across the lifecycle of projects. These include drones for monitoring and simulation for the design and construction phase; equipment/material connectivity and tracking for the construction phase; automated technology for the construction phase; mobile technologies, platforms and reporting for the construction and operations phase; project information encryption for the whole project cycle; integrated real-time and analytics across the whole lifecycle; building and information modelling across the whole lifecycle; and 3D printing.

According to the firm’s analysis, these technologies provide – in certain contexts – a range of benefits, from decreased costs and project transparency to improved productivity and efficiency through fault detection, remote monitoring and automated trucking.

Risks are rising on volume

Industry leaders are faced with difficulties, however, as the volume of projects increases, 55% of respondents say that they are increasing, and as the complexity of projects increases – with new building techniques, materials and designs – so do the risks. 78% of contractors say that risks are on the rise, while 41% of owners say they are on the rise. Technology itself, however, to the lament of several executives, creates additional risks, summed up by one executive as, “Is technology a solution or a problem in and of itself? It is a challenge on its own.”

Technological adoption

Respondents were asked to describe in how far they are leveraging current technologies. The survey highlights that, across company size, there is considerable variation in uptake. Cutting edge visionaries, who score above 70% adoption on the survey, are the most highly represented in companies with revenues of $1-5 billion, at 14%. Large companies, those with $20 billion or more in revenues, have a relatively low level of cutting-edge visionary companies, at 7%, but a large cohort of industry leaders, at 46%. Small companies, with revenues of less than a billion, are the most likely to be behind the curve, at 43%.

The difference in adoption, according to the firm, is the result of a host of factors, from lacking in funding for small players, to mid-sized companies seeking to boost their competitive advantage by investing in new technologies.

A mixed response to disruption

The need to leverage new technology to ‘disrupt’ current practices differs across the companies surveyed – some are jumping onboard, while others are waiting to see whether the ship is seaworthy. Of owner respondents, 19% say that they are aggressively innovating and have had good results. For contractors this comes in at 24%, while 45% of owners, and 38% of contractors, say that they are innovating in a few areas with positive results. 10% of owners believe that they need to innovate to remain competitive, while 15% of owners say that they are starting to innovate on a trial basis. 11% owners says that their current business model is sound and already includes leading practices.

Integrating technology

Technological complexity

Getting the most out of technology remains problematic, according to the report. One area in which technology has been touted to improve outcomes, is operations. Running large, complex projects creates considerable planning, resourcing and scheduling difficulties for management. Technology, particularly data collection and analytics combined with various operation requirements, has the potential to leverage broad data streams to deliver forecasts for resource requirements and staff deployment.

Difficulties are abound, however; and, according to the firm’s analysis, the complexity of systems, coupled with insufficient resources and fragmentation of data, is making it difficult for project leaders to leverage the data they have collected for actionable insights. Around a quarter of respondents say that they are able to obtain fully integrated project overviews in real-time at the push of a button, while 49% of owners and 33% of contractors have to use multiple software systems that need to be manually monitored from which to derive insights.

The firm concludes, “Technology plays an integral part in helping the industry realise these goals by enabling enhanced design, planning and construction. When applied effectively, technology can significantly boost a sector that for many years failed to improve productivity. Yet, despite substantial investments in innovation, the construction industry is struggling to reap the full benefits of advanced data and analytics, drones, automation and robotics.”

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Four ways digitalisation is transforming car brands and dealers

16 April 2019 Consultancy.uk

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”