With annual revenues of nearly $10 trillion, or about 6% of global GDP, the engineering and construction (E&C) industry is a cornerstone of the world’s economy. It serves almost all other industries, much of whose value creation involves buildings, infrastructure facilities, and other “constructed assets.”
Yet, unlike other industries, E&C has been slow to adopt new technologies and has never undergone a major transformation. Consider, for example, the opportunity offered by lean process methodologies—take-up has been limited, and many companies that have adopted them have failed to apply them wholeheartedly. In addition, construction firms now find themselves struggling to cope with ever-larger and more complex “megaprojects,” particularly in infrastructure. As a result of these setbacks and challenges, the construction industry has registered disappointing efficiency gains, and its growth in labor productivity continues to lag far behind that of other industries.
Substantial change is on the way, however, driven by digitalization: the development and deployment of digital technologies and processes. Construction will soon be characterized by connected systems of sensors, intelligent machines, mobile devices, and new software applications—all integrated on a central platform of building information modeling (BIM). As their adoption increases, digital technologies are enabling companies to boost productivity, manage complexity, reduce project delays and cost overruns, and enhance safety and quality.
Other industries, such as the automotive industry, underwent radical process changes earlier and are now well into their digital transformation. In E&C, digitalization is just beginning. Given the sector’s vast size, however, even small improvements will translate into substantial benefits for companies and for society.
Within ten years, according to our estimates, full-scale digitalization in nonresidential construction will lead to annual global cost savings of $0.7 trillion to $1.2 trillion (13% to 21%) in the engineering and construction phases and $0.3 trillion to $0.5 trillion (10% to 17%) in the operations phase.
Digitalization will change the game fundamentally in E&C, not only enabling efficiency and quality gains along the value chain but also reshuffling the competitive league table of companies and countries.
Post originally published on bcgperspectives.com.