A recent study produced by PwC and Oxford Economics1 came to two conclusions about the engineering and construction (E&C) sector’s move to digital.
First, the reason that many E&C businesses have yet to realize the hoped-for savings from digital is because they were using it for the wrong thing, which we explored here.
And second, and notwithstanding that, there are three areas that are beginning to see those benefits, now that the sector is belatedly making that move. And one of those areas is not where you might expect. But it’s worth looking at all three of them, as they are each instructive.
Back office and management
This is the area you’d expect to see savings in. After all, the traditional lack of integration between HR, finance, and accounting has always been a problem. Surprisingly though, those savings have been much slower to materialize in E&C.
Looking at hiring practices between 2010-2015, and then 2016-2019, they found that companies were spending more on back-office and management than they were before, despite increased investment in digital.
That’s because they were simply assuming that whatever the problem was, digital would solve it. When what you need to do is use it in an integrated way. As Josh Ensell, VP for Talent Strategy at Black and Veatch says:
“I think there is a real opportunity to accelerate the use of technology so we’re looking at more automation… using bots, workflow and integration tools to reduce some of that ‘swivel chair’ work to focus on high-value functions.”
And the emphasis there is on those integration tools. Because if it’s not properly coordinated, none of it will work.
Construction and extraction
This surely is the last place you’d expect digital to be of any practical use. After all, it’s precisely because construction is so physical that its move to digital has been so slow. But, as elsewhere, Covid-19 has forced a re-think. As Vaseem Khan, Global VP for Innovation at McDermott International, states:
“We are leveraging emerging technology and automation to minimize disruption (from Covid-19), perform more site-based tasks remotely and reduce overall ‘footprint’ on-site.”
And when you reduce physical access to trailers, latrines, wash tents, and the like, you not only improve health and safety, you reduce costs and improve productivity.
You are also starting to see far more use of drones, which can be used to monitor inventory and progress, augmented reality (AR) and virtual reality (VR), for worker safety training, and even Lidar (like radar, but using light instead of radio waves), to detect rust and contaminants.
More generally, there’s a move towards automated, off-site fabrication, which was another byproduct of Covid-19. This “modularization” produces assets that can then be used across multiple projects.
All of which is part of a general move towards advanced work packages, or AWPs. As companies turn increasingly to software solutions so that all the work can be kept track of throughout each of the engineering and fabrication stages. Which massively improves transparency, reduces risks, and minimizes errors.
IT and software
This is the third area the study homes in on. Part of the reason the E&C sector has increased its digital hires is to fend off the challenge from construction technology firms, as well as from big tech. Indeed, a number of the larger construction firms have started investing in start-ups themselves.
The most famous, and then notorious example of which was Katerra, which rose, and then fell, with debts of between one and ten billion dollars.
What the paper illustrates is that digital can and will produce all of those amazing savings and efficiencies. But only when you begin by carefully examining what it is that you need fixed. Which is one of the things Covid-19 has forced us to look more closely at.
Because the pandemic presented us with a number of very specific and urgent problems. Which, it turns out, digital was instrumental in fixing. Even, and indeed especially, on the construction site.
But it’s pointless having all of those tools working in isolation. They need to be talking to each other. And that, after all, is what digital does best.