What manufacturing can teach AEC about digital transformation


As the two sectors continue to converge, Arvind Rao, CTO of Edge Platforms, EdgeVerve, asks what Architecture, Engineering, and Construction (AEC) industries can learn from manufacturing about the digital transformation

The Architecture, Engineering, and Construction (AEC) industry has been evolving rapidly in recent years.

By adopting digital construction, Building Information Modeling (BIM), and other modern approaches, some AEC companies have been on a convergence path with the manufacturing sector, an earlier and more aggressive adopter of digital transformation.

At the same time, economic headwinds have slowed near-term growth. That makes this an opportune time to step back and ask a few questions. How are these transformations in AEC going? And are there any lessons to be learned from the manufacturing sector’s own attempts at digital makeovers? The answers are both cautionary and prescriptive.

To the Egan Report and beyond

The story of the AEC industry’s slow transformation goes back more than a quarter century. In the U.K., at least to 1998, the year the task force chaired by Sir John Egan issued an influential report titled Rethinking Construction.

While Egan and team could point to home-grown improvements in quality and efficiency, they also said their ambitions for the “underachieving” construction industry were informed by “our experience of radical change and improvement in other industries.”

Achieving similar results in construction would require several drivers, including “a focus on the customer” and “integrated process and teams.”

Elaborating on the latter, the report said the industry should embrace an integrated project process comprised of four “complementary and interlocked elements,” involving product development, project implementation, supply-chain partners, and component production.

Rapid advancements in IT, communications, and data technologies in the following years would provide additional, powerful tools to achieve this vision.

Developments in prefabrication, BIM (in its various iterations), 3D printing, modular construction, and more would lead to significant breakthroughs. But progress across the board was slow.

Two decades after the Egan Report, five McKinsey & Company analysts from Europe and the UK opened their own report on digital transformation in construction with this admission: “Few engineering and construction companies have captured the full benefit of digital.”

Collaboration is key to the successful integration of digital technologies

The leading anecdote in that 2019 McKinsey report is telling. A large contractor, who had spent five years and “countless sums” on technology and new ways of working, was about to call an end to its digital transformation program.

A lot of isolated pilots involving promising techniques, including 5D BIM, had failed to deliver. Buy-in from site and office workers had diminished to the point of resistance. Project delays and cost overruns had continued. Productivity was stagnant.

The sad truth is that transformation exercises often fail, even in the more technically advanced manufacturing sector.

A recent Forrester Consulting paper that surveyed 106 decision-makers from the manufacturing and materials industry worldwide found that while a majority of manufacturers surveyed were investing more than $100m annually in these efforts, only 20 percent strongly believed that they had achieved success.

Why is that? Why the enduring inefficiencies and process dead-ends? The Forrester survey pointed to various challenges, including a lack of strategy, siloed business cultures, and technological gaps.

Only about one of four agreed that their organisation had a well set-up working group across business, operations, and technology teams to improve end-to-end processes. But on the flip side, there was a consensus about the way forward.

A majority (78%) pointed to connectivity as a top priority in driving digital transformation success.

A second takeaway was that close to 60 percent of respondents were looking for a platform-based approach to drive digital effectiveness. By nature, platforms are horizontal structures that connect multiple points – humans and data – within an organisation.

As such, this finding echoed one of the practices that McKinsey said was common in successful construction-industry transformations: Digital use cases that promote collaboration.

Bold ambitions must first meet basic requirements

At $13tn globally, the AEC industry is one of the largest in the world. It has also been one of the slowest to innovate. But it is far from abandoning its multi-decade convergence with manufacturing. To the contrary, it has accelerated along that path.

Labor shortages, demand for infrastructure, sustainability expectations, stakeholder pressure, and competition are today’s drivers.

From 2020 to 2022 (according to another McKinsey study), $50bn was invested in the AEC tech ecosystem, 85 percent higher than the previous three years. Spectacular demos, like the completion within 140 hours of a 3D-printed data center in Heidelberg, indicate that emulating advanced manufacturing has not been too much of a stretch, after all.

But no success is guaranteed. In that light, the Egan Report’s focus on “integrated process and teams” remains valid. From our perspective, executed on a platform basis in multiple industries, transformation means ensuring the first step of actually extracting data from non-digital sources, as well as then automating processes and building agile supply chains. With recessions a fresh memory, at best, in many economies, now is the time both to think boldly and remember those basics.

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