Overcoming Obstacles to Digital Transformation

by | Apr 13, 2023

Confront the Conflicts that Delay Digital Transformation

The nature of the construction industry puts many constraints on digital adoption. But other industries with similar constraints have managed to become more digital, highly automated, safer and more productive with higher quality. 

Manufacturing is a good example, proving that change is possible. Competition with Chinese manufacturers has been a strong incentive to change and improve productivity.

Today, in construction, solving the skilled labor shortage provides a similar incentive. Fewer workers means you must raise productivity without reducing safety and compliance. 

Raising productivity means confronting business conflicts of interest. It also means confronting inherent cultural conflicts, such as between jobsites and headquarters. Solving the labor shortage also means recruiting more women and minorities. Confronting the industry’s white male culture and history of EEOC violations won’t be easy either.

Go along/get along management styles won’t cut it. Managers need to resolve the very real business and cultural conflicts digital transformation requires. It’s time the industry’s managers grew a pair.

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Don’t let the obstacle win.

Management Conflicts that Delay Digital

Project Accounting vs Investment Accounting

Project firms in an industry with tight margins do find it harder to invest. Projects are transitory, so unless an investment has immediate payback within the project’s budget, it’s often shelved. The payback on investments across projects can be difficult to measure, and some projects will feel “overtaxed” with burdensome overhead.

Financial managers should be challenged to reconcile needed investments with project accounting, fee and profit targets. And by investment I mean both technology purchases and talent. 

Investments are not meant to have an immediate payback. Competent ROI analysis can assure managers and owners that investments are paying off or course-corrected. Change must be budgeted by your head of finance.

Compensation vs Profits

Project firms compensate project managers primarily on the performance of their projects. But if the goal of a technology investment is overall corporate profitability, project managers might not care as much. Especially if the cost of technology change is not accounted for in the project budgets.

Project managers are rightly some of the most highly compensated employees in construction. A better balance of that compensation between their projects and corporate success can pay off. And closing the HQ/Field cultural divide may depend on such compensation changes.

Tech Talent Cost vs Lack of IT Expertise

All businesses today are partially software businesses. Software applications are a kind of automation that process data to raise productivity. Increasingly, all businesses interact with their customers via software and digital communications. Even mining companies. Software has indeed eaten the world.

Most construction managers will recognize that a lack of digital talent on staff makes it more difficult or impossible to competently buy and adopt digital technologies.  But even non-management IT resources cost a lot – more than many construction supervisors or project managers.

The cost of IT talent is high because of hiring competition and that’s unlikely to change. But cost is no excuse for denying the need. You need to employ skilled IT talent, either directly as an employee, or fractionally via professional services firms.

Low Cost Labor vs Investments in Automation

For over a generation, most construction companies have been blessed with plentiful low cost laborers. Even if those laborers were not exactly legally employed. Managers could often argue that low cost labor was as good as automation and less risky. But a combination of immigration restriction, heightened enforcement at large employers, and boomer retirements has ended the good times.

As with manufacturing in the past twenty years, construction needs to adjust to having fewer but more highly educated and skilled workers. Otherwise, digital automation benefits may be hard to achieve. 

Managing thru data is not instinctive. But without digital, productivity and safety will continue to sag, as they have for fifty years. 

For some firms, separating general contracting from all trade work is a way out. That way, the general can focus on the office/knowledge work, and the subcontractors can optimize around trade labor management.

Family Ownership vs Professional Managers

Family owners and non-family managers are not mutually exclusive. But family owned firms tend to prefer control over performance. They also prefer income over investment.

Families can have a hard time separating their emotional relationship with their firm. Especially if the firm is a legacy, and named for the family, then the legacy needs to be nurtured and kept healthy. And the best managers of the legacy might not be family members.

The best governed family firms will make succession planning a priority. If family members can learn the ropes, educated and trained, great. But if not they need to hire outside the family. 

As with technology talent, professional managers do not come cheap. But the heart of all businesses today is talent. Without talent, long term value will disappear, slowly at first, and then all at once. Giving up some equity to hire the best has certainly worked for many industries. 

Assuring Safety vs Gambling with Lives

Compliance and safety do put additional cost burdens on construction firms. Because construction projects are not permanent, but have a limited duration, it is rational to weigh the costs of compliance with project duration. If the actual project safety and compliance risks are variable, it’s rational to make the costs of compliance variable too.

Still, the tendency to gamble with compliance via wishful thinking is irresistible to many construction managers. Maybe the inspector won’t show up or won’t carefully examine all records. Maybe weather conditions will remain favorable. Maybe your subcontractor employees really will be highly trained. Etc.

Good safety and compliance systems exist that are effective and affordable across all projects. The safety of employees and the local population should never be compromised. One good reason young people avoid construction careers is that it’s just not safe enough. We’re not going back to the pre-OSHA days.

Service Delivery Systems vs Ad Hoc Traditions

Manufacturing over the past three decades has demonstrated that a very high degree of safety and quality can be achieved using data. Six sigma methods and lean manufacturing have now become pervasive and standard. 

The Lean Construction movement has adopted many of those practices. In the sense that a contractor “manufactures” a building, it makes sense. There are alternative systems as well.

Adopting a management system and philosophy has many advantages:

  1. Systems have a body of literature explaining the system.
  2. There are usually training & education consultants & resources.
  3. Often there are software products for the system.
  4. Systems incorporate measurement and KPIs.
  5. Measurement enables better accountability.

Maybe best of all, adopting a system can cut out a lot of explaining. In answer to the inevitable “why are we doing this” questions, managers can answer “because the firm decided on a system and the system requires it”. Being able to simply say “because you have to” is a blessing for busy managers.

Subcontractor Accountability vs Voluntary Compliance

Construction projects have many stakeholders. But some of the most important are your subcontractors, suppliers and vendors. Keeping them accountable is critical to keep projects on track.

Assuring quality, safety and compliance across company boundaries is not easy. Too many subcontractor contracts don’t make clear such requirements. Instead they rely on an old boy network that leaves responsibilities vague. And that vagueness leads to disputes. Subs can argue they don’t need to use new digital solutions. 

Cultural Conflicts Also Delay Digital

Cultural conflicts between HQ and field may be the most difficult of all to overcome. My next post will focus on that topic exclusively.