Sections

Digital Transformation: Saving Money In The Construction Industry

Dustin Anderson

The construction industry is changing as technology and resources grow. The industrial construction market has already seen numerous new business models that transform how every component of the construction industry works together.

One key change is in the way construction companies operate. Today’s business model involves fewer people and a more streamlined, cost-effective supply chain. This leads to higher profits and happier customers—all due to digital transformation.

Understanding the challenges of the construction industry

Numerous limitations in the construction industry relate directly to its supply chain. Many individuals are involved in the average construction project. Individual contractors may come from multiple companies. Supplies and raw materials come from numerous sources. And companies must find a way to bring together these parties to create a cohesive, completed project. That is not easy to do.

According to Sikich, one of the biggest problems impacting today’s construction industry is cost overruns. Even the largest construction contractors face escalating costs related to mismanagement, lack of planning, and raw material costs.

The supply chain within the construction industry is also quite complex. Unlike most other industries, where product and raw material remains the same, every construction project differs. The supply chain is constantly changing, as Designing Buildings discusses. The outcome is more cost, more overseeing of the details, and more risk to the business.

Within the construction industry, companies must take steps to minimize these situations. They add risk to every project. They also lead to lower profit margins and fewer satisfied customers.

Digital transformation means improved opportunities

Changes to the construction industry through added technology is significantly changing the way companies operate. For example, project management software for construction companies is working to streamline every facet of the supply chain. It also ensures every individual contractor is working together toward a better outcome.

Verticalization and new contract models are at the heart of this. Civil construction projects are rapidly changing. Company leaders are working toward verticalization, in which more of the supply chain is handled in-house. By performing more tasks, companies reduce risk while also managing the process in a more streamlined and efficient manner.

As Financial Times reports, increasing stagnation in productivity in the U.S. construction industry has become a costly problem. This problem stems from the complex processes of the supply chain. The design to bid to delivery method, which is common, is difficult to manage. It also limits information-sharing to prevent litigation matters.

However, integrated project delivery contracts can minimize this challenge. The best construction project management software makes such integration much easier, improving interactions between parties and enabling what is best for the project to come through. There is less focus on individual companies protecting themselves.

A secondary benefit to this type of verticalization is in the evaluation of the project. Individual participants can be evaluated based on the outcome of the entire project. As a result, contractors can reduce their overall project risk. This may also help improve relationships and give the customer a better perception of the finished project and the risk involved.

How simplification occurs in the construction industry

When businesses incorporate technology, these benefits become possible. Integrated project delivery contracts are one component of digital connectivity in the construction industry. Collaboration technology is also widely beneficial. It aids every facet of a project, from construction schedule development to design work. Creating an open opportunity to communicate enable new opportunities and better outcomes.

Technology also allows for true verticalization. Integration of projects can expand more fully and ultimately empower businesses to achieve more with less, simplifying the supply chain. This in turn helps companies reduce costs. Supply chains become more reliable because they can be controlled. A single entity is then controlling the entire project. From design to prefabrication to construction, the process is managed more simply.

Implementing technology: a solution the construction industry needs

Imagine cloud-based construction management. Consider the benefits of having fewer people to interact with during the construction project. With technology, verticalization and supply chain simplification becomes valuable and easily accessible.

A simpler view of the benefits technology can offer is this: Technology allows for a brand-new business model to become available to the construction industry. Now, construction companies can manage the entire project in-house. Contractors perform with each other more effectively because improved communication opportunities enable them to work together in a more streamlined and less litigation-focused manner. This helps them retain their workforce with improved productivity.

All of this can occur by investing in software designed specifically for supply chain simplification in the construction industry. It is a powerful yet very simplistic upgrade that changes the way companies work while improving outcomes and profits. Simply put, it enables verticalization through new business models and helps construction companies exceed their goals. Even small businesses can reap these rewards with integrated technology. It is within their reach and offers a significant ROI.

To learn more about digital transformation in construction, see “Building a Sustainable World, How to survive and thrive in a digital construction economy.”

Comments

Dustin Anderson

About Dustin Anderson

Dustin Anderson is a Global Industry Solutions Director for the Engineering, Construction, & Operations Industry Business Unit at SAP representing North America and Latin America. Prior to this role, Dustin worked at an SAP partner company implementing SAP Solutions. Dustin helps clients deliver value through SAP solutions.

Blockchain: A Rose By Any Other Name

John Bertrand

The question of what exactly blockchain is came to the fore in March with the publication of the eBook Blockchain Meets Supply Chain: Rewiring Business Operations for the Digital Age, which acknowledged “blockchain is difficult to pin down … it is a class of software composed of other technologies.” The eBook aims to clear that up a bit, as I’ll try to do here.

The blockchain is a secure, transparent, layered container. The container is distributed and made available across the Internet or cloud, with any changes reported back to all parties in the specified group. This process is referred to as distributed ledger technology (DLT).

The DLT is available to either a public or private group. Financial services activities will predominately be in private groups, for example “syndicated loans.”

The key features in the transparent container include:

  • Consensus – algorithms that confirm and accept the information as it arrives and make sure that information is distributed
  • Shared ledger – the record of information that is available to all parties
  • Immutability – cryptographic technology that ensures that records cannot be tampered with

Who says blockchain is hip and modern? The Byzantine Army in 330 AD needed to manage the diversity of loyalty in its generals through coded, distributed, hand-delivered messages. Today we use mathematicians and technology to ensure the shared ledger is robust and staying true to the course, as did the Byzantine generals.

It is the right choreographing of the different technologies that is most important, says the eBook. Given the correct combination, blockchain/DLT should appear sooner than currently anticipated.

Gone are the days banks when banks build their own technology. Most banks now only care that the technology works, with the caveat that the tech supplier is approved by the bank. To meet regulatory requirements, bank technology suppliers must be low risk, which is not the profile of most fintech companies!

The eBook suggests that more caution is needed in implementing blockchain; that is probably correct, but the banks’ situation is urgent. The long and ongoing low interest rate environment has made it very difficult for banks to generate revenue growth. The Swiss Central Bank now charges fees for money on deposit – so times really are getting hard. Banks also have very high internal cost infrastructures. Banks need to start charging for their services, cut costs, or both.

Blockchain/DLT offers efficiency, better security, and one source of the truth. As the eBook points out, the digital supply chain reduces procurement costs by 20% and halves supply chain costs, enabling controlled activity instead of caution.

The eBook’s focus on the digitalization of assets and the provenance of them, rather than crypto currency, is refreshing. I recently noticed on CoinDesk that one of the crypto currencies dropped 31% in 24 hours. That’s a Zimbabwean dollar-like fall. Maybe, like the Zim dollar, crypto currency will be officially abandoned and the U.S. dollar used instead.

One final question to ponder: What should we call the stack of technology that forms the blockchain and DLT? Every stack could be different. How about Rose? After all, U.S. hurricanes are given human names, and I believe blockchain/DLT/Rose will bring the force of the hurricane to banking. Blockchain Meets Supply Chain: Rewiring Business Operations for the Digital Age represents the calm before the storm.

To learn more about blockchain, read the Forbes Insights Briefing Report: Transforming Transaction Processing for the Digital Economy.

Comments

Supply Chain Risk Managers Must Be Fuzzy, Or Fail

Susan Galer

I’ve been eager for the chance to inject the fashionable word “fraught” into one of my blogs for a while, and a recent conversation about supply chain risk presented the ideal opportunity.

During an exclusive roundtable at the SAP Ariba Live 2017 event in Las Vegas entitled “Managing Risk in Your Supplier Engagements,” three experts talked about how companies can prevent the worst from happening in a world fraught with stuff that can go wrong.

Their message was that companies can use advanced technologies like machine learning and predictive analytics to neutralize the impact of natural disasters, global currency fluctuations, and labor strikes, more easily ensure compliance with increasing regulations, and even address evils like forced and slave labor in their supply chain ─ but only if all that tech is backed by a corporate commitment to do good.

Cognitive computing changes the game for risk managers

Investigators and risk managers require both data transparency and context, something Padmini Ranganathan, vice president, products & innovation at SAP Ariba, said is foundational to how the SAP Ariba network of buyers and sellers operates. Dan Adamson, CEO of OutsideIQ, an SAP Ariba partner, discussed his company’s cognitive computing platform, which, together with SAP Ariba, changes the game.

Ranganathan noted that advanced technologies can help companies make sure they have the right data at the right time in the right place, and with the right person able to act. “When your supplier is tripping up somewhere, you need to be there to catch it,” he advised. “Technology is a very powerful tool with the ability to machine learn and pattern match to find out what’s going on.”

“Until now, machines have been great at combing through vast amounts of data but not providing context,” he added. “We bring in the right data and apply the first layer of context to make sure it’s a risk you would care about. How you deal with it is another level of context. We’ll see an evolution because some of your suppliers, depending on your industry, might have a heavy regulatory slant, and you need to treat them differently. Our layers of cognitive computing help filter out the noise and bring the relevant events to bear.”

Outside IQ conducts research far beyond simple watch list monitoring. “We go deeper with our cognitive process, replicating what a researcher would do, looking for patterns and links,” Ranganathan continued. “What might be clean today may have a news report tomorrow. Companies need to know before something becomes an explosive issue. The power SAP Ariba brings in is the whole layer of scoring indicators with relationship insights.”

Purpose-driven supply chain

James Edward Johnson, director of supply risk and analytics at Nielsen, said companies have a shared responsibility in managing supply chains for the greater good. The SAP Ariba network helps Nielsen conduct due diligence at scale faster and more cost-efficiently.

“World development has made some people richer and left a lot of people behind,” Johnson noted. “Because we’re so active in the supply chain, we actually touch millions of lives. How do you make sure that’s a force for good, that when you negotiate deals your push for price isn’t merely favoring companies that will cut corners, abuse their workers, enslave people, or rip up the environment by dumping chemicals into lakes?

“SAP Ariba is a great platform because it’s to a degree, data-neutral. A group like Outside IQ will find and read documents from everywhere in the world. If we can find and solve problems in our supply chain, we can make a difference in the world.”

Forget focus, follow the arc to uncover bad behavior

Responding to an audience member question, Johnson cautioned against zeroing in on risks.

“The moment you start focusing, you’re going to fail to capture risk, which is about seeing the unseen,” he said. “Sometimes your peripheral vision is more effective than your central vision. This is the arc of whatever risk you’re looking at. For example, I can guarantee financial indicators are a good leading indicator. The moment a company starts to fail at meeting their numbers, they’ll start taking risks. The question is where those risks materialize. You have look at other things that might provoke bad behavior.”

Every risk manager should be willing to say, “The answer I just gave you is wrong.”

Make data actionable, but accept fuzziness

These experts agreed that people need to factor risk indicators into contract negotiations while recognizing the level of uncertainty inherent to all kinds of data.

“Everyone in risk management should be willing to say ‘the answer I just gave you is wrong’ – the question is by how much and in what direction,” said Johnson. “Too often people are called on to give specific answers they can hang their hat on. That might teach people to manipulate the data or give people who are politically capable an advantage over people who are technically capable, so you might end up promoting people who are better at talking.”

Machine learning promises to strip out biases like recency and sample selection to give decision makers greater objectivity in understanding actual and potential risks and how to address them. “We should have science-based answers, we should have the data, and we should be able to know how well we know what we say we know,” said Johnson.

For more supply chain risk management strategies, see Managing Third-Party Risk Through Verified Trust.

Follow me: @smgaler

Comments

The Future of Cybersecurity: Trust as Competitive Advantage

Justin Somaini and Dan Wellers

 

The cost of data breaches will reach US$2.1 trillion globally by 2019—nearly four times the cost in 2015.

Cyberattacks could cost up to $90 trillion in net global economic benefits by 2030 if cybersecurity doesn’t keep pace with growing threat levels.

Cyber insurance premiums could increase tenfold to $20 billion annually by 2025.

Cyberattacks are one of the top 10 global risks of highest concern for the next decade.


Companies are collaborating with a wider network of partners, embracing distributed systems, and meeting new demands for 24/7 operations.

But the bad guys are sharing intelligence, harnessing emerging technologies, and working round the clock as well—and companies are giving them plenty of weaknesses to exploit.

  • 33% of companies today are prepared to prevent a worst-case attack.
  • 25% treat cyber risk as a significant corporate risk.
  • 80% fail to assess their customers and suppliers for cyber risk.

The ROI of Zero Trust

Perimeter security will not be enough. As interconnectivity increases so will the adoption of zero-trust networks, which place controls around data assets and increases visibility into how they are used across the digital ecosystem.


A Layered Approach

Companies that embrace trust as a competitive advantage will build robust security on three core tenets:

  • Prevention: Evolving defensive strategies from security policies and educational approaches to access controls
  • Detection: Deploying effective systems for the timely detection and notification of intrusions
  • Reaction: Implementing incident response plans similar to those for other disaster recovery scenarios

They’ll build security into their digital ecosystems at three levels:

  1. Secure products. Security in all applications to protect data and transactions
  2. Secure operations. Hardened systems, patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud-operations security framework
  3. Secure companies. A security-aware workforce, end-to-end physical security, and a thorough business continuity framework

Against Digital Armageddon

Experts warn that the worst-case scenario is a state of perpetual cybercrime and cyber warfare, vulnerable critical infrastructure, and trillions of dollars in losses. A collaborative approach will be critical to combatting this persistent global threat with implications not just for corporate and personal data but also strategy, supply chains, products, and physical operations.


Download the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.


Comments

Tags:

How Digital Transformation Is Rewriting Business Models

Ginger Shimp

Everybody knows someone who has a stack of 3½-inch floppies in a desk drawer “just in case we may need them someday.” While that might be amusing, the truth is that relatively few people are confident that they’re making satisfactory progress on their digital journey. The boundaries between the digital and physical worlds continue to blur — with profound implications for the way we do business. Virtually every industry and every enterprise feels the effects of this ongoing digital transformation, whether from its own initiative or due to pressure from competitors.

What is digital transformation? It’s the wholesale reimagining and reinvention of how businesses operate, enabled by today’s advanced technology. Businesses have always changed with the times, but the confluence of technologies such as mobile, cloud, social, and Big Data analytics has accelerated the pace at which today’s businesses are evolving — and the degree to which they transform the way they innovate, operate, and serve customers.

The process of digital transformation began decades ago. Think back to how word processing fundamentally changed the way we write, or how email transformed the way we communicate. However, the scale of transformation currently underway is drastically more significant, with dramatically higher stakes. For some businesses, digital transformation is a disruptive force that leaves them playing catch-up. For others, it opens to door to unparalleled opportunities.

Upending traditional business models

To understand how the businesses that embrace digital transformation can ultimately benefit, it helps to look at the changes in business models currently in process.

Some of the more prominent examples include:

  • A focus on outcome-based models — Open the door to business value to customers as determined by the outcome or impact on the customer’s business.
  • Expansion into new industries and markets — Extend the business’ reach virtually anywhere — beyond strictly defined customer demographics, physical locations, and traditional market segments.
  • Pervasive digitization of products and services — Accelerate the way products and services are conceived, designed, and delivered with no barriers between customers and the businesses that serve them.
  • Ecosystem competition — Create a more compelling value proposition in new markets through connections with other companies to enhance the value available to the customer.
  • Access a shared economy — Realize more value from underutilized sources by extending access to other business entities and customers — with the ability to access the resources of others.
  • Realize value from digital platforms — Monetize the inherent, previously untapped value of customer relationships to improve customer experiences, collaborate more effectively with partners, and drive ongoing innovation in products and services,

In other words, the time-tested assumptions about how to identify customers, develop and market products and services, and manage organizations may no longer apply. Every aspect of business operations — from forecasting demand to sourcing materials to recruiting and training staff to balancing the books — is subject to this wave of reinvention.

The question is not if, but when

These new models aren’t predictions of what could happen. They’re already realities for innovative, fast-moving companies across the globe. In this environment, playing the role of late adopter can put a business at a serious disadvantage. Ready or not, digital transformation is coming — and it’s coming fast.

Is your company ready for this sea of change in business models? At SAP, we’ve helped thousands of organizations embrace digital transformation — and turn the threat of disruption into new opportunities for innovation and growth. We’d relish the opportunity to do the same for you. Our Digital Readiness Assessment can help you see where you are in the journey and map out the next steps you’ll need to take.

Up next I’ll discuss the impact of digital transformation on processes and work. Until then, you can read more on how digital transformation is impacting your industry.

Comments

Ginger Shimp

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she's also earned her Connoisseur's Certificate in California Reds from the Chicago Wine School. She holds a bachelor's degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University. Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube's 10 EDU Gurus, Ed Shimp.