Digitization is disrupting industries worldwide. Is your construction business ready for serious growth?
Urbanization means the 30% of the world’s population that lived in cities in 1950 will grow to 66% of the population by 2050. Where will these new urbanites live? It’s estimated that 75% of the infrastructure that will be needed has yet to be built. What a great time to be in construction!
Many opportunities abound. But there’s also risk. Your business could fail to adapt to the digital economy. Your construction project management software could leave gaps that need too much outside intervention. Your business may not take advantage of the benefits of new business models. Any of these risks could leave your business open to danger. How do you avoid it?
How as-a-service business models allow partnerships for construction
Strong project management software provides project control to assume the risk of maintaining a budget goal. The operating business model effectively recovers costs at a profit, allowing the contractor to assume operating risk. This allows creation of public private partnerships. Traditional roles previously made this process difficult to impossible. New project management software lets construction businesses blur those roles. They can create as-a-service business models. This allows them to use vertical integration. They’re diversifying their offerings.
How have these operations come about? Digital construction businesses are creating facilities- and assets-as a service in their business models. Why? To preserve their profit margins. Large engineering, procurement, and construction firms have developed in every geography. They’ve grown out of partnerships and consolidations. Now the entire process is vertically integrated.
This allows those companies to form public-private partnerships. These partnerships allow companies to work together in joint ventures. They are able to merge to provide design-to-operation solutions. Our world has a specialty company for every aspect of life. Partnerships provide a one-stop shop for building needs. This simplifies the process.
The modular approach to construction allows better safety standards. It improves safety in both developed and developing countries. At the same time, it allows much faster construction processes. This includes Zhang Yue’s 19-day 204-meter skyscraper build in Changsha.
How as-a-service models are different than traditional design-bid-build models
There’s a traditional problem with the design-bid-build model: It pits the owner, architect and contractor against each other. It doesn’t allow a smooth flow of information between the three parties. Why? Fear of litigation keeps these roles separated.
Digitization provides better communications that build a true partnership. It removes these blocks. It doesn’t focus on what information to keep apart. An integrated project delivery contract pushes the parties together. They can create the best construction outcome.
But where did this concept come from? It started with the design-build format to reduce risk. It changes the owner’s perception of that risk. Increasing worldwide demand for construction and vertical project integration allows faster contract delivery. At the same time collaboration increases throughout the project to reach this goal.
An integrated system provides estimating software in construction industry requirements. It then feeds into construction project management software and commercial property management software. Because these systems are linked, it reduces the need for human involvement. More of the process is automated. One company controlling the entire project means supply chain logistics are greatly simplified. This turns the human involvement into exception handling. It focuses human involvement on getting the building completed on time and under budget.
Beyond that, many companies are going beyond the constraints of design-build models. They’re creating an asset-as-a-service or facility-as-a-service model. Some contractors are financing and operating the structures instead of simply delivering a finished product. This provides better margins and allows for public-private partnerships.
This type of partnership has traditionally been seen more commonly in roadwork and bridge construction. On a toll way a private company provides public road construction, financing, and maintenance. In return they receive payments over time. This is typically through the collection of tolls. Constrained municipal budgets are falling short. This type of partnership may make all the difference in the amount of infrastructure construction needed in the next few decades.
But how does the company determine the best investments using this type of model? Digitization. The Internet of Things, predictive analytics, and similar tools available in a wide range of industries makes the process much easier. The company’s digital core has access to construction information and sensor data. This allows automated adjustments. It provides insights into operation. It also improves profit margins and secures revenue streams for years to come.
With this level of information available and ready to act upon the project delivery and transition to operation process becomes seamless. Set up your business with a single system that integrates sensors, cloud-based construction management, preventative maintenance software, and similar information services. This ensures better overheads, reduces human intervention, and increases profits.
Why isn’t everyone taking advantage of these opportunities? Most executives recognize that disruption and the digital economy will impact their business—but few are taking any action. Are you?
It’s time for change. Are you ready to reimagine your business model to one that will stand the test of time and provide you with a flexible, agile construction enterprise? Take a look at what SAP has to offer your company today.
To learn more about digital transformation in construction, see Building a Sustainable World, How to survive and thrive in a digital construction economy.