Insights, Resources

Decoding digital transformation in construction

Industry and technology concept. INDUSTRY 4.0

Few engineering and construction companies have captured the full benefit of digital. Five practices can help E&C companies move beyond isolated pilots and unlock digital’s value across their enterprises.


After spending five years and countless sums on trialing new software platforms and ways of working, the executive team at a large contractor was nearly ready to call an end to its digital-transformation program. Dozens of attempts to streamline projects with digital solutions, such as 5D BIM, had failed to deliver. A few had succeeded in the pilot phase, but the company had struggled to apply those solutions at scale. Site and office workers grumbled about having to adopt yet more new technologies—before abandoning them and returning to their old ways of working. Overall, projects hit delays and ran over budget as frequently as before, and productivity had barely budged upward.

Scenarios such as this remain all too common in the engineering and construction (E&C) sector, which is one of the world’s least digitized.1 The difficulties are understandable. The typical construction project involves a multitude of independent subcontractors and suppliers, which have little incentive to embrace new methods during the brief periods when they are on the job. Projects vary greatly, so E&C companies often struggle to develop tools and methods they can apply repeatedly. Limited R&D budgets prevent E&C businesses from spending as much on digital as companies in other sectors do. And construction work often takes place in remote, harsh environments that are not well suited to hardware and software developed for the office. It is no wonder, then, that many E&C businesses end up with little to show for their technology investments.

Yet we are also seeing an increasing number of E&C companies overcome these challenges to transform projects or even business divisions digitally. When we assessed construction companies that successfully implemented digital technologies and ways of working, we found that, despite differing conditions, their transformations had five practices in common, from which other E&C companies embarking on similar transformations may learn:

  • Focus on fixing pain points, not installing IT solutions.
  • Implement digital use cases that promote collaboration.
  • Reskill and restructure engineering teams.
  • Adjust project baselines to capture value.
  • Connect projects to unlock impact across the enterprise.

For a digital transformation to be successful, executives and managers must start with a clear definition of how digital will create value for the business (see sidebar, “Defining digital transformation in engineering and construction”). During the transformation, they must spend as much time, if not more, on operational change as they spend on technology. Those that do stand to realize a significant productivity payoff. Research by the McKinsey Global Institute indicates that digital transformation can result in productivity gains of 14 to 15 percent and cost reductions of 4 to 6 percent. In this article, we offer a closer look at how E&C companies can realize benefits like these.

Article originally published by McKinsey & Co.

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