Construction industry indicators are often a measure of economic progress. In the US alone, the construction industry accounted for about 4 percent of GDP in 2021, i.e., $800 billion. Hence, analysts and investors pay close attention to leading or lagging indicators such as construction spending, Bid and Take-Off Performance, employment rates, the NAHB (National Association of Home Builders) housing market index, and more. However, the construction industry is typically a low-margin industry prone to inefficiencies. Large capital construction projects are often late, over budget, and poorly executed. The average profit margin in the construction sector is below 6 percent — very low compared to other sectors like Banking, Oil/Gas, Retail, and Telecom. Also, while labor productivity in the global economy has increased by an average of 2.8 percent a year over the past two decades, the construction sector has registered a mere 1 percent annual improvement [1].

So, what can construction or AECO (Architecture, Engineering, Construction and Operation) companies do to increase productivity and profit margins in today's business environment of complexity, speed, ambiguity, and volatility? While there are many solutions, one key option available to construction companies is investing in data and analytics (D&A) capabilities. D&A is considered a key enabler of innovation and productivity in every business function and industry sector. A McKinsey report says D&A can provide EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) increases of up to 25% [2]. According to Boston Consulting, nine of the top ten innovative companies in the world are data firms. A report from MIT says digitally mature firms are 26% more profitable than their peers [3].

Fortunately, the construction industry today has enormous amounts of data needed for D&A. This data often comes from BIM/CAD (Building Information Modeling/Computer Aided Design) data from projects, jobsite data collected by IoT (Internet of Things) devices, accounting, procurement, and project management data, and much more. But many construction companies don't have the right tools, skills, and capabilities to capture and analyze this data. Research by McKinsey found that the construction industry has the lowest D&A adoption [4]. Given this, how can the construction industry leverage D&A to improve business performance?

Before diving into the technical matters related to D&A, let's look at some construction business use cases for D&A — specifically how D&A helps construction firms improve business performance. Fundamentally, D&A helps organizations derive insights by asking the "right" questions at the "right" time to improve business performance. With D&A, construction companies can streamline workflows, automate tasks, reduce costs, and more. For example, by analyzing worker movements with GPS tracking from IoT wearables and smartphones, construction companies can assess the level of unnecessary and dangerous movement happening at work facilities. This can help eliminate unproductive work and improve worker safety. D&A can also help closely track job costs, change orders, material and equipment usage, and worker productivity to get a better status of tasks for productivity improvement and work forecasting. Lastly, analyzing data from past projects helps ensure that project bid submissions are accurate and competitive, helping companies land more projects.

In this regard, D&A can source data by integrating systems such as Procore, BIM/CAD tools from Autodesk Revit, Dassault CATIA, SAP ERP, SharePoint ECM, and other data sources into a canonical system such as a data warehouse or data mart. The data in the data warehouse or data mart can be used in the D&A workspace to derive insights at the project, program, and portfolio level. The D&A workspace is a flexible SaaS (Software as a Service) interface that allows GCs (General Contractors), Construction Managers, and other analysts to quickly derive insights and share results with team members [5]. Using a drag-and-drop interface, one can craft analyses, add powerful visualizations, curate datasets, and share and schedule projects with anyone in the organization. Overall, the data and insights can be presented in configurable dashboards and customizable BI reports from the D&A workspace, helping companies make the right decisions in real time.

While technology brings speed, scale, and security, technology alone will not help construction companies unlock the true and full value of their data. Overall, there are five key components construction or AECO companies need to leverage D&A for improved business performance: data culture, data literacy, quality data, technology, and data governance. Implementing these five components increases the odds of successfully transforming D&A solutions into tangible business results — namely, increased revenues, reduced costs, and mitigated business risks.

About the Author

Dr. Prashanth Southekal is a Consultant, Author, and Professor. He has consulted for over 80 organizations including P&G, GE, Shell, Apple, FedEx, and SAP. Dr. Southekal is the author of three books — "Data for Business Performance," "Analytics Best Practices," and "Data Quality" — and writes regularly on data, analytics, and machine learning in Forbes and CFO University. His second book, Analytics Best Practices, was ranked the #1 analytics book of all time in May 2022 by BookAuthority. He serves on the Editorial Board of the MIT CDOIQ Symposium and as an advisory board member at BGV (Benhamou Global Ventures), Grihasoft (India), and Astral Insights (US). Apart from his consulting and advisory work, he has trained over 3,500 professionals worldwide in Data and Analytics. Dr. Southekal is also an Adjunct Professor of Data and Analytics at IE Business School (Madrid, Spain) and was included by CDO Magazine in the top 75 global academic data leaders of 2022. He holds a Ph.D. from ESC Lille (France) and an MBA from Kellogg School of Management (US). Outside work, he enjoys juggling, golf, and cricket.