Engineering and construction (E&C) companies are moving ahead with digitization. In our survey of 397 senior executives in 26 countries, they say they are investing about 5% of annual revenue, which is in line with other sectors. About a third say they’ve reached an advanced level of digitization and 69% say they’ll be there in five years. As with the other sectors in our survey, E&C is counting on Industry 4.0 initiatives to help reduce operational costs and increase revenue growth
They are investing in product development. Currently, E&C companies are focusing on digitizing product development and engineering, and 46% of E&C respondents say they have already reached advanced levels of digitization in this area. This reflects the importance of the growth of digital design and engineering in the construction sector. But they are slower to digitize the horizontal value chain with suppliers, customers, and other value chain partners. When they do, they are likely to realize potentially significant benefits. Digitization would help facilitate collaboration among the many players involved in construction projects.
They have major internal challenges. We found that for E&C, the biggest challenges revolve around internal issues such as culture, organization, leadership, and skills. More than half (53%) of respondents put the absence of a digital culture and the right training among their top three challenges. Nearly 59% of E&C respondents feel that their workforce lacks needed data analytics skills. Around half lack a structured approach to data analytics organization and governance. Many (39%) rely on the selective, ad hoc data analytics capabilities of individual employees, while another 11% have no significant data analytics capabilities.
The second major challenge is that much of the sector (41%) does not clearly see the economic benefit of digital investments. Following in close succession are the high financial investment requirements, insufficient talent, and lack of a clear digital operations vision and support/leadership from top management. The more external challenges – whether they have the right standards, infrastructure, and intellectual property protection or adequate data security or privacy protection – are seen as lesser issues.
Some will step up investment; others are waiting. Looking ahead, many E&C companies that haven’t yet made significant investments in Industry 4.0 initiatives say they plan to do so in the next five years. But just over a third of companies still expect to keep their future investment relatively low. This will further widen the gap between companies taking advantage of new technologies and those reluctant to move ahead. The longer companies wait, the harder and more expensive it will be for them to catch up. And many may not succeed because faster-moving companies have a significant advantage in positioning their digital offerings. Perhaps most importantly, it takes time and a dedicated effort to fashion an internal culture that can support advanced technology. E&C companies know this is an important issue, but they may not realize they need a long lead time to effectuate change.
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