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FMI Quarterly/June 2015/June 1, 2015

From Laggard to Leader: How the Construction Industry Can Catch Up With “Big Data”

ImageNow is the time to harness available data to make informed business decisions.

Executive Summary: This is part two of a three-part series about how the construction industry can embrace progressive data strategies to drive improvement to top and bottom lines. The most recent article by Mike Dow and Jeremy Brown focused on helping readers think about the organizational dynamics of becoming more data-driven —i.e., the structure and leadership needed to make change happen.


In this article, we will give specific examples of how the world around us is changing — i.e., how the construction as well as other industries are harnessing data to make more informed business decisions. The final article in this series will give readers more insight into how they should go about selecting the tools and technology to make these changes happen.

Data Sprint: Construction CAN Catch Up!

It’s all around us. Doctors are looking at patterns of effective care; retailers are watching how customers move around their stores, looking for merchandizing clues; and taxis are unsure what to do about Uber’s algorithm-driven pricing model. If the construction industry thinks the status quo will leave us alone, think again. At the very least, we need to hire up-and coming next-generation employees — individuals who are already living 100% in a data-driven world. They expect nothing different.

Of course, there are other imperatives too, including:

Profitability. Pennies add up to real profits. Construction is still notoriously inefficient. Why, for example, do mom and pop retail stores have sophisticated real-time inventory processes and technology, and construction companies rarely have any? At a recent CFMA presentation, one of the authors presented to over a dozen construction companies that had little or no inventory management technology. Jewelry kiosks at malls have better inventory control than many construction companies, with yards and warehouses holding many times the inventory value of these basic kiosks. Mall kiosk owners know that controlling “shrinkage” helps protect profits. Why do they know this and many in construction do not? That type of data control is basic, to not even mention more sophisticated activities such as pricing algorithms and statistically validated inventory planning.

2015q2_laggard_leader_money

Time Constraints. No one has time to read long reports. And even if they do have time, they don’t want to take that time, given the pace of projects in today’s environment. And while information “noise” is overwhelming, there are key metrics that can change unprofitable or unsafe behavior, prevent operational problems and better serve customers. This combination of need and time constraint means that data must be delivered visually, in real time and in a format to allow for additional insights. “Dashboarding” is becoming the old term. Associative search and data visualization are the new and emerging terms. Microsoft, Qlikview, Tableau, Jasper and many others are evolving their products quickly in order to accommodate these shifts. Not surprisingly, most firms in the industry are slow to adopt these tools; clients often want help rewriting Crystal and Oracle reports. The challenge is, these are typically static reports that the younger generation will not read, especially if delivered weekly in PDF or paper “hard copy.” Meanwhile, Uber drivers get immediate feedback on their performance, and mining companies are monitoring environmental data in real time to prevent accidents. A company called Blueforce Development has created a platform for service companies to view in real time a variety of sensors associated with crews of workers in sensitive, dangerous situations. Adoption of this technology by life-safety companies is strong but, sadly, it is less so in construction.

Planning/Predictions. Ultimately, we need to look ahead. What is coming in new markets? Where are employees coming from? What are the trends in our safety program? Data analytics are key to answering all these questions. An interesting article in The New York Times by Sendhil Mullainathan recently pointed to research showing that the exact same resume, one a with “stereotypical” minority name and one with a “stereotypical” white name, received statistically (and significantly worse) response rates by HR departments.1 While this example can happen in any industry, not being cognizant of hiring biases is dangerous to your reputation and is not helping you win the war for best talent. Is your HR department using data to look at the flow of employee prospects? What actions might increase the inflow of better candidates? Who, indeed, are the best candidates? In one of the more people-intensive industries in the world, the need for sophisticated hiring data management should be obvious. The actions we take can improve performance. We need to move beyond simplistic numbers and look for true cause and effect. Averages and trends of data sets tell us what happened yesterday; regression and correlation help us predict what is going to happen tomorrow.

2015q2_laggard_leader_math

For a number of years now, we have heard and read about some industry leaders buying and/or developing technology and, sometimes, technology companies — to serve theirs and other construction companies’ needs. Sometimes those investments are for competitive advantage, some are to reduce internal cost, and others are for a combination of the two. Technology cycles are compressing so fast — and costs are coming down at such a pace — that other, smaller companies can make important investments too. Instead of investing millions in enterprise software, could perhaps the amount of investment similar to the cost of a backhoe be invested in data management software and/or a custom-developed mobile application that meets a specific internal need? Surely, these business decisions are not easy, and often the “real” equipment that construction firms need to invest in represents the urgent decisions, whereas investments in data intelligence may be important for long-term improvement to profits and mitigation of risk.

Changing the Discussion

The question used to be, “Can construction firms evolve towards data-driven investments?” Now the question is, “Who will the leaders and laggards be in this area?” Here are some things that you need to think critically about, and reference Exhibit 1 for how the industry’s “get work, do work and keep score” functions will change the nature of managing a construction business:

What is your long-term data and IT strategy, and how do you spend your time and money? Do you invest in “one-off” ideas du jour in the name of being an “innovative” company? Or do those investments relate to one another as well as to your firm’s strategy? Rather than just tell your staff that, “We are open to all ideas,” do you also provide understanding as to the most critical business imperatives that you are trying to solve for (whether it’s operational or project challenges, talent shortages, business development constraints, etc.)? Providing transparency into your most critical business challenges and allowing staff to be part of the solution tend to go miles.

Are your systems producing accurate data? Also, do your systems provide data and insights for today… or partially accurate data for last month? And lastly, do you put the reporting into the hands of your bright staff or rely on accounting or IT to create static reports?

Are you delivering visually appealing and easy-to-understand data? Our observation is that if field and project management staff cannot read and understand a report in 15 seconds or less, then it will have no impact on them. They will move on to the next order of business very quickly — it’s just how we’re wired.

2015q2_laggard_leader_ex1

Are you using any statistical methods, even simple ones, to interpret your data? Or are you relying simply on averages and linear trends? One simple example of this is that while many companies survey employee engagement and morale, they are unable to attribute the specific talent practices that have the highest correlation to higher-performing employees.

Per our most recent article, we want to ensure that we are doing everything possible to minimize intimidation surrounding this topic. Developing your data strategy is really just a more advanced “keep score” function with the purpose of making better decisions surrounding getting work, doing work and building your bench. The following graphic summarizes this theme and calls out a few of the key areas of invaluable data and information.

2015q2_laggard_leader_ex2What Next?

We would like to leave you with some advice on framing your own data strategy. Given all of the “noise” about this subject, the more focused you are, the more successful you will be.

We’ve developed a “closed loop” data strategy model to help you think through your business life cycle and specifically identify the areas where you think you are the most susceptible (Exhibit 2). Additionally, we give a few ideas about what other industries are doing in each respective business area as well as what leading construction firms are focusing on.

Other industries live by data, and the construction industry is ripe for change. The time has come. Construction can, and will, get there. In Exhibit 3, we outline some of the trends that are starting to become commonplace in the industry, and this is only the beginning. What insight will give your firm the biggest competitive advantage in the coming years?

2015q2_laggard_leader_ex3


Mike Dow is vice president of consulting with Tilson IT Consulting. He can be reached at 720.370.5381 or via email at mdow@tilsontech.com. Jeremy Brown is a consultant with FMI Corporation. He can be reached at 303.398.7205 or via email at jbrown@fminet.com.

1 “Racial Bias, Even When We Have Good Intentions,” “New York Times,” Jan 3, 2015, by Sendhil Mullainathan

 

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