13% of the world’s GDP is construction related spending. It means this industry is one of the largest in the world. Construction is connected to most of the industries from oil industry until the manufacturing. Over the past 20 years the productivity of the industry growth has only increased 1%. With the increase of the productivity and the catch up with the total economy the industry would prevent $1.6 trillion added value per year. This added value is equal to profit for companies. Participants need to be changed and the market needs to push further the contractors to the digitalization direction. Based on a report from 2017 from McKinsey and Company

Piece of Histroy

Connected machines and tools used in different working environments have created an opportunity to increase efficiency and productivity in recent years. Internet of Things (Industry 4.0) has created several new markets, products and services.

The spread of the Internet, smart products and cloud-based services provide opportunities for digitalization to break into the traditional markets. Several examples have shown that the development of technology is an unstoppable process. Every industry proved that digitalization is a value proposition for a market leader company.

Today, the fourth industrial revolution expands the industrial environment at an exponential rate and smart products appear in the traditional market. Smart devices prove that it is more and more important to know how to use a device.

The third industrial revolution provided opportunities for multinational companies to grow internationally. This new multinational environment and the continuous development of IT enabled to generate more and more collection of data. With big data analysis human behaviour, shopping habits and personalized information are much easier to analyse today than 100 years ago. Big data analysis gives back the shared information’s in technology, products and services to the market in return.

In the first wave of the fourth industrial revolution showed dynamic improvement for computers, smartphones and tablets. During this revolution several new mobile applications appeared in the market. In the first wave the IT industry focused for gaming applications. In the next wave traditional devices began to be supplied with unique digital functions through cloud-based services.

The fourth industrial revolution opened new markets for industry-specified applications, platforms and services. Smart devices have become the inevitable relationship of cloud-based services. The Industry 4.0 is a new opportunity to improve further traditional markets such as construction industry.

What is happening in the European Union?

In the European Union the construction sector generates about 9% of gross domestic product (GDP) and provides 18 million direct jobs. It also means that the internal market offers our international partners access to more than 500 million people and approximately EUR 13 trillion in GDP.

The EU strategy for the sustainable competitiveness of the construction sector focuses on five objectives: Investments, Jobs, Resource efficiency, Regulation

So how can we access the Market in the EU?

“The European Union is a major actor in world trade and supports open markets, clear regulatory frameworks and the removal of barriers to trade. The EU is engaged internationally to open opportunities for sustainable construction, cooperate with its partners in areas of mutual interest and share its expertise” by European Comission

In 2012, the European Commission published a Communication Strategy for the sustainable competitiveness of the construction sector and its enterprises. The document is a part of the Europe 2020 initiative which focuses on the promotion of favourable market conditions for sustainable growth in the construction sector. In this strategy there are five focus areas:

1.      Financing and digitalisation: especially for energy efficient investments in the renovation of buildings and for research and innovation in a smart, sustainable, and inclusive environment

2.      Skills and qualifications: workforce and management training for job creation through up-skilling and apprenticeships to meet demands for new competencies

3.      Resource efficiency: focusing on low emission construction, recycling and valorisation of construction, and demolition waste

4.      Regulatory framework: emphasis on reducing the administrative burden for enterprises, and particularly SMEs

International competition: encouraging the uptake of Eurocodes and promoting the spread of new financial tools and contractual arrangements in non-EU countries. (Construction sector competitiveness 2019)

Integrating Digital Innovation in the European Construction Sector

The construction industry is among the least digitalized industry in Europe and has been hesitant to embrace digital innovation and IT spending is less than 1%. Over the past twenty years its labour productivity has only slightly grown. We can already see some great examples from the digital innovation which is going to have a major impact in the industry like BIM, the Internet of Things, 3D laser scanning and component printing, big data analytics, augmented reality, drones. These first innovations could result a faster innovation in the building construction sector and could show great examples to increase profit and productivity. These new technologies not only need special integration, but the enterprises also need to rethink their business model. Companies need to focus more for data and how to use the data to improve their productivity. (Integrating digital innovations in the construction sector 2019)

“The European Commission has developed the Construction 2020 Strategy, followed by an action plan, with a pillar specifically dedicated to financing and digitalisation. Other crosscutting policies and (financial) instruments such as the Cohesion Policy or the Horizon 2020 and Competitiveness of enterprises and SMEs (COSME) 2014-2020 support the research, technological development, uptake of technical innovations along the construction value chains.” Integrating digital innovations in the construction sector 2019

We can see some progress in the sector but innovations are often adopted at a slow rate.

New Digital Markets in the Construction Industry

Digitization penetrates all parts of the economy. Engineering and construction industry is no exception. Engineering and construction companies slowly start to understand the value of the digitalization. Some companies have successfully invested more to digital solutions than their competitors. Those companies are already reaping significant benefits. Analytics not only can make sharper bids but also anticipate problems with ongoing projects, allowing managers to intervene before potential delays and cost overruns turn into real ones. The companies that get in early will likely emerge as leaders. Amazing article by McKinsey and Company explains the opportunities today in the construction indusry with a fascinating map.

What are the new markets for the construction industry?

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  1. Digital twins with three main clusters: back-office, digital collaboration and on-site execution such as: BIM, project scheduling resource planning, equipment and material management
  2. Artifactial intelligence and analytics: predictive asset performance, machine learning and deep learning
  3. 3D printing, modularization and robotics: drone-enabled land inspection, laser scanning, virtual scanning, design simulation
  4. Supply chain optimalization and marketplaces: labor and professional marketplaces, construction material marketplaces, equipment marketplaces

Are you prepared for the innovations? In my next article I am going to introduce the new innovations and Startups from the The Digital Construction Week 2019 London Event.

About the Author

I am a Structural Enginer with MBA background. During my MBA I did several research in the field of digitalisation in construction industry. Since I finished my studies this topic became a passion for me. I love reading, testing and researching every innovation in the construction industry. If you have further questions about the topic do not hesitate to share it with me!

Orsolya Nagy

MBA, MSc Structural Engineer

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