10 data science & AI trends in india to watch out for in 2019
CG.1595.Analytic Brochure- Final
1. STRATEGY | ANALYTICS | FINANCE
Leveraging Analytics
to Strengthen Competitive Advantage
in the Construction Industry
2. Photo By: Nasa, United States
Source: “Shaping the Future of Construc on: A Breakthrough in Mindset and Technology, World Economic Forum, pg. 11
The construction industry is expected to grow from $10 trillion to $15 tril-
lion by 2025, globally. Those who can harness the power of analytics in the connected econo-
my will capture the greatest share of this value creation.
3. nalytics are transforming the way engineering, construction, and infrastructure
companies compete in the new economy. Those who adopt and strengthen analyti-
cal capabilities will be well poised to capture profitable market share through strategic
positioning and lower cost structures. To win, companies need to act quickly and de-
cisively while maintaining nimble structures. Those who hesitate may struggle to re-
main viable and face serious risks.
Mega Trends
The term “analytics” has infiltrated the business environment, as in-
creasingly, companies begin to drive decisions through data. An esti-
mated 73% of companies will have invested in big data analytics by the
end of 2016.1
While harnessing the power of data will yield a slew of
organizational benefits, companies have barely initiated the data revo-
lution. A mere 0.5% of data is used, and a smaller percentage is cor-
rectly analyzed.
The Internet of Things (IoT) is continuously expanding, projected to
reach market value of $1.7 trillion by 2020.2
Organizations have begun
to sort and analyze streaming information to refine processes, cut
costs, and better understand the consumer through trending analysis
such as textual ETL, bionic brain, building information modeling (BIM),
and open source.
Big data analytics are transforming the bounds of traditional business,
and although the industry has lagged in analytical adoption, the future
of construction will be largely shaped by emerging digital design.
Through the Internet of Things, the number of physical objects (such
as buildings and infrastructure) that are capable of interaction with
humans will increase to 44 billion by 2020.3
The outcome of the digital
revolution will be smarter designs that require less material and labor
and are environmentally-friendly. Companies that do not adapt to the
changing business landscape will not be able to maintain a competitive
edge. As stated in the 2016 World Economic Forum construction re-
port, “...the firms with strong processes in place and the ability to
adapt their business models to new markets will prove to be the win-
ners.”4
Implications:
· The emergence of analytically-driven companies is a threat to anti-
quated business practices. In fact, 65% of senior executives recog-
nize the risk of becoming irrelevant if they do not embrace big
data.5
· Forty-three percent of organizations are restructuring and reor-
ganizing their companies to exploit big data opportunities.6
Those
that fail to adapt will struggle to compete with savvy companies.
1. “Gartner Survey Reveals that 73% of Organizations Have Invested or Plan to Invest in Big Data in the Next Two Years,” Gartner, September 23, 2014.
2. Steven Norton, “Internet of Things Market to Reach $1.7 Trillion by 2020: ICD,” Wall Street Journal, June 2, 2015.
3. “Construction 2025,” HM Government, July 2013.
4. “Shaping the Future of Construction: A Breakthrough in Mindset and Technology,” World Economic Forum, May 2016.
5. Louis Columbus, “54% of Enterprises Will Increase Their Investment In Big Data Over the Next Three Years,” Forbes Magazine, March 22, 2015.
6. Louis Columbus, “54% of Enterprises will Increase.”
4. F
A
B
C
D
E
Dominant Market Share
HighProfit
LowProfit
Minimal Market Share
G
Market Focus & Position
Market focus and position has been
traditionally regarded as a classical
strategic move established through
trade-offs and long-term market pro-
jections. As the intensity of rivalry in
the construction market continues to
squeeze profits, the industry must
seek alternative solutions. In this tu-
multuous, rapidly-changing business
environment, data-driven analysis is
required to help companies under-
stand and best serve the market.
Analytics can be applied for internal
and external analysis. Companies
can measure internal historical data
to derive information on organiza-
tional competencies: In what mar-
kets (sector, geography) does a com-
pany produce greatest profitability?
Companies can make informed deci-
sions and solicit jobs that best match
unique capabilities.
Through continuously-updated ex-
ternal projections, companies can
understand demographic and sector
shifts and how the economic, politi-
cal, and cultural environment will
contribute to future market perfor-
mance. The culmination of internal
and external statistical analysis ena-
bles companies to define an adapta-
ble strategy that best capitalizes on
opportunity.
“Construction
companies need to act
quickly and decisively:
lucrative rewards await
nimble companies,
while the risk are
serious for hesitant
companies.”
Figure 1.0: The figure demonstrates the profit and market
share results yielded from different companies’ (A-F) market posi-
tioning.
5. Want to develop a competitive advantage? Based on a recent
survey, 72% of construction professionals were not familiar with big data, while 22%
were somewhat, and only 6% were familiar with the concept. Smart companies rely
on statistical data-driven information to make faster decisions and better forecasts,
resulting in high performance. By performing the same activities as peers but in a
unique manner, a company carve out a competitive advantage, leading to above av-
erage profitable growth.
Source: “Sage Construction and Real Estate: Information Technology Trends,” Sage, 2015.
6. Leveraging Value Driven Activities
to Lower Cost Structure
The value chain defines the distinct set of
activities performed by an organization to
deliver unique value to the customer. The
support and primary activities effectively
produce the margin. Every activity has a
relative cost and value associated with it
and is interactive with the other activities.
The whole of the activities function as the
overarching business structure.
In-depth analysis requires apportioning the
structure into each unique activity. Howev-
er, the intermingled nature of financial re-
porting categories avert attention away
from individual cost and value driver disa-
bling management from identifying the
areas of strength and disadvantage in their
businesses.
Analytics support a holistic view of opera-
tions, allowing companies to monitor and
improve the operation of each activity, re-
sulting in superior cost savings. Companies
can extract historical data on any activity
being performed in the business and pre-
pare predictive trend analytics on future
outcomes.
The result is visible in cost savings and
productivity improvements. The Interna-
tional Data Corporation recently forecasted
that by 2020, through analyzing data and
creating action items based on this infor-
mation, companies will achieve a collective
$430 billion in productivity benefits. As the
construction industry continues to struggle
with the severe labor deficit, enhanced uti-
lization of resources can increase speed
and the ability to accept further projects.
Furthermore, for the typical Fortune 1000
company, a 10% increase in data accessibil-
ity is expected to yield greater than $65
million additional net income. Through val-
ue chain and activity mapping, inefficien-
cies are revealed, allowing management to
focus efforts on refining competitive edge.
Application:
· As a primary function and activity in
the value chain, project estimators di-
rectly impact project margins. Inexperi-
enced estimators may miss bid items
which leads to higher costs due to
scope gap. By performing analytics on
bid price vs. final cost compared
against the estimator, companies can
gauge inexperience and learn where to
apply appropriate training to save on
costs.
Figure 2.0: Interdependent activities within the value chain
1. “6 Predictions for Big Data Analytics and Cognitive Computing in 2016, “Bloomberg Businessweek, January 6, 2016.
7. Excellence on speed and delivery
With the majority of company focus on profits and costs, one of
the most critical factors impacting competitive advantage is
overlooked: the speed of business. Speed is loosely defined as
the rate at which the company moves through business and
jobs; examples include project completion time, lag time be-
tween jobs, and cash collection rates. Through increasing effi-
ciency, companies can heighten profit per day and reduce cash
stuck in net working capital, therefore spurring competitive ad-
vantage.
Determining and understanding the speed of a business re-
quires detailed analysis of historical data. Analytics can accumu-
late past project information to derive metrics that can direct
companies in job bidding, scheduling, and asset utilization deci-
sions. Almost every cost associated with a business from both a
personnel and tangible asset standpoint can be based on a
metric of time that will allow a company to reach a Cost per X
variable.
Excellence on speed and delivery can be derived firstly through
job selection. By analyzing jobs based on time metrics, compa-
nies can instate speed stipulations for bidding. The largest driv-
er of efficiency is through process optimization. By collecting
timing information for each activity of the value chain, compa-
nies can establish process improvement initiatives to drive cost
reductions.
Application:
· Efficient processes in logistics and buyout can greatly re-
duce extraneous time gaps that slow the pace of projects.
As experienced estimators can better account for site re-
quirements and modifications, scope gap is reduced and
scheduling is enhanced. Efficient project management max-
imizes asset use and value capture.
· Companies that use external data to continuously monitor
site conditions in real time are prepared for schedule ad-
justments and faster overall delivery.
Figure 3.0: Figure 3 demonstrates how profit per day can contribute more to com-
petitive advantage than profit %.
8. Transactional vs. Thinking Companies
Companies have implemented an overabundance of
measures and don’t understand how to truly reduce cost
without destroying value. Average company employees
spend 79% of their time on tasks and a mere 21% of their
time on thinking activities. By using analytics to increase
efficiency for the necessary transactional and compliance
activities, companies can free time for forward-thinking initi-
atives that drive the greatest firm value.
Through a comprehensive activity analysis, management
can pinpoint sluggish areas that stand as barriers to com-
petitive advantage. Applying data-driven information, organ-
izations can transform antiquated systems and implement
new structures that support company strategy, interde-
pendent leadership culture, refine processes, and enhanced
financial position.
Figure 4.0: Figure 4 shows how time allocation to transactional and compliance,
forecasting, and strategy activities can impact company performance.
9. Photo By: Paul Bergmeir
The strategies of yesterday are
failing the companies of today. No
longer will the rewards go to the
biggest players, but rather the
smartest, most nimble—those who
can adapt quickly to shape the un-
predictable, yet changeable nature
of the construction industry.
10. The Coltivar Value Growth Triangle
provides a holistic framework for
companies to strategically grow. Winning
companies in the construction industry use analytical
techniques and statistical knowledge in each of these six
core areas (the P’s) to drive unique value to the customer,
who is at the core of the triangle.
Creating and Capturing Value
The Value Growth Triangle integrates analytics to measure and
fuel the six drivers of firm value: purpose, plan, people, process,
product, and profit. A sustainable business relies not only on
reduction of cost structure to elevate profits, but rather requires
holistic improvement to ensure long-term vitality.
Strategy analytics evaluate the 360-degree business environ-
ment to ensure that companies proactively adapt to market
changes. People analytics can be implemented to derive employ-
ee retention, turnover, and aid in performance appraisal. They
can also inform and alleviate the pressure of the construction
labor crisis. Efficiency metrics used to streamline processes can
reduce employee burn rate, thus lowering organizational cost
structure. Consistent monitoring and advancement in all areas
of a business mitigates risk and reveals a competitive edge.
When working effectively in conjunction, the drivers result in
strong profits and enhanced cash flow.
12. Attracting people into the industry
One of the most consistent and prevalent factors affecting the construction indus-
try today is the availability of skilled labor. In an industry based on cyclical work,
finding young skilled labor has becoming an increasing issue as evidenced by Fig-
ure 5. Based on BOL census data, the average age of a construction worker has
increased from 36 years in 1985 to 43 years in 2015 with the average age of 45+
currently accounting for 44% of the labor market, compared to just 27% 30 years
ago.1
In order to attract millennials, coined the “digital generation,” construction compa-
nies must be able to technologically compete with peers. According to a study
from the CMO Council and Executive Networks, 61% of companies have begun to
implement modern brand platforms to attract millennials including interactive and
real-time recruiting tactics.2
In addition to branding, companies are implementing
digital technology and analytics into their operations, capitalizing on millennial’s
new and broad skill set.3
Millennials are 2.5 times more likely to be early adopters
of technology than older generations. As millennials seek and rely on technology,
offering a culture of analytics will attract and retain more laborers.4
Turning Around a Labor Force
The construction industry not only struggles to attract and
retain skilled workers, but also to manage productivity lev-
els of its current labor force. As demonstrated in Figure 6,
construction labor productivity has lagged significantly
compared to non-farm business labor productivity as re-
sult of lagging adoption of technology and analytics.
Though approximately 73% of companies will have invest-
ed in big data analytics by the end of 2016, a mere 6% of
construction professionals were familiar with the concept
of big data.5
The key to success lies not only in the indus-
try’s ability to recruit new workers, but also to heighten
the efficiency of current resources.
1. US. Bureau of Labor Statistics, Nonfarm Business Sector: Real Output Per Hour of All Persons [OPHNFB], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/OPHNFB,
June 21, 2016.
2. Lauren Brousell, “Attracting Millennials Starts with Digital Tech,” CIO, July 2, 2015.
3. Shaping the Future of Construction: A Breakthrough in Mindset and Technology,” World Economic Forum, May 2016.
4. “The Millennial Generation Research Review,,” U.S. Chamber of Commerce Foundation, 2009.
5. “Sage Construction and Real Estate: Information Technology Trends,” Sage, 2015.
Figure 6.0: U.S. Labor Productivity Index
Figure 5.0: The increase in average age of construction
employees over the last 30 years.
14. Looking Ahead
In the years to come, investing in analytics will become less
of an option and more of a pre-requisite to gaining a com-
petitive advantage. As profit erosion threatens construc-
tion, companies must begin to address internal challenges,
namely the lack of innovation and delayed adoption, re-
sulting in production decline, lack of recruiting appeal, and
process inefficiency.
Through alignment of strategy and analytics, companies
can optimize operations. By reviving the traditional busi-
ness model, construction companies will become more
forward-looking, adaptive, and competitive. According to
the World Economic Forum, “The [construction] industry is
ripe for and capable of transformation.”1
It is now up to the
leaders to initiate the positive change for lasting impact.
1. . “Shaping the Future of Construction: A Breakthrough in Mindset and Technology,” World Economic Forum, May 2016.
15. STRATEGY | ANALYTICS | FINANCE
Helping engineering, construction, and infrastructure
companies cultivate winning positions through rigorous
analysis and strategic-powered growth.
