Trends and Directions of Digital Transformation in the Construction Sector
▲ Senior Researcher Kim Jong-hyeob, Department of Construction Policy Research, KICT
Prologue
With the advent of the Internet and the development of communications technology, the emergence and evolution of the digital transformation have been taking place for a long time. Recently, the Fourth Industrial Revolution and the development of digital technologies (virtual and augmented reality, artificial intelligence, blockchain, mobile technology, big data, Internet of Things, etc.) have been changing the structure of industry, and they are rapidly changing everything, including business processes and business models of companies. In addition, the current government's pledges to support industries stress digital transformation and deregulation as a whole. In such pledges, the digital transformation of all industries is emphasized, and information technologies such as AI, the metaverse, and blockchain are mentioned as catalysts leading digital transformation. On the other hand, the construction industry is evaluated as an industry with very low productivity compared to other industries due to the labor-intensive production system, the disconnection of information between construction project implementation stages (MGI 2017), etc. Considering this, it is necessary to make this an opportunity for the construction industry to achieve innovation that can have a productivity equal to or higher than that of other fields through the systematic promotion of Digital Transformation (DX) and the utilization of Fourth Industrial Revolution technologies.
Definition and Current Status of Digital Transformation
The dictionary definition of DX can be said to be digital change or digitalization of information, which means a fundamental change and transformation with a higher intensity than the change that has been pursued previously. DX at a high level includes all the profound changes that take place in society and industry through the use of digital technologies. Specifically, it is defined as "bringing about significant changes to and improving the characteristics of entities through a combination of digital technologies (information, computing, communications, etc.)" (Gregory Vial, 2019). DX at the corporate (or organizational) level is "a management strategy that fundamentally changes the system, such as a company's strategy, organization, process, and business model, on a digital basis," and is mainly defined as the use of digital technologies to improve business performance, such as efficiency and productivity. The definition at the corporate level is the most commonly used DX concept, and DX at the social or macro level can be defined as "the process of globalization of individuals, businesses, societies, and countries resulting from digitalization."
In 2020, IDC (International Data Corporation) defined the stages of the introduction and application of corporate digital transformation as Stage 1 (Ad Hoc), Stage 2 (Opportunistic), Stage 3 (Repeatable), Stage 4 (Managed), and Stage 5 (Optimized). It announced that more than 60% of construction companies both domestically and overseas are in the early stages of DX, Stage 1 (Ad Hoc Stage) or Stage 2 (Opportunity Stage) (IDC InfoBrief 2020).
As for the definition of DX in the construction sector, 68% of South Korean construction companies prioritize DX and interpret it from the enterprise's point of view, so it can be defined as “implementing the operation and growth of new businesses while driving organizational, operational, and business model innovations by using third platforms or emerging technologies” (IDC Info Brief 2020). Currently, digital activities performed by construction companies can be divided into two categories according to their purpose, which are as follows: ① Activities focusing on internal system integration, which refers to "a series of activities to improve work efficiency" (e.g. Big Data-based BIM, DfMA, Robotics, etc.). ②"Fundamental change in the form of construction work" through the integration of the outside of the company, that is, the eco-system (finance, manufacturing and transportation, etc.). However, this is similar to the existing digitalization activities, and the reality is that the definition of DX in the construction industry is still ambiguous.
©Built Robotics, Branch Technology, Q-Bot Ltd., XYZ corp.
Examples of DX Application in the Construction Industry
Recently, many ConTech companies using BIM, IoT, AR/VR, cloud blockchain, autonomous driving, platform, module, modular, artificial intelligence, cloud, etc. are emerging in the global construction market, and each company is striving to improve their efficiency in construction from various perspectives, including improvement in productivity and added value, risk reduction, and eco-friendly effects. In addition, global ConTech companies that have applied DX to the construction industry are emerging in various countries, including the United Kingdom, France, and Germany, with the United States in the lead.
In South Korea, the roadmaps for smart construction technology and construction business production structure innovation were announced to invigorate the application of DX in the government-led construction industry. In addition, the application of DX in the South Korean construction industry is being stimulated through the smart construction technology development project, which has been promoted by the Korea Agency for Infrastructure Technology Advancement (KAIA) since 2020. In addition, South Korean ConTech companies have introduced related technologies applying BIM, Digital Twin, Internet of Things, Modular, etc. at the 2022 Smart Construction EXPO.
©Basis Soft Inc., Hyundai E&C, Angelswing, POSCO A&C
Advantages and Expected Effects of Introducing DX into the Construction Industry
The introduction of DX into the construction industry can greatly contribute not only to productivity improvements, but also to the acceleration of the conversion to high-value-added businesses, risk reduction, and eco-friendliness in line with ESG trends. With the introduction of digital technology, it is expected that construction productivity will be increased by 25%, added value will grow by 1.42 p, industrial accidents and risks will be reduced, and eco-friendly responses will be possible (waste will be cut down by 3-60% and carbon emissions decreased by 50%) (Samjong KPMG Economic Research Institute, 2021). According to McKinsey Global Institute, DX will enable productivity gains of 14-15% and cost savings of 4-6%. The institute estimated that an increase of KRW 1.6 trillion in added value will be possible if the construction productivity growth (annual average of 1% over the past 20 years) reaches the level of global economic productivity growth (annual average of 2.8% over the past 20 years). However, for DX to be successfully promoted and accomplished in the construction field, it is necessary to clearly define the problems based on the lessons learned from the successes and failures of other industries rather than simply adding digital technology to the construction industry, to make innovative improvements through the application of digital technology, and to reach the level that can change the business competition system.
