Labor shortages and supply chain delays impact a construction company’s ability to maximize project profitability. To address these obstacles, contractors are shifting to digital transformation.
This article covers the CFO’s role in a digital transformation, a framework for success, and expectations regarding the return on investment (ROI).
Understanding Digital Transformation
Digital transformation is the use of digital technology to modernize processes. More than just the use of technology in the office or on the jobsite, digital transformation is about a company’s culture and transforming the way the business is managed to ensure that technology is seamlessly woven into every process. The goals of digital transformation include simplification, current and consistent views on the status of each project and line of business, and reducing or eliminating time consuming and/or paper-based recordkeeping.
The perceived benefits of digital transformation have led to construction technology being one of the fastest growing investment sectors over the last several years. In 2021, investment in the construction technology ecosystem reached a record $4.5 billion, which is triple the amount invested in 2020.1
In terms of effectiveness, today’s workers see the benefits of digital technology. A recent survey found that 95% of workers report being more productive because of using new technologies that are designed for the construction industry.2
The latest technologies often associated with digital transformation include smartphone apps, project management platforms, GPS layout, drones, robots, augmented reality, and wearables. Each of these technologies create or complement digital records, making it easier to understand the big picture of project profitability. They also allow project managers (PMs) and executives to dig into the details and quickly and accurately identify and address potential issues before they create unnecessary risks or impact project profitability and client satisfaction.
Adopting digital transformation is on the radar for most construction companies, with 71% of companies saying that digital transformation is a priority.3 However, only 15% have implemented a digital transformation strategy,4 which is often due to the perceived time, costs, and labor — ironically the same issues that digital transformation addresses.
The keys to digital transformation success are to start small and secure quick wins that show higher productivity and ROI. This will drive support from the top and across the organization while steadily enabling the company to modernize and digitize processes.
The CFO’s Role in Digital Transformation
Digital transformation is not an option; it’s a major disrupter, and organizations that don’t prepare for change will be left behind. The CFO plays a major role in driving the success of a contractor’s digital transformation. If the CFO does not have a deep background in digital, then the IT team may also play a big part.
Expanding Company View
As a company’s digital transformation progresses, part of the CFO’s role is to expand the view beyond corporate growth. This requires taking a closer look at how aligned and prepared the company is for significant changes that will be driven by digital transformation.
For example, the CFO must ensure that the executive team is on board with the digital transformation strategy and active in its rollout, which involves being in lock step with IT and articulating the impact of digital transformation on lines of business, projects, and throughout every level in the organization.
When evaluating every level of the organization, it’s important to get a pulse on all employees’ comfort levels with technology.
Technology has often been an afterthought in construction, and with four generations currently in the workforce, these factors can lead to stalled or abandoned technology projects and wasted investment dollars. For digital transformation to be successful, it needs to be accessible, easily understood, and used by workers at every level.
Recognizing Change & Planning Ahead
The CFO must also recognize how digital transformation is changing the construction industry as a whole and plan accordingly. For example, over the past few years, construction technology has ushered in highs and lows.
Being able to spot trends, accurately assess where they’re going, and form partnerships with companies that are on an upward trajectory further advances a contractor’s digital transformation agenda. The CFO’s understanding of technologies and its long-term impacts enables them to accurately assess potential outcomes and balance risks while allowing the organization to quickly make smart decisions.
Investing in Technology
Further, to accelerate digital transformation, some CFOs are combining their operational and technology budgets. When this happens, contractors can invest more on technology because IT is not seen as a cost center, but rather a competitive differentiator that can accelerate digital transformation.