Why they fail “Our most fundamental lesson from the past half-dozen years is that average companies rarely have the combination of skills, mind-sets, and ongoing commitment needed to pull off a large-scale transformation,” the authors wrote. We know many E&C companies that cherry-pick digital use cases that apply to just one activity or trade. This might involve observing site works and tracking downtime before and after implementing a use case. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Reskill and restructure engineering teams. Digital transformation: The difference between success and failure. Flip the odds. Managers can capture the benefits of increased productivity in several ways: compressing on-site schedules, reducing noncritical resources, and even restricting overtime. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. And construction work often takes place in remote, harsh environments that are not well suited to hardware and software developed for the office. De-risk. For IT leaders, the result of each initiative can either be a career maker…or a career breaker. Common challenges include unclear definitions of what digital means, an indistinct idea about what the transformation should accomplish, and poor integration of digital tools with business processes. Site and office workers grumbled about having to adopt yet more new technologies—before abandoning them and returning to their old ways of working. McKinsey Global Institute. By digitizing and standardizing element data, the company gained an enterprise-wide view of element volumes, which allowed it to standardize specifications and aggregate purchase orders to obtain savings. To ensure sustained success, companies must also prioritize efforts to define new products and services as well as digitize their operating models. The statistics related to digital transformation are disappointing. Yet we are also seeing an increasing number of E&C companies overcome these challenges to transform projects or even business divisions digitally. Digital Transformation may be a trending topic today, but the concept of digitizing business processes, products, and services was introduced way back in the early 90s and the 2000s. Historically, site workers hadn’t sent feedback to a supplier on all defects in the elements that the supplier was making. These failed transformations show common missteps, but the companies behind them prove that failure isn’t the end of the road and that successful digital transformation is possible. He helps small and medium enterprise owners understand what's most important to their company's growth and success. ~70% of digital transformation projects fail according to Mckinsey. Most DTs don’t yield the benefits that leaders expect. A good process-centered use case should specify three things: a process change, the required enablers (data and technology tools, capabilities, changes in mandates and responsibilities, legal and contractual requirements, and others), and the expected benefit. Yet, according to McKinsey, more than 70% of digital transformation projects fail. The digital transformation market is expected to grow at a CAGR (compound annual growth rate) of 23% from 2019 to $3.3 trillion by 2025. Why Digital … McKinsey reports that less than 30% of companies enjoy true digital transformation success, and only 16% realize improved performance and sustainable changes. The authors wish to thank Shankar Chandrasekaran and Garo Hovnanian for their contributions to this article. Concentrating on business processes must not stop after the first wave of use cases. Discover. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. But these factors don’t explain entirely why digital transformation in the E&C industry is so hard. This approach requires close collaboration among the organizations working on the project as well as clear communication about the project plan, especially with new workers who are accustomed to a slower pace of execution. Overall, projects hit delays and ran over budget as frequently as before, and productivity had barely budged upward. Something went wrong. David Foote from Foote Partners gets it exactly right: “Clearly the … McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. We'll email you when new articles are published on this topic. For example, there is little to gain from compressing the time taken to survey a site if excavators are not in place for employees to start earthworks as soon as the survey is complete. But if the labor force isn’t streamlined or reassigned to other activities, then workers will end up waiting during the time they would have spent on rework, and the costs will still accrue. consolidating cost and schedule data from multiple projects and business units to increase the accuracy of bids for future tenders, thereby increasing the margin, gaining an enterprise-wide view of resources to optimize resource loading and respond quickly when project demands change, creating central repositories for designs at the element, package, and project levels so those designs can be repurposed on future projects. by . The result is a proliferation of subscale, often competing tools within a single company. For more on cross-industry challenges, see Jacques Bughin, Tanguy Catlin, Martin Hirt, and Paul Willmott, “, Overcoming pandemic fatigue: How to reenergize organizations for the long run, What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries, Reinventing construction through a productivity revolution. In digitally savvy industries (high tech, media, and telecom), the success rate is less than 26%. In more traditional industries, including pharmaceuticals and healthcare, success rates of digital transformation fall between 4-11%. McKinsey Quarterly. Please click "Accept" to help us improve its usefulness with additional cookies. Digital transformation should not be handed off to consultants. Limited R&D budgets prevent E&C businesses from spending as much on digital as companies in other sectors do. Misunderstanding what “Digital Transformation” means, coupled with poor internal alignment, is often why digital efforts fail. 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