Driving value for capital projects with digital
May 6, 2021
Digital enablement has emerged as an imperative across most industries and the construction industry is no different. The industry has already made impressive investments in digital programs. Both owner-operators and global engineering and construction companies are making significant progress in this area.
By Andy Webster, Grégory Christophe and Preeti Bajla
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Accenture's research shows how a small group of companies is able to drive much higher value from digital by making specific changes to their operating environment. Find out if you are one of them.
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For capital projects, digital initiatives can enable greater business transparency and agility throughout the value chain. Many companies planning, developing, and executing projects today are investing in new digital architectures and approaches, frequently leveraging cloud platform capabilities, to harness technology innovations. These investments are targeting performance gains in key project indicators related to managing cost, predictability, delivery cycle time, resource productivity and security. However, while digital investment is occurring across the industry, our study found that only a third of companies are realizing improvements in key performance indicators with data-driven digital transformation initiatives.
Data-driven insights are the key to delivering increased value from digital solutions such as digital twins. Owner-operators are using big data analytics to predict market trends, optimize commercial viability and predict project performance. Likewise, some engineering and construction companies are integrating project data to build project control towers that monitor and analyze project execution from engineering through construction, and digital twins that integrate design data and project execution plans.
Few executives dispute the value of reliable and transparent data. It enables a highly trusted, collaborative decision-making process for project planning and execution. Our latest capital projects research examines where owner-operators and engineering and construction companies are in their data-driven digital transformation journey. It considers the challenges they face and the various actions that have been adopted by the most progressive companies during the 2015-2020 period.
The key data challenges
The capital projects industry understands the growing importance of data-driven insights. Nearly nine out of ten companies say they collect/use average or good quality data and invest significantly in digital technologies to create value with them. But much work remains for the industry to fully achieve the potential value. We asked executives participating in our survey about the impact digital initiatives had on their most recently completed projects. Nearly two thirds admitted they are not experiencing success around key performance indicators linked to cost, delivery, risk, talent, and financial management from data-driven digital transformation initiatives. So why are they struggling to succeed?
From our perspective, their two biggest missteps are:
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- A strategic failure to institutionalize ownership to build the right operating environment (people, structure, or culture) for collating and deploying useful data to drive engagement, collaboration, and shared success. As a result, their teams continue to operate in silos within and across the project value chain and they fail to facilitate the strategic transformations needed to get on a ‘data offensive’.
- An inability to operationalize data and technology for decision making which leads them to waste critical resources (time and money) dealing with mundane issues. They don’t develop a fully interoperable infrastructure that can provide valuable insights to workers.
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Understanding the root causes
One key issue stood out among the roots of these challenges: A lack of preparation at the strategic and optional level, that is needed to build ownership and the operating environment. Without this, companies are failing to drive decisive use of data within and across project stakeholders.
Owner-operators find their contractor project teams often lack required digital skills and are not interested or incentivized to collaboratively generate data-driven insights. And owner-operators find it hard to integrate freshly appointed “data drivers” with incumbent “data resistors”.
For owner-operators, the top five challenges that prevent them from digitally transforming their most recently completed capital projects include:
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Graphic: Blomqvist
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For the engineering and construction companies, we found the key challenge is to operationalize data and technology for decision-making. Contractors struggle to manage schedules and feedback and build systems that help them respond to change and integrate new technologies to drive improvements in KPIs relevant for owner-operators.
The top challenges faced by engineering and construction companies while executing their most recently completed capital project (by major project activity) include:
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Graphic: Blomqvist
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How can owner-operators and engineering and construction companies create the right operating environment for each other? And how do they effectively realize the full benefit of their data-driven digital transformation initiatives? By deploying CAPSTONE, a new approach to help owner-operators and engineering and construction companies reinvent their collaboration to cement higher returns from investments in data-driven digital transformation.
CAPSTONE: A greater value release for owner-operators and engineering and construction companies
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The CAPSTONE framework: Reinventing collaboration to unlock value with data-driven digital transformation.
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CAPSTONE (Capital Projects Strategic and Operating Network) is our new framework for aligning operating models to achieve improved outcomes from investments in digital. It helps owner-operators and contractors reinvent collaboration to effectively use data and unlock the full value of digital transformation. And CAPSTONE works on the network effect. That is, the larger the number of people using data and analytics in capital projects, the greater the value release for owner-operators and engineering and construction companies.
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Our research shows that integrating elements of the CAPSTONE framework can give owner-operators an incremental 6.6 percent return on their capital investment. And it can boost contractor’s operating margin by an additional 5.8 percent. The CAPSTONE framework is generating incremental value to be shared between contractors and owner-operators. It comprises four action-based elements:
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- Data-committed C-suite: C-suite involved across in the capital project must commit to a culture of data-ownership, data-sharing, and data-driven decision-making. There must be a top-down focus on unlocking innovation and real-time value for the organization to overcome barriers both internally and with other key participants in the project value chain. Around 60% of the outperforming engineering and construction companies in our research make their CEO or the COO responsible for data-driven digital transformation while only 15 percent of the Others adopt this approach (link).
- Data-sharing infrastructure and capabilities: Capital project stakeholders must align investments across relevant technologies, digital assets, and digital capabilities. Consistent with the Construction Industry Institute’s (CII) Industrial Integrated Project Delivery (I2PD) research, shared information systems can enable the integration of project stakeholders building contextual data stacks and mutually beneficial solutions across the project lifecycle. For example, implementing shared digital twins of capital projects enables owner-operators and contractors to collaborate and detect problems early to minimize defects and delays.
- Data-centric talent: Data stewards must facilitate timely and intelligent use of data-driven insights towards schedule management, productivity, and regulatory or other key stakeholder issues that could distract from executing on the plan. Capital projects must engage data coaches to upskill the on-ground workforce and extinguish resistance within the workforce to on-site data to realize the improved project outcomes from digital project technology and data. In our research, 65 percent of outperforming engineering and construction companies report that they are able to access to digitally skilled labor compared to 38% of the rest of the contractors (link).
- Incentive-based contracts: Both owner-operators and contractors must structure contracts that incentivize all project stakeholders (suppliers, subcontractors) to make collaborative use of data-based insights. Supported by CII’s I2PD research, these should be tied to the stakeholders’ financial goals to better integrate the overall project team and establish shared risk and reward. Additionally, non-financial goals should be included to align across project objectives (such as lower climate footprint, local content, and supplier diversity).
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A highly collaborative environment
CAPSTONE helps create a mutually beneficial and collaborative environment to effectively share and leverage data. This reinvented collaboration approach combines the decision-making power of data and technology with the ingenuity of human collaboration.
But the CAPSTONE journey isn’t easy. Each step rests on a foundational commitment to accepting and collectively managing change—both within and across stakeholders. Only those who boldly lead in this way see the full benefit of their data-driven digital transformation.
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About the authors
Andy Webster, Grégory Christophe and Preeti Bajla
Andy is a Managing Director at Accenture and leads globally the Capital Projects offering in Industry X. Meet him at LinkedIn.
Grégory is a Managing Director, Global Engineering & Construction, Real Estate and Business Services lead at Accenture. Start a conversation with him on LinkedIn.
Preeti is an Associate Principal at Accenture's Research division. Get in contact with her via LinkedIn.
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