Why does the construction industry lag behind other sectors when it comes to productivity? Why are cost and schedule overruns the norm for engineering and construction projects?
The answer to these questions is complicated, as there are many factors that affect project outcomes. However, there is one critical factor that is often overlooked, but has a huge impact on returns and margins – predictability.
What is predictability and why is it important?
Predictability is simply defined as knowing the outcome of an event as early as possible. For construction projects, we mostly focus on cost and schedule predictability. In order to have predictable projects you need early and accurate forecasts.
An organisation’s inability to accurately predict cost and schedule outcomes massively impacts the bottom line and management confidence, to say nothing of investor confidence. Given Wall Street speaks the language of predictability, executives in the industry must also attain fluency in predictability. Again, early knowledge of outcomes enables project teams to address project performance proactively to reduce cost and schedule variance.
You cannot eliminate all surprises, but the quicker you identify them the better chance you have to take action. Simply put, improved predictability breeds better project control and better financial outcomes.
Technology’s role in predictability
It’s no coincidence that in addition to productivity and predictability, the construction industry also lags other sectors in technology adoption. Deloitte notes that Construction invests just 1.5 per cent of revenue into IT, less than half of the average for all industries. Further, KPMG reported that two-thirds of surveyed firms don’t use advanced data analytics to monitor project-related estimation and performance.
This void of technology has contributed to low predictability in the industry, as executives lack visibility and transparency into the project level to properly incentivise and drive predictability across the organisation.
There is hope, however, as digital transformation is becoming a critical business initiative for organisations in the Engineering & Construction industry. Digitisation can extend the reach of an organisation, improve management decisions, and drive efficiency throughout an enterprise.
Another benefit of technology is its ability to help track, analyse, and ultimately drive predictability. Technology can directly impact many of the practices that CII identified as distinctly correlated to predictability:
- Project characteristics – technology helps you manage complex projects more efficiently, promotes more effective communication and collaboration between project teams and management, helps mitigate the impact of external influences, and in some cases, software can help directly measure and assess project teams based on predictability.
- Forecasting practices – utilising one software solution as a central hub for project data can help improve forecasting, making sure forecasts are based on consistent, accurate, and real-time information. In addition, reporting can be done much more quickly, and with less manual effort.
- Management processes – software solutions can help make project planning, execution, and contract management more efficient and effective. The correct software will also improve risk and change management, and make sure that best practices are standardised throughout the organisation. Solutions that integrate management processes with project controls provide the added benefit of making sure project delivery is aligned with organisational strategy, and that all data is accurate and consistent across the enterprise.
- Human behaviour and organisational culture – there are some solutions on the market that can even help with the human behaviour and culture aspect of predictability. Software that leverages predictability indices can help organisations measure, track, and benchmark based on predictability. Shining a spotlight on predictability allows management to reward it, thus helping drive out “optimism bias.”
A digital transformation of your enterprise provides a great opportunity to increase the productivity of your organisation. And since predictability is such a critical part of project and organisational success, it is important to consider predictability as part of your digital transformation strategy.
To find out how EcoSys can help you take the first step towards implementing predictability into your projects, get your free info kit here, or visit EcoSys.net today.
This partner content is brought to you by Hexagon PPM. To find out more, visit hexagonppm.com.
