Building Bytes: Tackling Digital Transformation Challenges in the AEC Sector

Two-thirds of those in the construction industry are optimistic about its trajectory. They’re buoyed by the dual promise of increased demand and breakthrough technologies. 

All in all, 2024 will be an exciting year for firms in the architecture, engineering, and construction (AEC) sector, which is an important focus within Stanton Chase’s engineering, construction, and building materials practice.

But let’s not gloss over the issues. The AEC sector is no stranger to inefficiency, with 98% of megaprojects overshooting their budgets by nearly a third. Why mention this? Because inefficiencies tie directly into our main affair for this article: digital transformation. And digital transformation could funnel over a cool USD 1 trillion back into the collective industry pocket.

Thankfully, digital transformation is already making its way through AEC firms worldwide, albeit at a leisurely pace that risks leaving some in the dust. A common leap toward modernity is the adoption of Building Information Modeling (BIM). With BIM mandates in countries like the UK, Singapore, and Germany, AEC firms face a choice: evolve digitally or fall by the wayside. 

Nations waving the BIM flag are already counting their winnings, too. The UK, for one, credits BIM with USD 4.25 billion in public project savings from 2011 to 2015. Now, with eyes on the prize, it’s shooting for a 50% cut in project timeframes and a 33% reduction in costs by 2025.

Beyond BIM, there are more ways for AEC firms to embrace digital transformation. Confronting these challenges is key for AEC companies’ future relevance and success.

Digital Transformation Challenges in the AEC Sector

In 2023, the global AEC market hit the USD 10.05 billion mark. Come 2032, it’s set to scale up to USD 24.36 billion. 

This valuation plants AEC firmly among the titans of world industries. It’s a deserved spot on the leaderboard. 

And by 2050, as the world’s population is projected to brush the 9.8 billion mark, AEC will be the force behind countless new projects sprouting up to accommodate an additional 1.7 billion people.

So, here’s the puzzle: with more potential work on the horizon than ever before, why does the AEC sector seem to be stuck in the slow lane of digital transformation? Here are the top five reasons.

1. Customer Fragmentation and Multiple Customer Personas

The AEC sector’s scattered customer base resists one-size-fits-all digital solutions. Projects in this industry usually involve numerous stakeholders, from architects to end-users, each with specific needs. Creating universally valuable digital tools is a difficult task in this context and it necessitates custom solutions. 

Take Skanska, for example. They’ve embraced technology and use virtual design and engineering to deliver projects efficiently. Their digital engineering methodology is a good example of how digital strategies can meet the varied requirements in the AEC industry. When it comes to addressing customer fragmentation, the answer is specialized digital transformation, not broad strokes.

2. Low Margins and Economic Headwinds

The AEC sector is known for its tight margins, which can make investment in digital technology a tough sell unless it shows quick payback. With low-profit margins, investment in new tech needs clear justification through a direct boost to the bottom line. 

But interestingly, investment patterns are changing. A McKinsey report notes that investment in AEC technology has multiplied, with investors warming up to the potential benefits of AEC tech for productivity and profitability. Established AEC firms have also started looking beyond the immediate when it comes to tech investments, with 77% planning to up their investment in AI and emerging technologies in the next few years.

3. Resistance to Change

The AEC industry faces cultural hurdles when it comes to embracing new technologies and digital transformation. It’s no surprise, given that this sector is well-known for its long-standing practices and traditions deeply rooted at every level. And resistance toward digital transformation in the AEC sector isn’t confined to a single age group either; it spans from seasoned Baby Boomer architects—who transitioned from blueprints to computer-aided design (CAD) software many years ago—to younger professionals, who may also hesitate or lack the resources to adopt technologies like BIM, AI, or machine learning.

An inclusive approach to technology training is the answer. You need to recognize that employees of all ages may perceive barriers differently and addressing these perceptions are key steps in fostering a better transition to new technologies. It’s also an important measure for ensuring your employees’ psychological safety—resistance to digital transformation often stems from concerns over job security.

4. Lack of Standardization

There is often a lack of interoperability and standardization among the digital tools available to AEC firms. Naturally, this makes digital transformation harder than it needs to be. While BIM exists, other digital tools and platforms may not easily integrate with each other. This creates barriers to proper digital transformation. Many small to medium-sized AEC firms lack a robust technology department capable of assisting with integration, too. And with typically slim AEC margins, there’s limited budget to hire software developers for such tasks.

A case study reflecting these challenges with integration and standardization is the adoption of BIM across the Chinese AEC industry. Research found that smaller AEC firms in this region were hesitant to adopt BIM technology due to a combination of cost concerns and lack of standard integration practices. Studies into 5D BIM implementation in smaller-sized planning and engineering offices also indicated that the uptake of this technology is a complex process that can be impeded by a lack of standardized procedures.

5. Skill Gaps

This is the most important barrier, in my opinion. Everything else on this list can be tackled with a bit of finesse, savvy, resilience, and planning—but skill gaps are hard to overcome if you can’t find the right talent to plug them, or if you can’t upskill your existing talent properly. There’s a significant skill gap in the AEC industry—there just aren’t enough professionals trained and comfortable working with emerging digital tools. This lack of expertise can really slow down digital integration efforts.

Plus, existing training systems within the AEC industry often fail to adequately prepare workers for the realities of digital integration in the AEC field. Which means simply reskilling or upskilling existing employees isn’t as straightforward as you might think.

How to Get Digital Transformation Right in Your AEC Firm

A company’s success, no matter the industry, depends on the quality of its leadership—period. For your AEC firm to nail digital transformation, you need leaders who can navigate customer fragmentation with a strategy that goes beyond the “broad strokes” method. 

A company’s success, no matter the industry, depends on the quality of its leadership—period.

You need leaders who are courageous enough to make tech investments (and savvy enough to do it right), despite economic pressures and tight margins. 

You need change management gurus who can rally everyone, from your most seasoned to your newest employees, around digital transformation—all while fostering a safety net of psychological security. 

And you need leaders who can properly lead (or establish) a CTO or tech department equipped to handle the sticky wickets of integration and standardization (or who know how to smartly outsource it). 

We can help you find or develop leaders that fit the bill. At Stanton Chase, we recognize the invaluable asset that is world-class leadership.  Contact me at [email protected] to discuss your leadership needs or click here to reach out to one of our other leadership consultants.

About the Author

Stuart Glassman is a Director at Stanton Chase Baltimore and the Global Subsector Leader for Engineering, Construction, and Building Materials. Stuart’s extensive background in industry-related matters, combined with his expertise in strategic marketing and brand building, enables him to specialize in highly collaborative, consultative search efforts. 

Drawing from more than 25 years in marketing, advertising, brand building, and business development, Stuart has successfully transitioned his knowledge of B2C and B2B sectors to the executive search industry. His extensive track record includes collaborations with Fortune 500 companies and prominent brands such as 3M, Owens Corning, Pearle Vision, Aspen Dental, Black & Decker, and Sherwin-Williams, among others.