Amir Berman
Construction profit margins are notoriously thin. An underperforming project can wipe out a portfolio’s gains. For executives, this fragility comes with enormous pressure, but they are often the last to know when a project is going astray. Course correction is then costly or impossible.
Why does this happen? It starts with fragmented and inconsistent reporting. Often, each project in a portfolio reports progress differently and with a different agenda or bias: some focus on milestone completion, others on budget variance, while others emphasize schedule adherence. In addition, much of the data that executives see is of poor quality and lacks the predictive risk insight needed to anticipate upcoming problems.
This patchwork of inconsistent reports and disconnected data points obscures rather than illuminates the decision-making process. This represents a strategic crisis that prevents growth, optimization and efficiency.
Bbeyond individual projects
Historically, construction has operated within a closed, project-by-project mindset. Each workplace operates as its own fiefdom, with unique teams, profit and loss (P&L) statements, and progress reporting methods. An unfortunate side effect is that this creates fragmented data environments, making it nearly impossible to identify organizational trends or replicate success across projects.
The industry necessarily begins to change. Forward-thinking companies now use standardized technology and data to optimize performance at the project level, and going forward, the real opportunity lies in scaling these insights across entire portfolios. Scale is not a limitation for technology. In fact, its superiority over manual human-driven processes becomes more apparent when dealing with large and complex portfolios.
As one executive at a large construction company recently told us, “It’s great to see technology starting to drive efficiencies on some projects, but to extract the full value from our technology investments, our ultimate goal must be enterprise-wide change.”
It is essential to recognize that data standardization is not just a means of ticking a box or reporting better, but is crucial to driving transformation at both the portfolio and enterprise levels. Here are some reasons why:
It gives executives visibility into the health of their portfolio: When reporting is done differently for each project, the reports are inevitably prone to bias, either presenting an overly optimistic view that masks risks or a pessimistic one that exaggerates problems. Additionally, each report has a different structure, timing, and level of accuracy, creating a fragmented picture of progress that makes it difficult to compare apples-to-apples. Standardization allows executives to compare the risk levels of different projects and prioritize resources accordingly. Plus, instead of discovering problems after they’ve escalated, executives can finally identify early warning signs and intervene when solutions are still simple and low-cost.
It reveals inefficiencies throughout the organization: Standardizing data collection and reporting at the portfolio level allows executives to ask (and answer) strategic questions such as: “Are we consistently underperforming on MEP approaches?” or “Do we have specific trades that underperform on various projects?” Once you measure these inefficiencies, you can improve them, marking the beginning of true organizational transformation.
It enables cross-project learning at scale: Just as data standardization allows you to isolate and address inefficiencies, it can also help you scale best practices, turning isolated project experiences into organizational knowledge. Organizations can harness the power of incremental gains here, with small efficiency gains on each project translating into big leaps forward over time. However, it is important to note that this compounding effect is only possible when data is collected consistently, performance metrics are standardized, statistics are shared and implemented throughout the organization, and benchmarks are established and updated regularly.
How organizations are making the change
Shifting from project-centric thinking to portfolio and organization requires more than new technology. It requires a cultural change – backed by rigorous processes – on the part of the construction companies. Here’s how some forward-thinking companies are putting it into practice.
Implementation of unified data standards: Construction companies establish enterprise-wide data collection standards. Each project captures the same metrics in the same format at the same intervals.
Invest in executive visibility: Portfolio dashboards that provide standardized views of all active projects are becoming essential for senior management. These improve project-level management by providing the organizational context necessary for strategic decision-making.
Creation of learning systems between projects: The most advanced organizations are establishing collaborative planning groups and processes that ensure that insights from one project quickly inform others. Instead of imposing rigid standardization, it is about creating a systematic transfer of knowledge.
Measure what matters at scale: Rather than getting lost in project-specific details, these organizations focus on a core set of performance indicators that can be measured and compared consistently across the portfolio: production rate, area utilization, critical path health, and quality metrics.
The shift from looking at individual projects to a portfolio-wide mindset requires new tools, updated processes and fresh thinking. Executives intuitively understand the need for a direct, objective, data-driven approach to portfolio control, even if that solution was beyond their reach due to technology limitations. Now, change is possible. The challenge is dealing with the temporary discomfort that comes with change. However, once engaged, executives will find themselves operating the way they always imagined.
Organizations that recognize this and act on it will outpace competitors still stuck in a vicious cycle of inefficiency.
Amir Berman is Vice President of Industry Transformation at Buildots
