The potential of Process Digitalization in the construction and real estate industry

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Compared to other industries such as banking or insurance, construction and real estate has always been low in digitalization. Both, construction and real estate managers have various explanations for this fact. For one thing digitalization generates biggest potentials when it comes to repetitive processes and building construction typically produces prototypes. For the other one, cases by case decisions, which shall not be taken by a system, dominate the construction and real estate business. I remember a joke made by a top executive of a construction firm, when he asked if we haven’t forgotten to close a D&O Insurance for a system.

I am absolutely sure that digitalization is possible in construction and real estate. I am even convinced that some time in the future an innovative construction company will change the game at least in a regional market (it is still a people business after all).

Beginnen wir mit den Zielen der Digitalisierung. Im Wesentlichen können folgende Ziele / Arten von Optimierungen unterschieden werden.

  • Efficiency gains based on facilitating the user

Frequently managers spend a lot of time approving orders, invoices, holiday requests and similar documents. And most likely the job is done in the office having all the papers around them. If this work can be done on their mobile device while waiting for their flight or being stuck in a traffic jam they experience massive efficiency gains.

  • Efficiency gains based on eliminating process steps

Probably the best example of this category is the automized booking of invoices where a 3-way-match of order, delivery note and invoice is given and order and delivery note are signed. Obviously it does not make sense to approve the same thing twice. Strangely enough this is often done in daily business.

  • Automation of manual processes

Even in 2020 a lot of repetitive tasks are handled manually although they might be automized from a technical point of view. One typical example is to send information to a defined address list (reporting, system messages, authority communication).

What should companies do to address the topic of digitalization?

First of all, it is important to note that all efficiency gains result from optimized processes.

Thus the following steps shall be carried out.

  • Make a list of time intensives processes

This step makes clear where the potential lies.

  • Check for process weaknesses

Frequently processes are outdated and bear restructuring potential even without optimization. Processes shall be generally streamlined despite the opportunity of application support.

  • Check if certain steps need to be done manually

This topic requires a critical analysis. A lot of executives do not trust IT-systems. Obviously, it is important to deal with their concerns. However, it is also important to make sure that general habits do not hinder progress and condone inefficient manual processes. It really does not make sense to recalculate the results derived from a well-tested IT-application (like excel) using a calculator.

  • Check for automation potential

This step might cause difficulties if you don’t know about the IT-system. Generally speaking it is safe to say that everything can be done automatically as long as it can be described in logic rules. Hence, the following checks shall be made:

    • Can it be formulated as a repeat function?
    • Can the rule be derived logically?
    • Is there a clear trigger for this event?

Speaking about prioritizing the following steps are recommended:

  • Calculate the potential
  • Talk to your implementation partner how much it takes to automate these processes
  • Draw up a priority list based on calculated ROI and start with a process of low complexity This is important to challenge the promises of your implementation partner.

The following processes typically bear a lot of potential for digitalization (one way or another):

  • Approving orders and invoices (please note: many executives think that aproving with a signature produces better results than just by pressing a button. Many applications offer the function that the signature ist signed once and then displayed every time the manager approves an invoice. Obviously, the effect is only psychological as the program does not read the signature. But hey, just don’t tell…)
  • Holiday requests (whole process: request – approval – outlook calender – absence note)
  • Repetitive bookings (rent contracts, leasing contracts, etc.)
  • Automated booking
  • Authority communication (e.g. handing in income statements, booking notes, etc.)
  • System messages (“application will close in 30 minutes”)
  • Internal distribution of reporting

It goes without saying that the whole field of application is much broader. However, the list above might serve to generate ideas. The potential is huge, especially in the areas of bookkeeping/tax, IT infrastructure and managers who have to approve a lot of documents. The barriers are mostly in our heads.