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Business Intelligence for Construction Firms: An Introduction


Posted on October 10th, 2017

heavy equipment on construction site.

Construction Growth in 2017

The Market Research Hub (or MRH) released their latest figures for the worldwide growth of the construction industry. According to that source, "The pace of expansion in the global construction industry steadied in 2016, standing at 2.4%, but there will be an improvement in the next five years, with growth averaging 2.8%." This means that worldwide more projects are being undertaken year over year with steady growth, and in the next five years that growth is only going to increase. This means more work in more places for at least the next five years.

MRH goes on to clarify that "In real value terms... global construction output reached US$8.8 trillion in 2016 up from US$7.9 trillion in 2012 and will stand at US$10.1 trillion in 2021. The value of construction activity in the emerging world surpassed that of advanced economies in 2014, and this difference will continue to widen. In 2012, emerging markets accounted for 46.7% of global output a share that will rise to 52.8% by 2021." Breaking those numbers down a bit shows us that worldwide the construction industry will grow from $8.8 to $10.1 trillion dollars within the space of five years, proving that more projects in more places means more money circulating around. A little over half of that value will be in the emerging world, i.e. not Europe, America, or other "advanced economies."

So what?

Basically all of these numbers and facts point to one thing- the construction industry is healthy, alive, and growing the world over. So why, then, does it seem like many firms, especially those in the United States, are still experiencing so much trouble? Take, for example, the worker shortage. Daniel Gross of Slate reports that "All over the United States, in Colorado, in Nebraska, and elsewhere, construction companies have been complaining that they can’t find enough labor to do their job. The National Association of Home Builders reports that 77 percent of builders are facing a shortage of framing crews while 61 percent are grappling with a shortage of drywall installation workers and 45 percent report a shortage of weatherization workers." He sums up that, since the bust of 2008, "As the U.S. housing and construction recovery has chugged on, it has become more difficult to hire construction workers."

The result is that even though worldwide construction is experiencing steady, healthy growth the West is still experiencing some pains from the past that are leaving many construction firms floundering. A lack of workers, a lack of acceptable offers, and undercutting from rival firms all leave construction firms feeling that there is something big out there happening but they are not taking part in it. Money is essentially being left on the table.

What is Business Intelligence?

So how does the average construction firm take part in this 2.8% year-over-year growth that the global construction market is experiencing? The resounding advice from experts the world over says the same thing: invest in business intelligence.

What is business intelligence? Gartner writes that "Business intelligence (BI) is an umbrella term that includes the applications, infrastructure and tools, and best practices that enable access to and analysis of information to improve and optimize decisions and performance." We find this definition just specific enough to be interesting and just vague enough to be frustrating. What are the best business intelligence applications out there? What is a business intelligence infrastructure? What's the difference between an application and a tool?

Business intelligence can be confusing waters to wade into, but the good news is that you are not alone. Our friends at Gartner write "BI and analytics have grown to become the fourth-largest application software segment as end users continue to prioritize BI and information-centric projects and spending to improve decision making and analysis... As more and more information is generated, business models need reinvention, and it's increasingly clear that mastering analytics on big data will be a key driver for the next economic cycle." Gartner goes on to report that the market for business intelligence software programs is growing (though not quite as large as construction, obviously) from $13.8 billion in 2013 $17.1 in 2017.

All that growth means that more and more companies of all different kinds are investing in software that takes the data their business is generating and analyzes it for insight into how to run the business better- that is the heart of essentially any business intelligence tool. Sure some of them present the information in different ways, some of them give users the options to run their own specialized kinds of reports, but in the end all business intelligence runs the same way: gather the data that a business generates, analyze it, then present those findings in a way that makes the actionable insight readily apparent.

The growth of tools in that area should be proof enough: BI is an investment that more and more companies are making. And they are experiencing fantastic returns. Lach James reports on findings from Nucleus Research that "organizations that invest in analytics solutions, such as Business Intelligence (BI) software, are experiencing average returns of $13.01 for every dollar spent." An independent McKinsey study also showed that "companies labeled 'Big Data leaders' are five percent more productive and six percent more profitable than their competitors"

How can Construction Firms do it?

But such lofty returns don't come automatically or immediately. The Harvard Business Review writes "There is a lot of hype and buzz around business intelligence. Companies are investing millions of dollars in business intelligence technology. However, unless this is accompanied by the simultaneous creation of a strong foundation for taking intelligent business actions, they are unlikely to reap a good return on that investment." The authors are essentially dashing a lot of hopes out there: it's never as simple as downloading a piece of software that will immediately make your business more efficient. Any software promising to do that is lying to you.

They are lying to you because every industry is unique and every business within that industry faces its own challenges. To state that there is one software solution that can do all things for all business is beyond ridiculous. And even if there were such a software out there, the cost would be prohibitive.

We aren't saying that BI tools aren't worth the time and investment- they absolutely are. Independent research has shown that. We are saying to be careful of the pie-in-the-sky promises of ROI with just a simple download of a BI or data analysis tool. You need to be careful because the construction industry, even with all of the growth it is experiencing, is its own animal that needs to be treated as such.

No, we are going to take the Harvard Business Review at its word and create a strong foundation for taking intelligent business actions tailored for the construction industry. That is what we are going to be talking about for the next few weeks- we are going to present a comprehensive course in BI for Construction Firms, outlining the tools, applications, infrastructure and best practices that will let your firm, no matter how big or small it is, to earn a piece of that $10.1 trillion market.

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