How do you describe digital transformation?
Josefien (Neanex): To begin, I think digital transformation is a challenge. working with several companies, we always start by asking our customers whether they want to digitize or digitalize. While the digitization move is more about becoming a paperless industry, digitalization is embedding data-drivenness into a firm’s strategy and the core business. In addition to that, digital transformation is a strategic mind shift towards qualitative data, to extract information, and develop an efficient decision-making process based on a lot of technologies.
So, as individuals, we can use our experience, talents, skills, and experience to make the right ones because digital transformation is really a human thing. It involves thinking in a different way in order to make decisions in a different way.
Thomas (FacOrg): There are several dimensions to digital transformation that companies want to implement. First, through automating processes, firms want to be more efficient. Second, companies want to reduce risks. For instance, they want to know who has signed a document, who has approved it, and when was it approved. They also want to make sure that some fields are automatically filled in to decrease unwanted errors. Third, firms are looking for better decision-making tools that are only achievable with proper insights and more data information. So, firms need dashboards in order to know, organize and manage the workload of the team. Fourth, companies want to be more client-oriented. In fact, today more than ever, companies are trying to be more efficient, have less risk, make better decisions, and offer new services to their customers. If they want to do it without digitalization, it’s nearly impossible.
Digitalization gives firms an opportunity to gather information from every source possible. Digitalization should not happen because an individual or a company likes to work on tablets, computers, or screens, but rather they want automated processes, reduced risks, efficient decision making, and better customer insights. I think these are the four driving forces for digital transformation right now.
Looking to the future, what do you think will be the driving forces to digital transformation?
To go further, Thomas think the fifth dimension is changing a firm’s own business model. Although the above four dimensions are quite intense and challenging, yet the biggest challenge will require firms to re-design their business models and change their mindset towards digital transformation. At the moment, we can witness many companies evolving in a certain direction. For instance, companies that used to invest in co-working technologies have begun implementing these innovations into their facilities. Notwithstanding the fact that many of the established firms are still investing in digital transformation innovations, they are also carrying out these technologies into their own systems. Thomas reasons that firms can switch completely to a good decision-making process based on an evolved business model and qualitative data, that is efficient and less risk-taking.
Josefien (Neanex): It’s really recognizable. The first four dimensions Thomas is referring to represent the three pillars of sustainability. First, The economical sustainability. ew business models, fit into that economical sustainability. It is how can established firms make sure that their business grows proactively throughout the complete lifecycle of an asset. A good example is developers that were purely developers at first and are now moving more into the operations. They tend to keep the assets in their portfolio. For instance, we see some companies are putting out a new brand of affordable housing while keeping the assets inside their portfolio. More so, economical sustainability is also about building partnerships and ecosystems, not only the digital ones from the project side but also the partnerships of the client-supplier relationship is changing completely. It’s about adding value together. There is a big mind-shift going on. However, the larger the corporation, the more they ares strugglingto organize the innovation.
Additionally, the second pillar of sustainability, which is evolves around our ecological goal, is enabled by digital transformation. That is lowering CO2 emissions and reduce waste . For construction and real estate, data provided through material passports or building passports supportbetter decision making and the move towards a circular economy with less impact on the environment in general as construction is responsible for 40% of the waste and 25% of the co2 emission, so we can have a large impact.
More so, the third pillar of sustainability that is driven by digital is social sustainability. This dimension is linked to customers and customer-centricity.
In the built environment we see that public asset owners need to focus onmaking critical assets available and safe. To add to that, established organizations are crossing borders between live, work, and play. We see it has a large social impact on a community because everybody gets in touch with the built environment. Sustainability is a topic that organizations in the real estate and construction industry are really looking into besides of efficiency, risk avoidance, better decision making and changing business models.
Does digitization have an impact on employees and their competencies? Do they have to evolve?
Thomas (FacOrg): Yes, of course. That is something that has to be managed! While the transformation process can be easy for some companies, it can also be difficult for others. Nevertheless, with regards to the four dimensions mentioned earlier, it depends a lot on the management.
There are two ways companies begin their digital transformation journey. The first approach is to start by changing their internal operations (efficiency). Then they introduce the new technology to their employees in order to start to further optimize and run processes. Further down the line, companies will tackle down risks and become more client-oriented. However, this might not be the best approach.
Accordingly, becoming more customer-centric, as a first step, could be a better decision. Whilst this is more intimidating, firms can gain a large advantage to start with understanding their customers in a better way and “will have a story” to target. Once the incumbent is more client-oriented, they can offer more tailored services, with potentially high demand, and explore a new market. Only then, firms should focus on decisions metrics based on their newly gained customer data, focus on riskreduction, and finally try to be more efficient in their internal processes.
Senior management should make very clear decisions as to why they are choosing to digitalize their processes and what they are looking for in the transformation. In order to reduce friction between the management and the employees, established firms should clearly state their vision and priorities towards the future. This requires a clear and transparent communication between the employees, the firm, and all the stakeholders.
Josefien (Neanex): The change of digitalization of course has an impact on needed skills but can be in first hand solving human friction that relieves frustrations of people on a daily basis. The use cases that are solved by digital tools a lot of times focus on end users in need of automation, efficiency or tooling to take away core issues. So starting a digital transformation case we always need to have clear views on “What are you trying to solve? And why are we trying to solve it?”
What are the long-term consequences if they ignore digital transformation?
For instance, if you compare the Belgian banking sector with the real estate and construction sector, there are four big banks in banks who some of which have a market share of around 20%. In contrast to the Real estate and construction industry, the biggest investor in the market has less than 1% of the market. Therefore, the market is super dynamic and the margins have always been very tough, especially in construction. We now understand that in such competitive industries, companies cannot afford to be a little late on their digitization, efficiency, or customer-orientation journey.
Again, if you compare our industry with the banking sectors, banks have taken a lot of time to go into the world of digitization, but they could do that. In real estate, organizations do not have that liberty. In a competitive market, you have to be efficient, you have to stay up to date, and frankly, you don’t have the choice. Unfortunately, it is very easy to lose the market position as a long-term consequence. But then if we talk about margins, we should recognize the complexiness of the market. For instance, if we compare the real estate and construction industries, you see that construction companies have really low margins like 2 to 3% of the market. Therefore, we see a complete risk avoidant in that area, because if one small risk turns bad, the margin is completely sunken.
On the other hand, the real estate developers have their margins much larger than the construction companies, because their risk is calculated into the contractor’s risk. Therefore, if we, look at the construction firms and compare them to the real estate companies, the asset owners, or the investors, the latter looks at digitalization on the customer-centric side because they have been focusing on the users of their buildings, while the construction companies also have low margins and it’s still a battle.
Nevertheless, while some front runners have begun picking up on the trends, they are neither investing a lot nor are they going into that digital transformation. One of the reasons that we see this, contractors versus the real estate companies, is because of the efficiency and productivity. But if the firm has low margins they have to play on efficiencies.
What is the culture needed for digital transformation?
This is a typical exercise each startup, corporate or individual has to do. For instance, startups need to ask themselves who is the ideal customer. While the corporate should be willing to look at the firm’s DNA and ask themselves what DNA does our company has to have to make that digital transition.
Fundamentally, a company’s culture should focus on the pillars that have been discussed above. It’s about automating processes, risk reduction, customer-centric, and adapting the business model to allow for digital improvements. It also involves the will to do something extraordinary, or out of the usual. This explains why the food & beverage, manufacturing, and automotive industries have been much quicker in their digital transformation. However, in the construction and real estate industry, players in the market have been successful in doing the same practices for so long, they do not see the need to change.
To counter these situations, we need people ambassadors who want to be able to step out and say they want to try novel ideas, they want to change, and they believe in digital transformation. That is what activating a new mindset really means!
Changing mindsets actually works in an ecosystem! Hence, companies should not be worried about investing time and resources into startups.
Finally, Thomas, what advice do you have for those who want to begin the digital transformation? And how can you get the entire company on board?
First, it is crucial to be aware of the market and create a vision that is aligned with all the potential trends. Firms also need to consider developing an enterprise map that lists all the software they are utilizing, as well as all the alternative software in the market. Also, the enterprise map is key for firms to be able to ask what do they really want to do with digitization and how can they optimize all their operation in different software. A single map for the whole enterprise, can delegate the team about the vision of the company, provide an understanding to what is digitalization and help them begin to prioritize what to tackle first. Established firms need to be sure that everybody is on track and appreciates the logic behind the new implementations, the reasons behind these changes, as well as, what to expect in the future.
The main benefit that FacOrg brings to a company is allowing them to control the journey and the destination when they decide to apply a new software. We coordinate the different actors that will help to build the new vision and give the actors a plan to align different tactics and make the whole process smooth.
Josefien, what advice do you have for those who want to begin the digital transformation journey? And how can you get the whole company on board with what?
I completely agree with Thomas. The advice we have if a firm wants to start their digital transformation is to ask themselves the why question: Why do we want to do something? usually it is not about digitalization, it’s about the process. So, look at your process. Where do you have the hurdles? Where do you have difficulties, where do you need to put a lot of effort in and you’re not sure about the quality and about control?
We want to make sure that if you want to reach (smart) decision-making, on a strategic level, and on a project level, your senior management needs to be aware and in control of the quality of their processes, their information, their data, or even the way they approach the different projects. Therefore, I advise companies to start with the basic questions: why do we want to do something? What resources do we already have? And how can we start collecting data and information and making the process easier, approachable, and reusable? Also, it doesn’t really have to be fancy to increase a lot of optimizations in a company’s process or the daily work of people. We talk about AI, blockchain, machine learning and digital twins. Sounds really fancy, but digitalisation starts with standardization on process and data level. Not that sexy for a lot of people, but the game changer for enabling all of the dimensions we talked about in this article.