Blockchain technology has proven itself to be a transformative business force. It enables businesses to accurately record and store just about any kind of transaction data from the supply chain, and it has already made its mark on various industries, from shipping and transit to agriculture to pharmaceuticals. Most construction firms have approached this new disruptive technology cautiously, but blockchain could definitely help fulfill some of the industry’s needs.
Blockchain “A Natural Fit” for Construction
As ever, the main challenges to successfully implementing the technology are around adoption and understanding. Construction is more steeped in technology than it’s given credit for. However, this industry has historically been resistant to making significant changes to processes that seem to work just fine. A recent Harvard Business Review article acknowledged this hang-up while noting blockchain is a natural fit for construction, particularly when it comes to augmenting or enhancing tried-and-true project management methods.
Projects are well-structured and contract-based. Objectives are clear—be on time, on spec, and avoid rework.
Classic project management techniques still work, but projects can benefit from a more decentralized and agile approach, where transparency is high and parties can be compensated for outcomes as well as for work performed,” Sweetbridge CEO Scott Nelson told HBR.
Automating the contract process, along with the accompanying cumbersome paperwork, is one of the main use cases for the technology right now. Even across large scale projects with multiple subcontractors, blockchain allows tracking every deliverable on an objective distributed ledger. Thus, everything remains transparent and companies have the data needed to identify the most reliable subs.
Blockchain is also used for smart contracts. They identify the firm or party responsible for any given project task, enabling automatically triggered payments based on agreed-upon project milestones. Those milestones must be proven complete against the ledger before payment is released, ensuring no work gets done without payment while no payments are made for incomplete work.
Getting Your Company On Board
A common problem with new technologies like blockchain is people’s judgment getting clouded by FOMO. “Competitor X has implemented a blockchain solution, so we better do the same” is not a compelling business reason to push ahead. In order to start the conversation about blockchain at your business, you need to become well-versed in exactly what problems you’re facing that blockchain could solve. By identifying and understanding the immediate solutions as well as the long-term value creation possibilities, you will be better positioned to make a learned decision.
Without extensive knowledge of the technology, selling the leadership on the technology will be much harder.
Another key step, closely tied in with the understanding piece, is to get company leadership on board. This will require detailed explanations of the specific blockchain applications that would be the best fit for the company and assure them of its value. Without extensive knowledge of the technology, selling the leadership on the technology will be much harder. Prepare examples of how your company has a specific need for the blockchain technology and how it can help ensure project success, improve processes and reduce risk.
To attain hard numbers and potentially secure early buy-in, you can set up pilot projects or prototypes to test the technology. This also allows you to gauge the sentiment of users who would be most directly affected by the changes. Identify their needs and pain points, or even enlist them in the pilot design and testing phase. If the pilots perform as expected, you’ll have broadened support for the initiative within the company.
Less Time Doing Paperwork = More Time Making Money
Blockchain technology has the ability to improve many daily processes for construction firms, many of which have a direct impact on productivity and profitability. If onerous processes like contracts and payments can be automated, the company has more bandwidth to focus on things that generate revenue. Enhanced transparency keeps everyone honest and helps establish trust.
“Collectively, we are all better off if we encourage data collaboration and use blockchain and machine learning to help us establish longer-term industry road maps for investments, and technologies that can boost productivity and efficiency and lessen risk,” construction industry global risk advisor Aon’s Global Director of Growth, Innovation, and Insight David Bowcott told HBR.