Blockchain, the technology that powers things like bitcoin, is set to revolutionize the way that construction companies, engineering firms, architects, and customers interact. Blockchain is defined as a growing list of records, or blocks, that are connected using cryptography. Each block contains a link to the previous block, a timestamp, and transaction data. It’s a little like communicating on the cloud, but with intense security, and on some serious steroids.
According to a recent article in the Harvard Business Review, the Danish construction firm HerenBouw, is applying the technology to large-scale development of Amsterdam’s harbor. The intent was to make a project management system that would make the building development life cycle more efficient. They focused on registering communication between contractors, sub-contractors, and others are certain legally-binding moments, where accuracy and an audit trail are essential.
“Blockchain provides a platform for clearly cascading work products down the chain and holding everyone accountable for completing key tasks,” said Marc Minnee, Propulsion Consulting’s founder. “Stakeholders have a clear and evenly distributed incentive to register these facts on-chain: Either you won’t get what you ordered or you won’t get paid. Stakeholders spend more time discussing creative design and building method options.”
Aon, the global risk advisor to the construction industry, reports that a staggering 95% of construction data is lost on transferring the property over to its first owner. Companies are looking at ways to develop blockchains that can secure the project’s information, create a sort of digital ledger, and hand it over to the owner as a deliverable.
“When a product or specification needs to be found in a building, there is finally a place to go to simply search for what is actually in that building,” said Briq CEO Bassem Hamdy. Briq is a California-based blockchain firm. “The blockchain-encoded specifications are granular: paint colors, ceiling fixtures, LED bulbs, door hardware — plus manuals, warranties, and service life in a countdown clock that building owners can monitor.” In addition, any future improvements or repairs to the project will be continued in that same blockchain, so that future owners will get a full copy of that information as well.
Some objections to blockchain adoption include the fact that construction is often reluctant to adopt new technologies. Also, the industry is heavily relationship-focused, with some companies doing business with the same family friends, trusted partners, or long-term contractors. This can be a liability when it comes to adopting new technologies that rely on other firms to adopt those same technologies.
Also, less than 1% of a project’s revenue is invested in updating new technologies (compared to 3.5-4% in the aerospace and automotive sectors).
But Scott Nelson, CEO of Sweetbridge, finds construction a natural for blockchain-based project management: “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.”
To read the Harvard Business Review’s article, click here.