Business and management experts Don Tapscott and Ricardo Viana Vargas foresee that blockchain construction use cases could deliver significant value to the construction industry. They have recently commented on the importance of blockchain in this industry in a Harvard Business Review (HBR) article.
Their opinion assumes importance in view of the significance of the construction industry in any economy, moreover, this once again highlights that blockchain is much more than Bitcoin. Tapscott and Vargas are particularly bullish about the potential of blockchain to improve efficiency in the construction industry.
The construction industry is large, and market-watchers estimate that it made up 14.7% of the global GDP in 2017, up from 12.4% in 2014. This industry was valued at $1.23 trillion in the US in 2017, and New York City alone will likely see $70 billion spent on construction in 2019!
There are several challenges plaguing the construction industry though, e.g., labor shortage is a key challenge in this industry. Industry observers also cite stagnant productivity and the lack of safety as the other challenges, moreover, they state that the lack of technology adoption slows down the resolution of the other challenges.
Construction being complex industry, there are far too many stakeholders involved here. Optimal flow of information among these stakeholders is crucial for the success of large construction projects, however, too many manual processes involving large paperwork hinder this.
Blockchain, with its distributed ledger, the immutability of records, and smart contracts can bring the much-needed efficiency in the construction industry. That’s also the essence of what Tapscott and Vargas state in their HBR article.
Why do the blockchain construction use cases matter?
Large construction projects generate a humongous amount of data, e.g., design specifics, construction-related information, maintenance-related data, etc. Much of this data is handled in silos though, therefore, it doesn’t reach the relevant stakeholders after the completion of the project. The distributed ledger of blockchain with its immutable records can streamline this.
Project management is crucial to the success of large construction projects, however, manual processes and too much paperwork pose significant challenges to construction project management. With blockchain, every stakeholder can view key information immediately on the distributed ledger, which helps the construction project managers.
Contract administration is another area where blockchain can help significantly with its smart contracts. Smart contracts are tamper-proof pieces of code that are transparent, moreover, they execute autonomously. They can simplify the supply chain and payment processes in the construction industry significantly, as experts state.
When you think about what Tapscott and Vargas state in their HBR article, what strikes you is that other industries are already using blockchain for improving efficiency. Take the examples of Walmart joining MediLedger, a blockchain project to combat counterfeit drugs or Visa designing a cross-border payment solution using blockchain, and you can see how the construction industry can also benefit from this technology.
A more efficient construction industry, thanks to blockchain?
Admittedly, some work is needed before realizing the potential of blockchain construction industry use cases, e.g., implementing enterprise blockchain isn’t easy, and smart contracts are hard to verify. However, significant work is in progress to address these, e.g., Salesforce, the cloud computing giant has unveiled a Blockchain-as-a-Service (BaaS) platform to make enterprise blockchain implementation easier. Moreover, Microsoft Azure BaaS has integrated VeriSol, a smart contract verification tool in its DevOps toolset. The day may not be far when the construction industry benefits from blockchain!