August 6, 2022

Implications of Moore’s law on Construction industry

What are the implications of Moore’s law and faster, cheaper computing on a firm’s ability to create a sustainable competitive advantage? What are the implications of Moore’s law on the construction industry?

It is obvious that the construction industry is rapidly changing. The digital transformation of the construction industry is fast. A few years ago, construction projects were mainly based on printed documents and manual measurements. But we can see a lot of digitalized tools improve the productivity of the construction sector and it is everywhere. The digital transformation in the construction industry is not limited to BIM, planning software or even takeoff software. AR, VR, AI and even IoT have changed the way of construction project management from inception to completion. Beyond that, it is the operation and maintenance phase where digitalization has affected rapidly. All these digital transformations are possible due to the available cheap and fast computing. As Gordon E. Moore’s observation in 1965, we are experiencing cheap and fast computing and its effects in every industry including the construction sector.

The co-founder of Intel, Gordon E. Moore’s observation in 1965 on faster and cheaper computing was later identified as Moore’s Law (Tardi, 2021). Although Moore didn’t name his observation as Moore’s law, the observation on faster and cheaper computing has become a reality throughout the years. Today every industry is impacted by computer technology including mobile phones. The cost is inexpensive. Therefore, the majority of people experience the benefits of powerful yet less expensive computing (Gallaugher, 2015). In this discussion post, I will share the implications of Moore’s law and faster, cheaper computing on a firm’s ability to create a sustainable competitive advantage.

Moore’s Law

As mentioned above, in 1965, Gordon E. Moore shared his observation on powerful chips on a four-page paper he wrote for Electronics Magazine. In his paper, he described how powerful chips to be manufactured less expensively (Gallaugher, 2015). Later, his friend Carver Mead coined this as Moore’s Law. According to Moore’s Law, the number of transistors on a circuit will double every two years (Caltech,2018).

Implications on a firm’s ability to create a sustainable competitive advantage

Although it is nearly 60 years, the impact of Moore’s Law is still strong. Numerous benefits of this law were a driving force for economic growth through technological and social change improving productivity (Tardi, 2021). When a company can sustain profits over the industry average, then the company is having a competitive advantage over the competitors. However, the company needs to have both cost advantage and differentiation advantage to obtain a competitive advantage (Bourgeois,2014). According to Porter’s value chain that consists of two main activities that are primary activities and support activities, a company can use information technology to create value by utilizing cost advantage or differentiation advantage, or both (Bourgeois,2014). Below is a brief description of how a company can create value using Porter’s value chain and how IT can be used to create a competitive advantage.

Primary activities

The functions that affect directly product or service creation are called primary activities. These activities include Inbound logistics, Operations, Outbound logistics, Sales/Marketing, and Service. A company can use IT for each of these steps to improve its productivity and to gain a competitive advantage. For example, in operation, IT can be used to improve efficiency and innovation of the production line. In outbound logistic activities, IT will enhance the process through real-time inventory checks and even in the delivery mechanism.

From innovative product designs to create a sales channel through the company website including online advertising, there are numerous ways that a company can use IT to enhance its sales and marketing activities (Bourgeois, 2014). All these are possible nowadays as there are different ways available to utilize information technology from a simple customized app to a software program. Faster and cheap computing is possible as Moore predicted nearly 60 years ago that adds benefits to any business. Considering the implications of Moore’s law on construction industry, measuring software, digitalization in surveying equipment, use of BIM and other technological tools are some of the examples.

Support activities

Activities or functions that support the primary activities of an organization are called support activities. These include firm infrastructure that includes functions such as finance, accounting, and quality control, Human resource management, Technology Development, and Procurement (Bourgeois, 2014). All these support activities can be enhanced by utilizing information technology to create a competitive advantage.

By utilizing ERP systems to enhance the firm infrastructure, a company can create an advantage over its competitors’ thanks to advance technology and fast and cheap computing. There are many ways to improve human resource management including online leave applications, approval, and even employee surveys. Procurement is an important activity for any organization to source materials (Bourgeois, 2014). IT can bring benefits when integrated with procurement activities including bidding, sourcing suppliers, and approval processes.

New computer models are faster, smaller, lighter yet powerful compared to earlier models that were available for the same price. Therefore the cheap and fast computing helps every type of businesses to create a competitive advantage (Thompson, n.d.). On the other way, companies that engage in the production of computer devices align their business plans based on Moore’s law that helps in advancement in information technology. New models that are lighter and smaller with more storage capacity allow users to run the latest software inexpensively (Thompson, n.d.). This advancement in IT allows businesses including SMEs to utilize the benefits of IT for their business process to create a competitive advantage.

Conclusion

The implications of Moore’s law on construction industry is significant. A business can obtain numerous benefits by integrating IT solutions for its business process.IT can enhance supply chains, database management, customer relationships, and many other aspects of a business organization including human resource management. As Moore predicted nearly 60 years ago, businesses nowadays experience cheap and fast computing thanks to the advancement in the computer industry. A business needs to utilize this faster and cheaper computing for creating a sustainable competitive advantage for their business.

References

Bourgeois, D. T. (2014). Information systems for business and beyond. Saylor.org. Licensed under Creative Commons Attribution (CC BY) License. Retrieved from https://resources.saylor.org/wwwresources/archived/site/textbooks/Information%20Systems%20for%20Business%20and%20Beyond.pdf

Caltech. (2018). Looking Back on the Birth of the Information Age. https://www.caltech.edu/about/news/looking-back-birth-information-age-82392

Gallaugher, J. (2015).Moore’s Law: Fast, Cheap Computing and What It Means for the Manager. Licensed under CC-BY-NC-SA 3.0.Retrieved from https://2012books.lardbucket.org/books/getting-the-most-out-of-information-systems-v1.3/s09-moore-s-law-fast-cheap-computi.html

Tardi, C. (2021). Moore’s Law. Investopedia. https://www.investopedia.com/terms/m/mooreslaw.asp

Thompson, S. (n.d.). Moore’s Law and How It Pertains to Business. Chron. https://smallbusiness.chron.com/moores-law-pertains-business-75824.html

Disclaimer: This article was created using a paper written as part of the MBA program.

Also read: Skills today’s managers need in the knowledge economy

Amila Gamage

Amila Gamage is the founder of Sihela Consultants and Builtlogy digital magazine. Her experience in the construction industry is over 17 years specializing in contract management. She is also an ACLP certified trainer in Singapore and conducts workshops and training sessions on related topics.

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