The last time the world’s economy experienced a major disruption prior to COVID-19 was in 2008 during the international financial crisis.
Two global business consultancies believe that lessons learned then could provide inspiration for the construction industry today.
According to a report written by McKinsey & Company’s Engineering, Construction and Building Materials Practice, “Companies that came out ahead after the financial crisis of 2008 typically moved fast and hard on productivity (including cost reduction), rapidly reallocated resources, and made bold moves (including early divestitures and acquisitions in recovery) to prepare for the future. Leaders also invested heavily in digital technologies.”
The McKinsey authors point out the construction industry’s volatile nature and sensitivity to GDP growth, warning that, “a four-year slump, for example, could substantially reduce construction’s share of GDP above and beyond the initial contraction.”
Construction has been singled out in the past as an industry that has failed to adapt to technology as easily, readily or quickly as others. However, McKinsey believes this could change due to COVID-19’s impact on even the limited amount of onsite project work currently permitted.
“Organizations across the industry are shifting to remote ways of working. For instance, designers and engineers are relying even more heavily on digital collaboration tools such as Building Information Modeling (BIM). Leading engineers and contractors are using 4D and 5D simulation to replan projects and reoptimize schedules. Integrated digital-twin solutions are being developed to be used end to end, from project concept to commissioning. And contractors are looking to online channels for monitoring their employees’ well-being through apps, ordering construction materials, managing scarce resources more accurately, and maintaining cash flow.”
One of the other key developments identified by McKinsey as vital to construction’s future is the adoption of increased levels of off-site construction.
“Building in controlled environments makes even more sense in a world that requires close management of the movement and interaction of workforces,” the report states. “Such rationale further strengthens the case for off-site construction, beyond the existing quality and speed benefits.”
Increased adoption of technology is a sentiment shared by Arcadis NV, a global design and consultancy practice focused on infrastructure, buildings, processing and energy assets based in the Netherlands.
A recent Arcadis survey investigated how COVID-19 solutions are evolving among their major construction clientele. Its report describes how adopting innovation and new technologies in partnership with designers, suppliers and trades, plus the adoption of modular components, are becoming critical elements in a collaboration that will be required going forward.
“We are already seeing that collaboration makes a difference; benefits can be greater if everyone is onboard. The crisis caused by COVID-19 is showing us that things can be done differently,” the report notes.
However, feedback from their surveyed clients also indicates that progress will not necessarily come quickly.
“This collaborative spirit should be tempered with fair expectations,” Arcadis says, adding that, “old habits die hard.”
For example, the Arcadis report addresses the current level of modularization that is both possible and practical in construction today.
“Whilst contractor consensus is that although modular construction is one of the levers that can be pulled to support the productivity challenge, their view is that modular solutions are not yet ready to step in and save the day.”
The McKinsey report also draws attention to the importance for contractors to build supply chain resiliency.
Over the short term, they say, contractors will build inventory, secure critical materials and long-lead items and identify alternate suppliers, but over the longer term, McKinsey sees more vertical integration taking place.
“Industry players are already starting to vertically integrate to increase efficiency and as a route to standardization and control of design and execution,” they state.
Despite the challenges, Arcadis concludes that innovation and the increased adoption of technology remains construction’s best path forward.
“Digital technologies have been on the agenda for a while, but the current disruption is moving them to the top, with contractors and wider project teams seeing first-hand the benefits in efficiency, co-ordination, and their ability to work remotely.”
John Bleasby is a Coldwater, Ont. based freelance writer. Send comments and Inside Innovation column ideas to firstname.lastname@example.org.