Boosting Productivity in Construction: Innovative Approaches & Future Trends
The construction industry plays a significant role in the global economy, employing about 7% of the world’s working-age population and contributing over $10 trillion spent on construction-related goods and services every year. Despite its economic importance, the industry faces a critical challenge - productivity growth.
Over the past two decades, the construction industry's productivity growth has averaged a mere 1% yearly. This might seem like progress, but we see a different picture when we compare it to the entire world's industries. On average, industries globally have been able to increase the amount of work they can do with the same resources by 2.8% each year. So, compared to most other industries around the world, the construction industry needs to catch up in improving efficiency and output. This discrepancy points to an opportunity for improvement and innovation that can transform the construction industry’s future.
The State of Productivity in Construction
Productivity growth in construction has been at a glacial pace for a number of reasons. Among these is that the construction industry is one of the least digitized sectors in the world, and in places like the United States and Europe, it ranks at the bottom of the digitization index.
The industry is also beset with challenges like extensive regulation, public-sector dependency, and market distortions due to informality and corruption. Furthermore, it needs to be more cohesive, with contracts often showing mismatches in risk allocations and rewards. This fragmentation, combined with underinvestment in skills development, R&D, and innovation, contributes to poor project management and execution and, ultimately, poor productivity.
A closer look at the sector reveals disparities even within the industry. Large-scale players engaged in heavy construction and large-scale housing have 20-40% higher productivity than smaller specialized trades that act as subcontractors or work on smaller projects.
Innovating for a Productive Future
Despite these challenges, the potential for change and growth is immense. By acting simultaneously in seven key areas, it's estimated that productivity could see a boost of 50 to 60%. These areas include reshaping regulation, rewiring the contractual framework to reshape industry dynamics, rethinking design, and engineering processes, improving procurement and supply-chain management, improving onsite execution, infusing digital technology, and reskilling the workforce.
In addition, the construction industry could borrow a leaf from the manufacturing industry's book. A manufacturing-inspired mass-production system, where the bulk of a construction project is built from prefabricated standardized components off-site, could revolutionize productivity in the sector. Although currently limited in its adoption, this approach has the potential to boost productivity by up to ten times.
Looking Ahead: Trends and Implications
The future of construction productivity looks promising. Increasing demand, the rise in the scale of players and projects, and the falling prices of productivity-enhancing technology and digital tools are bringing down barriers to change. As labor costs rise, the case for these productivity-enhancing technologies becomes even more compelling.
Moreover, governments are recognizing the need for change and are taking action. They're introducing new policies and investments to encourage more efficient practices and innovative technologies in the construction sector. This could lead to a boost in productivity in the industry.
Conclusion
In conclusion, the construction industry has a vast untapped potential for productivity improvement. By embracing digital technology, innovation, and systemic changes, the sector could add an estimated $1.6 trillion to its value, contributing an additional 2% to the global economy. This not only represents a significant economic opportunity but also promises to shape the buildings and cities of our future.
While the road to enhanced productivity has its challenges, the construction industry has the tools and the capability to overcome them. It's up to us as industry players, regulators, and innovators to seize this opportunity and drive the future of construction toward greater productivity and efficiency.
References
McKinsey Global Institute. (2017). "Reinventing construction through a productivity revolution.” McKinsey & Company 1.
Building Design + Construction. (2019). "The top 8 construction trends to watch out for in 2020”.
Statista. (2023). "Value of the global construction industry.”
Statista. (2023). "The impact of digital technology on the construction industry.”
World Economic Forum. (2016). "Shaping the Future of Construction: A Breakthrough in Mindset and Technology.”
Deloitte. (2020). "Engineering and construction industry trends.”
The Balance SMB. (2022). "The Future of Construction Industry Technology.”
