The Long-Overdue Transformation of the Construction Industry

Geneva, Switzerland, 4 May 2016 – Thirty measures are presented in a new report by the World Economic Forum as part of a construction “industry transformation framework”.

The report, Shaping the Future of Construction: A Breakthrough in Mindset and Technology, describes and promotes the effort needed by all stakeholders for the industry to fully realize its potential for change.

The construction industry has been slower than most to adopt technological innovations, and wary of modernizing strategies and processes. In the US, labour productivity in construction has in fact fallen in the last 40 years.

This is particularly surprising considering the industry’s central role in everyone’s daily life and its powerful impact on other industries, the environment and the economy as a whole.

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The report, produced in collaboration with The Boston Consulting Group (BCG), features, among other things, the use of innovative technologies, enhancements in operations and processes, adjustments to business and HR strategies, industry cooperation and, crucially, optimization of public policy.

Citing numerous best practices and case studies, it is intended not only for construction companies but also design companies, suppliers of technology and building materials or equipment, and others along the value chain, as well as for the industry as a whole, and governments.

“For many in the industry, the approach described in the report is a new and possibly radical one, but it is the path to a more innovative, productive and socially responsible future,” said John M. Beck, Executive Chairman, Aecon.

Leading-edge technologies already affect all subsectors and stages of a building asset’s life cycle – from planning and design through to operations and maintenance.

But their adoption is still sparse and uneven. Only when the various advances have been adopted pervasively will the industry really be able to boast of a transformation – that is the clear message of the report.

Pedro Rodrigues de Almeida, Head of Basic Industries and member of the Executive Committee at the World Economic Forum, noted that “The report provides a preview of the upcoming changes in the industry, and a way of accelerating their realization. It offers a toolkit for success, and also serves as a necessary rallying call.”

Change is already under way, headed by the construction firms themselves with the support of innovative processes and products. Emerging digital technologies will boost productivity, enhance the quality of buildings and improve on-site safety and environmental compatibility: 3D models for guidance, robots for the dangerous work, and drones and embedded sensors to check on progress, for instance.

“Individual companies have serious transformative opportunities now, by exploiting new technologies and materials,” said Santiago Castagnino, a partner and construction expert at BCG, and co-author of the report. “If you also optimize the planning and the processes, you could easily end up cutting costs by 15% and reducing the completion time by as much as 30%.”

Governments are key contributors to the industry’s evolution. A government is often not only the regulator but also the owner and a major client of infrastructure assets. By accelerating regulatory and environmental approvals, it can reduce project delays.

It can improve competitiveness by inviting foreign bidders to tender, promote technological innovation by supporting academic and corporate R&D, impose environmental standards and weed out corruption in procurement practices.

One of the megatrends shaking up the construction industry is an increase in the population of the world’s urban areas by 200,000 people a day, all of them needing affordable housing plus social, transportation and utility infrastructure.

Challenges of this scope pressure the industry to change. Its transformation will affect society, by reducing construction costs; the environment, by improving the use of scarce materials or making buildings more eco-efficient over time; and the economy, by narrowing the global infrastructure gap and boosting economic development in general.