How Projects 5.0 is revolutionizing project delivery for capital organizations

May 2021

Leading capital organizations are reimagining the way they work and the technologies they use to unlock value. As large-scale change looks increasingly inevitable for the sector, can you afford to wait?

Earlier this year, we published our vision for a new delivery model in large capital projects. Capital Excellence Projects 5.0 explored the potential value to be gained through new ways of working, the application of new digital tools and technology platforms across the value chain, and the adoption of new principles for partnership and collaboration among project stakeholders.¹

As part of our research for that report, we assessed the key drivers of large capital-project delivery across industries and geographies and interviewed more than 300 executives, representing companies working around the world and at every point in the capital-projects value chain. Looking back at those interviews, two things stand out:

First, the industry is convinced that change is imperative. Seventy-six percent of interview participants told us that a redesign of the project-delivery model was necessary for the sector, citing the need to address long-standing problems such as time and cost overruns or skills shortages. On average, those executives believe that a better project-delivery model could generate time and cost savings of 30 to 40 percent. And 65 percent of them also highlighted opportunities to boost quality and repeatability in execution.

Second, a significant number of players are already proceeding with efforts to transform the way they work. Our Capital Projects 5.0 research identified six shifts that could transform project-delivery performance (see sidebar, “Six dimensions of change”). When we asked executives about these changes, more than 70 percent agreed that each was either a high or medium priority, and around 15 percent said their organizations were already moving at scale on at least one of the dimensions (exhibit). Meanwhile, more than 80 percent said they had started to implement the shifts or were intending to do so.

Six dimensions of change

Our research identified six key shifts that could transform delivery efficiency and effectiveness in large capital projects:

—an ecosystem of partners that collaborates across multiple projects to maximize end-to-end value

—industrialization and innovation, with the adoption of standard processes for repeated tasks—all while challenging traditional ways of working to drive productivity

—agility, flexibility, and resilience, combined with a stable backbone of disciplined processes, progress monitoring, and management

—sustained capability-building, with a redesigned “people supply chain” that ensures companies acquire, develop, and retain the labor and talent they need

—a data-driven operating model, including a robust digital architecture shared by all stakeholders in the ecosystem

—future-proofing of projects, with metrics and incentives that consider future opportunities and risks and that promote innovation for long-term commercial and environmental sustainability


Exhibit


The value is real, and early adopters are already transforming the way they work

These businesses are not just changing their processes in expectation of future gains. Executives from a wide range of organizations said that their companies are already generating significant value from innovations in the project-delivery model.

The head of capital projects at one global manufacturing company described how his organization had used lean principles to coordinate an ecosystem of partners for complex construction jobs. Across multiple projects, the different stakeholders learned to work together in a deeply collaborative way, continually exploring opportunities to reduce waste or boost outcomes. Tight teamwork and continual communication between stakeholders help to ensure that problems are identified early and resolved quickly, he said—especially in complex projects with significant uncertainty. The result has been an average value uplift of 30 percent, achieved through a combination of cost savings and opportunities to generate additional value during project planning and execution.

In another example, a major North American construction player is applying the principles of industrialization and mass production to buildings. The company has developed a standard catalog of building modules suitable for a wide range of office, housing, and commercial applications. The products are manufactured off-site in factories equipped for efficient, high-volume production. And by aggregating demand from multiple projects, production facilities are highly utilized, minimizing wasted labor and materials. This standardized, industrialized approach to construction reduces building waste by 80 percent and allows project schedules to be compressed by up to 40 percent. The company estimates that constructing a 24-unit garden apartment building using its system takes 30 to 50 days less than it would with conventional methods.

A US-based engineering, procurement, and construction organization has applied agile principles to rapidly evolve and improve its approach to project delivery. Staff members work together in cross-functional teams, which are encouraged to continuously experiment with new processes to see if they add value. The company fosters innovation by training its people in specific skills, such as design thinking, that help them think beyond a narrow range of “tried-and-tested” approaches. The company has also adapted its culture, ensuring that teams are not penalized when new ideas don’t work out and that successful new approaches are widely publicized and shared within the organization.

Its new approach to product-delivery innovation has also led the company to rethink its people supply chain. It works with a network of external partners to supplement its in-house teams with specific expertise when required. An executive told us that this cross-functional working has led to a change in the profile of people the company now seeks to recruit. The company believes that its new approach provides a model for the sustainable growth of in-house expertise. Over the long term, it predicts that these changes will enable projects to be delivered 25 to 50 percent faster and at 20 to 30 percent lower cost.

A South African mining company used a new digital architecture to transform project delivery at a major greenfield development. In an effort to address delays in construction, the company introduced a digital control tower to consolidate all project data on a single platform and give project leaders a clear view into status and progress. It built a detailed digital twin of the mine site, allowing plans to be checked and adjusted based on precise measurements taken on the ground. New digital work-management tools helped frontline teams coordinate their schedules and the availability of materials and resources for scheduled tasks. Finally, the company used advanced analytics techniques to manage project-execution risks—spotting emerging problems early, identifying the root causes of issues, and allowing leaders to take proactive mitigation steps.

This digitization effort was fundamental in a performance turnaround at the mining site. Construction productivity increased by 30 to 60 percent, depending on activity, and schedules were compressed by a similar percentage. The project was delivered six months earlier than originally expected.

At a North American engineering consultancy, sustainability is seen as a key enabler for future growth. The company uses its expertise in areas such as climate-neutral construction and design for livable cities as a major element of its competitive proposition. An executive also told us that the stance is essential to ensuring that the business can attract top talent in the coming years. Its “future-ready” program has already resulted in a number of innovative projects, such as a multistory parking garage that is designed to be repurposed into residential units at a future date.

* * *

All of these organizations made some up-front investments to transform their delivery models using new tools, approaches, and working methods. They are already seeing those investments pay off, while the know-how and experience they have gained will provide the foundation for further innovation.

For other players in the sector, the key question must no longer be whether change is too costly—but whether they can afford to wait.


  1. Shankar Chandrasekaran, Shakeel Kalidas, Mina Mir, Gerhard Nel, Prakash Parbhoo, Anuradha Rao, and Siddharth Srikanthan, Capital Projects 5.0: Reimagining capital-project delivery, February 2021, McKinsey.com.

 

Article

Sustainable infrastructure is critical in reducing carbon emissions. More efficient design approaches, new technologies, and better benchmarking can help.

Lara Poloni, AECOM; Nick Smallwood, IPA and the Project Delivery Function of the UK government

 

Article

It is necessary to implement a prioritized approach to protect urban residents, and the infrastructure that supports them, from climate risk.

Brodie Boland, Elizabeth Charchenko, and Shivika Sahdev, McKinsey & Company; Milag San Jose-Ballesteros, C40

Article

Jonathan Woetzel and Shivika Sahdev, McKinsey & Company

Insights and events on the world’s most pressing infrastructure challenges, delivered straight to your inbox. Join the GII community:

GII follows McKinsey & Company’s Privacy Policy