Dubai 2018: Construction productivity in the digital era

May 2018

The construction industry is ripe for disruption. Projects are getting larger and more complex, and the growing demand for environmentally sensitive construction means traditional practices must change. Simultaneously, there is a growing shortage of skilled labor and supervisory staff. These are entrenched issues that require new ways of thinking and working. 

Research from McKinsey Global Institute demonstrates that productivity in the construction sector has stagnated for many years. While there is a variety of reasons, the low level of digitization in this sector is the biggest differentiator between construction and the sectors that have outpaced it in productivity growth, such as retail, media, and manufacturing.

On May 10, more than twenty senior major project leaders, from Owner and Contractor organizations in the Middle East, met to discuss key issues facing the construction sector in the digital era at the Global Infrastructure Initiative’s first roundtable in Dubai. The participants addressed the industry’s rapid shifts toward digitization, including the following key insights:

  1. Use transparency to build trust. Tools similar to collaborative, real-time digital platforms increasingly enable project stakeholders to reach a “single source of truth” for monitoring progress. This helps to minimize misalignments early and enables joint corrective action. Companies must embrace such transparency efforts and integrate their digital supply chain end-to-end to successfully use these tools to their maximum potential and fully materialize the potential improvements from digitization. Defining common standards can help stakeholders align and incentivize openness.  

  2. Reshape the project setup and contractual framework. To facilitate a collaborative approach between owners and contractors, owners should introduce incentives that significantly improve performance and alignment, not at a trade or package level, but at the project-outcome level. Involving stakeholders throughout the value chain and leveraging contractors’ input early in the process will create more accountability, identify potential roadblocks, streamline the process, and ensure constructability. Tendering processes should be based on best long-term value and past performance, rather than cost alone.

  3. Develop smart regulations to improve technology adoption. While technological solutions proliferate, they largely lack the ability to interact with each other today. The industry will benefit from regulators standardizing the quality and format of data capture and storage. Integrative technology solutions at scale, along with performance-based regulations that incentivize the use of technology, will ensure faster technology adoption across the construction value chain.

  4. Invest in capability building to realize digitization potential.   Though we know tools are only as effective as the team members who use them, the construction industry traditionally falls behind when it comes to investments in R&D (1 percent vs. 3-5 percent in other industries) and IT (1 percent vs. 2-4 percent in other industries). To that end, injecting the right skills and capabilities into both owner and contractor organizations is crucial for better adoption and effective use of new digital technology. Moreover, staff members must feel empowered and supported in implementing new standards—a step that starts at the leadership level—otherwise, processes and mindsets will not evolve to facilitate the adoption of new technologies and enable a productivity transformation.

  5. Improve workplace planning and communication. There is a need for careful planning and coordination of different disciplines on-site, along with the application of lean principles to reduce waste and variability. At the heart of this issue is a need to move from a system that maximizes short-term earnings to a holistic forward-looking operating model that relies on laminar, streamlined flow and improved productivity across project lifecycle.

  6. Introduce a culture of innovation. While tight margins and deadlines have traditionally hindered attempts to foster innovation within organizations, embedding a spirit of agility and experimentation is key for sustainable, effective change. Leaders need to create the opportunities and budgets for projects to pilot new technologies. Owners and contractors must focus on the lifecycle cost of projects to make a case for innovations and digital technologies—building in the savings in cost, time, and productivity that these tools can enable. Similarly, creating a system for capturing lessons and refining best practices for re-use in other projects is essential for broader adoption and maximum efficiency.

  7. Leverage localization through innovation and technology. As the GCC region moves toward regulation that increases localization, a significant proportion of locals will soon enter the working age population. Digitization and new building technologies can help to create employment opportunities in the industry, absorbing this incoming labor population and enabling a faster productivity ramp-up. This new workforce of digital natives may offer an opportunity for the construction sector to make a step change toward technology adoption.

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