Sydney 2018: Technology in Transport: How digital, data and analytics will disrupt the infrastructure value chain

May 2018

Due to technology’s rapid evolution, we are experiencing the beginnings of major shifts in mobility requirements and the infrastructure assets required to satisfy them. These trends will reshape the way that transport infrastructure is commissioned, regulated, planned, designed, constructed and used. Navigating this transformation will be critical to positioning both public and private organizations for success, and optimizing the outcomes for citizens.

Concurrently, McKinsey research shows that productivity in the construction sector has stagnated for decades. While this is driven by an array of reasons, the low degree of digitization in the industry is the largest differentiator between construction and the industries which significantly outperform it in productivity growth—including retail, media, and manufacturing. With so much to gain, the construction industry is poised for a productivity revolution and digitization may be one of the biggest drivers of change with the potential to unlock efficiencies in the order of 15 percent on major projects.

On May 3, McKinsey’s Global Infrastructure Initiative hosted a roundtable discussion in Sydney to explore these challenges and opportunities. The discussions delved into two topics: how government and other stakeholders can catalyze innovation and enable future mobility trends, and how should we approach delivering big transport projects in a digital age? The following insights emerged:  

  1. Harness the four global megatrends that are reshaping mobility. Autonomous driving, electrification, shared mobility, and connectivity are transforming mobility. With over $40 billion invested in these trends since 2010, they have the potential to alleviate many of the negative consequences of transport, including congestion, carbon emissions, low vehicle utilization, and safety threats.
  2. Embrace a “seamless mobility” model. For Australia’s major cities, “Seamless Mobility”—a flexible, highly responsive system that moves residents quickly from place to place, often by switching among modes of transport—was discussed as the most valuable long-term solution. Core elements of this model are a lower proportion of private vehicles, a shared fleet of electrified public AVs, integrated mobility platforms, enhanced public transit, and catalytic urban planning to enhance mobility. For example, McKinsey research suggests that the cost-per-mile of autonomous EV taxis will be 30-60 percent lower than private vehicles and public transport by 2025.
  3. Collaborate to create conditions for the new solutions to succeed. Government has a vital role to play in catalyzing change by communicating their long-term vision, creating a supportive regulatory environment for transition to the future state, and providing economic incentives for new transport solutions to overcome market failures. The private sector is far more likely to engage and participate constructively when these conditions are in place.
  4. Establish common standards for technology and a data-sharing platform. To that end, common technology standards established by the industry would go a long way to reducing uncertainty and encouraging adoption of new transport solutions. Additionally, a data-sharing platform would enable all stakeholders to analyze and better understand existing user patterns and future needs.
  5. Build flexibility into the design of all new assets. The pace of adoption of new mobility trends will challenge the assumptions (and business/funding models) made for large infrastructure projects being delivered today. Therefore, it is critical that today’s assets are designed with flexibility in mind, so that they can adapt to new modes of transportation, changing user patterns, and new business models.
  6. Understand the barriers to digital and technology adoption. Increased cost, risk, skills and workforce shortages were cited as barriers to the adoption of digital and technology in the Australian infrastructure industry. To explore a case for digital adoption, it is important to counterbalance these barriers with the benefits—accuracy, transparency, full lifecycle cost savings, safety, etc. McKinsey research links up to 15 percent of global construction productivity improvements to digital technologies, so overcoming these barriers can unlock substantial value for the industry.
  7. Drive digital adoption through public sector actions. Government can accelerate the adoption of digital solutions by creating incentives, mandating the use of technology in public projects (e.g. BIM), and enhancing the contracting model to encourage collaboration and innovation amongst all project participants. In Singapore and the UK, public projects are mandated to use BIM, resulting in broad adoption and resulting benefits.
  8. Cultivate innovation. Tight margins and deadlines hinder attempts to foster a culture of innovation among organizations in the industry. Industry leaders should be encouraged by board members and the government to create the opportunities and budgets for projects to experiment with new technologies. Similarly, creating a system for capturing lessons and refining best practices for re-use in other projects is essential for broader adoption. Crossrail’s Innovation 18 program is a good example of how to institutionalize a culture of innovation.
  9. Develop the necessary internal skills and capabilities to succeed. 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). This lag is also present in capability building with lower investment in training and upskilling. Increasing this investment, both through internal training and hiring new skills, is critical for better adoption and effective use of new digital tools.
  10. Involve stakeholders throughout the value chain. Changing an entire industry requires action along the full value chain. Digitization presents a tremendous opportunity for the industry to increase competitiveness. However, siloed solutions have proven to fail in complex supply chains—and construction supply chains are among the most complex. Therefore, companies must define common standards, adopt transparency, and integrate their digital supply chain end-to-end to fully materialize the potential improvements from digitization.
  11. Learn from industries that are further along the road. Lessons can be learnt from industries ahead of construction, such as aerospace and automotive manufacturing. For example, some international real estate players have successfully adopted digital tools including 5D BIM, digital control towers, seamless collaboration platforms, pre-fabrication, and even such cutting-edge technologies as augmented reality, robotics, and 3D printing.
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