6 Opportunities Construction Leaders Should Take Advantage of According to McKinsey's Jose Luis Blanco
In March 2021, McKinsey Partner Jose Luis Blanco joined Cyndee Hoagland, Trimble Senior Vice President, Global Accounts, for an episode of Trimble Dimensions' Q1 Spotlight Series. He drew upon his extensive background in real estate and construction technology to share McKinsey's latest findings and identify six opportunities construction leaders should leverage. If you'd rather watch than read, you can access the 17-minute episode above.
6 Opportunities Construction Leaders Should Take Advantage of
1. Use connected construction to solve substantial project delivery challenges
Even before the pandemic, we were seeing a massive increase in interest in technologies as applied to construction. We saw up to $25 billion of capital deployed in construction technology innovations over the past decade — even beyond venture capital, private equity growth, and investment transactions.
Initially, those investments were deployed mainly in point solutions. The industry had specific problems they wanted to tackle, and plenty of tools came into market to streamline construction management and provide more visibility into projects.
These solutions provided a lot of value but they also created some new challenges, including integrating these tools and technologies into legacy systems that either were or were not able to support that. So, while the initial momentum for point solutions was growing, there was also thought around creating another approach to make sure that owners could holistically manage their projects and accompanying value.
This brings us to the second wave of investment happening now, which is where McKinsey sees capital deployed in connected solutions. Over time, point solutions and technologies are combining with each other to create broader platforms or ecosystems that solve bigger problems than a point solution can solve.
For example, a digital twin is a combination of the BIM 3D geometric model, artificial and augmented reality, virtual reality, and simulation software to give us a better understanding of our project, pre-build and post-build. In supply management, material and equipment tracking tools are now better connected to traditional ERP, scheduling, and cost management systems. As a last example, there are newer technologies such as robotic arms being connected to design software and other construction methods such as modular construction.
2. Scale technology up and out to capture benefits
COVID has impacted the construction industry’s uptake of technology in two ways: First, there is overall just more adoption — more users, more licenses. People are now using what they have avoided in the past, and are actually trying to explore what they can do with these technologies.
Second, and perhaps more interestingly, is that McKinsey’s clients are using more features of their technologies. As a result of COVID, the industry realized they could maximize the value of technology — for example using project bidding, charge order management, or document management features in a construction management software that was previously used for cost management and scheduling alone.
3. Manage your project pipeline more dynamically
Until now, the ability for many owner-operators and contractors (especially in the government space) to impact their pipeline has been limited. By the time building or execution begins, that project and how it has been prioritized is based on information on capital planning that is two, six, seven years back — which might not reflect what the market or citizens need at the current point in time, given the many changes we see in mobility, access, etc.
Technology now is enabling us to reevaluate a project list and project prioritization in a way that we couldn’t before, a much more continuous way. Depending on the outcomes you want to achieve, such as improving access to certain urban or rural areas, or reducing commuting time to certain cities, you can overlay these desired outcomes onto your pipeline and get the insights you need to make the right prioritization decisions.
On top of that, the new techniques and technologies, such as generative design and design automation, are shortening the time frames to actually deliver design engineering projects. Incorporating new materials or new construction methods, or changing certain technologies inside a project are now possible because it takes months or weeks to modify a design, when before it would have taken months or years. This gives the industry much more flexibility and opportunity to align our projects to the current outcomes and experiences our citizens are looking for.
4. Change your organization’s demographics
There’s no question that the AEC industry is facing some tough challenges: Forty percent of the U.S. construction workforce will retire in the next 10 to 15 years. In the past couple of years, McKinsey surveyed construction executives across North America and 90% consider labor shortage as one of the top three topics they need to address. And, over 50% saw that need accelerating vastly over the next few years.
At the same time, we have the largest STEM classes graduating out of universities now. These students have a different profile than the current population in construction, the professionals that are retiring. This younger generation is obviously much more technology native, but they are also purpose-driven. They want to work in areas where they can impact society in different ways.
The savviest construction leaders will use this opportunity to attract the younger generation and showcase how a career in construction or infrastructure gives them the ability to reshape mobility in their states, regions, and communities for the next 20 years and beyond. That message, in addition to highlighting that this will all be done using technology that wasn’t available 5 or 10 years ago, is a compelling value proposition for these graduating STEM students. This is how we can incorporate new blood into the construction sector and I think we’ll be amazed by how tremendously this generation changes our industry.
5. Use collaborative technologies to effectively manage risk
Collaboration is an area in construction where we are seeing meaningful impacts. Technology brings transparency by creating a platform for all stakeholders involved in the project lifecycle, including designers, architects, engineers, general contractors, subcontractors, and building materials suppliers, to work in. Here, each stakeholder can understand why decisions are being made, who is making them, and the impact of those decisions.
Another area where technology enables collaboration for better outcomes is risk mitigation. Here at McKinsey, we are seeing more designers and contractors using the digital as-built to discuss and understand potential challenges and risks in project execution. This eliminates many of the ‘down-the-road’ contingencies that might cause significant delays, and allows teams to speed up execution and get broader clarity.
6. Learn to articulate the value of construction technology
Governments and municipalities can help the construction sector foster innovation and enforce guidelines and standards for the use of construction technology. But, the burden of proof is on everyone in the industry to convince government officials that there is a clear path for applying digital tools that can lead to a better, more cost-efficient built environment for all.
Jose Luis Blanco leads McKinsey's engineering and construction work in North America, with a focus on real estate and construction technology. He advises capital project leaders across the project lifecycle, including investors, public sector institutions with large capital programs and E&C or real estate project owners across Asia, Europe, Latin America, and North America. Jose also leads McKinsey's construction technology landscape scan, which periodically maps emerging construction technology solutions against innovation and investment patterns.