Shaping the Future of Construction A Breakthrough in Mindset and

218679

Industry Agenda

May 2016

Shaping the Future of

Construction

A Breakthrough in Mindset

and TechnologyPrepared in collaboration with The Boston Consulting Group

World Economic Forum ®

© 2016 - All rights reserved.

No part of this publication may be reproduced or

transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system.

REF 220416

Content

Forewords 3

Contributors 6

Context and Objectives of the Report 8

Executive Summary 9

1. Introduction: The Construction Industry - Time for a Transformation 11

1.1. The industry is crucial to society, the economy and the environment 11

1.2. Th e industry"s future will be shaped by a number of megatrends 12

1.3. Th e industry must also confront internal challenges 14

1.4. The industry is ripe for and capable of transformation 16

2. Companies as the Spearhead of Transformation 18

2.1. Technology, materials and tools 18

2.2. Processes and operations 26

2.3. Strategy and business model innovation 32

2.4. Pe ople, organization and culture 36

3. The Industry As a Whole Needs to Drive Transformation 40

3.1. Industry collaboration 40

3.2. Joint industry marketing 42

4. Government Needs to Encourage and Support this Transformation 44

4.1. Re gulation and policies 44

4.2. Public procurement 47

5. The Way Forward 49

Abbreviations 50

Appendix: Future of Construction Survey Results 51

Endnotes 55

Bibliography 58

3Shaping the Future of Construction: A Breakthrough in Mindset and Technology

Forewords

Foreword from the World Economic Forum

The world is changing faster than ever before. Consider just one of the global megatrends shaking up the construction industry: the population of the world" s urban areas is increasing by 200,000 people per day, all of whom need affordable housing as well as social, transportation and utility infrastructure. In the face of such challenges, the industry is almost under a moral obligation to tran sform. Its transformation will have transformative effects elsewhere: on the wider society, by reducing construction costs; on the environment, by improving the use of scarce materials or by making buildings more eco-efcient over time; and on the economy, by narrowing the global infrastructure gap and boosting economic development in general. While most other industries have undergone tremendous changes over the last few decades, and have reaped the benets of process and product innovations, the Engineering & Construction sector has been hesitant about fully embr acing the latest technological opportunities, and its labour productivity has stagnated accordingly. This unimpressive track record can be attributed to various internal and external challenges: the persistent fragmentation of the industry, inadequate collaboration with suppliers and contractors, the difculties in recruiting a talented workforce, and insufcient knowledge transfer from project to project, to name just a few. The industry has vast potential, however, for improving productivity and efciency, thanks to digitalization, innovative technologies and new construction t echniques. Consider the rapid emergence of augmented reality, drones, 3D scanning and printing, Building Information Modelling (BIM), autonomous equipment a nd advanced building materials - all of them have now reached market maturity. By adopting and exploiting these innovations, companies will boost productivity, streamline their project management and procedures, and enhance quality and safety. To capture all this potential will require a committed and concerted effort by the industry across many aspects, from technology, operations and strategy to personnel and regulation. This report begins with an assessment of the industry"s present state and the global trends that will impact on the industry. It then introduces a conceptual industry-transformation framework, listing a number of measures, grouped in eight topical areas, that would profoundly change the industry system. The measures are classied into three groups: measures taken by private companies on their own; measures taken by companies in collaboration with their peers - or by the industry as a whole; and measures taken by the government, acting both as the regulator and as a major project owner. For each of the topical areas, the report identies current best practices, and provides illustrative case studies of innovative approaches, to prepare for the industry"s transformation. The eight topical areas are: -Technology, materials and tools -Processes and operations -Strategy and business model innovation -People, organization and culture -Industry collaboration -Joint industry marketing -Regulation and policies -Public procurement

4Shaping the Future of Construction: A Breakthrough in Mindset and Technology

The World Economic Forum Future of Construction project is a collaborative endeavour, aimed at supporting the Engineering & Construction sector as it pursues its transformation. (Collaboration is, or should be, a hallmark of the construction industry itself: the industry"s future success will rely heavily on effective collaboration among all stakeholders.) The project is planned as a multiyear effort. In its rst year, the project is commencing with this wide-ranging report - a detailed map to help navigate the current industry transformation. Subsequently, the project will focus on specic topics; for example, the ways that new technologies, materials and processes will improve the project delivery and the life-cycle performance of buildings, and the ways of selecting r elevant measures from the industry transformation framework. The report involved input from a great many companies active along the construction value chain - suppliers of building materials, chemicals and construction equipment; contractors; and engineering, architecture and planning rms - as well as project owners and developers, academics, and leaders from government, civil society, and industry organizations. In this regard, we would like to express our gratitude to the World Economic Forum partner companies that served on the Future of Construction project Steering Committee: Acciona; Aecon; AkzoNobel; Amec Foster Wheeler; ArcelorMittal; Arup; BASF; Consolidated Contractors Company; Danfoss; Essar Group; Fluor; Lixil; Perot Group; SAP; Siemens; Skanska; SNC-Lavalin; Tarkett; and WS Atkins. And we extend a special acknowledgement and particular thanks to John M. Bec k (Executive Chairman of Aecon Group Inc.), David T. Seaton (Chairman and Chief Executive Ofcer of Fluor Corporation) and Uwe Krüger (Chief Executive Ofcer of WS Atkins) for their unwavering interest in and commitment to the Future of

Construction Initiative.

We would also like to thank the many experts who contributed to the report through their role on the Future of Construction project Advisory Committee: Victor Chen Chuan (Sichuan University), James Dalton (USACE), Juan El izaga (ENCORD), Timothy Geer (WWF), Tiago Guerra (TG International Manager), Shervin Haghsheno (Karlsruhe Institute of Technology), Franziska Hasselmann (University of St Gallen), Markus Kraft (University of Cambridge), F iona Murie (BWI), Ibrahim Odeh (Columbia University), Aristeidis Pantelias (Un iversity College London), Spiro Pollalis (Harvard Design School), Norbert Pralle (ENCORD), Bob Prieto (Strategic Program Management LLC), Aaron B. Schwarz (Plan A Architecture + Design), Douglas Stollery (Stollery Charitable Foundation), Jan V an Schoonhoven (Netherlands Government), Enrico Vink (FIDIC), Edmundo Werna, (ILO), and James X. Zhan (UNCTAD). The experience, perspectives and guidance of all the above-mentioned people and organizations have informed and enriched a number of remarkable discussions, notably at the World Economic Forum Annual Meeting of the New Champions, Dalian, September 2015; the Future of Construction Initiative Steering Committee, New York, December 2016; and the World Economic

Forum Annual Meeting 2016 in Davos-Klosters.

Pedro Rodrigues de Almeida

Head of Basic Industries

and Member of the Executive

Committee

World Economic ForumManuel Zafra SolasPractice Lead, Engineering and Construction IndustriesInfrastructure and Urban Development

World Economic Forum

5Shaping the Future of Construction: A Breakthrough in Mindset and Technology

Foreword from the Infrastructure and Urban

Development Co-Chair

The digital revolution of the last half century has made the world a much smaller place - opening markets, creating new products and goods, and facilitating

Industry Agenda

May 2016

Shaping the Future of

Construction

A Breakthrough in Mindset

and TechnologyPrepared in collaboration with The Boston Consulting Group

World Economic Forum ®

© 2016 - All rights reserved.

No part of this publication may be reproduced or

transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system.

REF 220416

Content

Forewords 3

Contributors 6

Context and Objectives of the Report 8

Executive Summary 9

1. Introduction: The Construction Industry - Time for a Transformation 11

1.1. The industry is crucial to society, the economy and the environment 11

1.2. Th e industry"s future will be shaped by a number of megatrends 12

1.3. Th e industry must also confront internal challenges 14

1.4. The industry is ripe for and capable of transformation 16

2. Companies as the Spearhead of Transformation 18

2.1. Technology, materials and tools 18

2.2. Processes and operations 26

2.3. Strategy and business model innovation 32

2.4. Pe ople, organization and culture 36

3. The Industry As a Whole Needs to Drive Transformation 40

3.1. Industry collaboration 40

3.2. Joint industry marketing 42

4. Government Needs to Encourage and Support this Transformation 44

4.1. Re gulation and policies 44

4.2. Public procurement 47

5. The Way Forward 49

Abbreviations 50

Appendix: Future of Construction Survey Results 51

Endnotes 55

Bibliography 58

3Shaping the Future of Construction: A Breakthrough in Mindset and Technology

Forewords

Foreword from the World Economic Forum

The world is changing faster than ever before. Consider just one of the global megatrends shaking up the construction industry: the population of the world" s urban areas is increasing by 200,000 people per day, all of whom need affordable housing as well as social, transportation and utility infrastructure. In the face of such challenges, the industry is almost under a moral obligation to tran sform. Its transformation will have transformative effects elsewhere: on the wider society, by reducing construction costs; on the environment, by improving the use of scarce materials or by making buildings more eco-efcient over time; and on the economy, by narrowing the global infrastructure gap and boosting economic development in general. While most other industries have undergone tremendous changes over the last few decades, and have reaped the benets of process and product innovations, the Engineering & Construction sector has been hesitant about fully embr acing the latest technological opportunities, and its labour productivity has stagnated accordingly. This unimpressive track record can be attributed to various internal and external challenges: the persistent fragmentation of the industry, inadequate collaboration with suppliers and contractors, the difculties in recruiting a talented workforce, and insufcient knowledge transfer from project to project, to name just a few. The industry has vast potential, however, for improving productivity and efciency, thanks to digitalization, innovative technologies and new construction t echniques. Consider the rapid emergence of augmented reality, drones, 3D scanning and printing, Building Information Modelling (BIM), autonomous equipment a nd advanced building materials - all of them have now reached market maturity. By adopting and exploiting these innovations, companies will boost productivity, streamline their project management and procedures, and enhance quality and safety. To capture all this potential will require a committed and concerted effort by the industry across many aspects, from technology, operations and strategy to personnel and regulation. This report begins with an assessment of the industry"s present state and the global trends that will impact on the industry. It then introduces a conceptual industry-transformation framework, listing a number of measures, grouped in eight topical areas, that would profoundly change the industry system. The measures are classied into three groups: measures taken by private companies on their own; measures taken by companies in collaboration with their peers - or by the industry as a whole; and measures taken by the government, acting both as the regulator and as a major project owner. For each of the topical areas, the report identies current best practices, and provides illustrative case studies of innovative approaches, to prepare for the industry"s transformation. The eight topical areas are: -Technology, materials and tools -Processes and operations -Strategy and business model innovation -People, organization and culture -Industry collaboration -Joint industry marketing -Regulation and policies -Public procurement

4Shaping the Future of Construction: A Breakthrough in Mindset and Technology

The World Economic Forum Future of Construction project is a collaborative endeavour, aimed at supporting the Engineering & Construction sector as it pursues its transformation. (Collaboration is, or should be, a hallmark of the construction industry itself: the industry"s future success will rely heavily on effective collaboration among all stakeholders.) The project is planned as a multiyear effort. In its rst year, the project is commencing with this wide-ranging report - a detailed map to help navigate the current industry transformation. Subsequently, the project will focus on specic topics; for example, the ways that new technologies, materials and processes will improve the project delivery and the life-cycle performance of buildings, and the ways of selecting r elevant measures from the industry transformation framework. The report involved input from a great many companies active along the construction value chain - suppliers of building materials, chemicals and construction equipment; contractors; and engineering, architecture and planning rms - as well as project owners and developers, academics, and leaders from government, civil society, and industry organizations. In this regard, we would like to express our gratitude to the World Economic Forum partner companies that served on the Future of Construction project Steering Committee: Acciona; Aecon; AkzoNobel; Amec Foster Wheeler; ArcelorMittal; Arup; BASF; Consolidated Contractors Company; Danfoss; Essar Group; Fluor; Lixil; Perot Group; SAP; Siemens; Skanska; SNC-Lavalin; Tarkett; and WS Atkins. And we extend a special acknowledgement and particular thanks to John M. Bec k (Executive Chairman of Aecon Group Inc.), David T. Seaton (Chairman and Chief Executive Ofcer of Fluor Corporation) and Uwe Krüger (Chief Executive Ofcer of WS Atkins) for their unwavering interest in and commitment to the Future of

Construction Initiative.

We would also like to thank the many experts who contributed to the report through their role on the Future of Construction project Advisory Committee: Victor Chen Chuan (Sichuan University), James Dalton (USACE), Juan El izaga (ENCORD), Timothy Geer (WWF), Tiago Guerra (TG International Manager), Shervin Haghsheno (Karlsruhe Institute of Technology), Franziska Hasselmann (University of St Gallen), Markus Kraft (University of Cambridge), F iona Murie (BWI), Ibrahim Odeh (Columbia University), Aristeidis Pantelias (Un iversity College London), Spiro Pollalis (Harvard Design School), Norbert Pralle (ENCORD), Bob Prieto (Strategic Program Management LLC), Aaron B. Schwarz (Plan A Architecture + Design), Douglas Stollery (Stollery Charitable Foundation), Jan V an Schoonhoven (Netherlands Government), Enrico Vink (FIDIC), Edmundo Werna, (ILO), and James X. Zhan (UNCTAD). The experience, perspectives and guidance of all the above-mentioned people and organizations have informed and enriched a number of remarkable discussions, notably at the World Economic Forum Annual Meeting of the New Champions, Dalian, September 2015; the Future of Construction Initiative Steering Committee, New York, December 2016; and the World Economic

Forum Annual Meeting 2016 in Davos-Klosters.

Pedro Rodrigues de Almeida

Head of Basic Industries

and Member of the Executive

Committee

World Economic ForumManuel Zafra SolasPractice Lead, Engineering and Construction IndustriesInfrastructure and Urban Development

World Economic Forum

5Shaping the Future of Construction: A Breakthrough in Mindset and Technology

Foreword from the Infrastructure and Urban

Development Co-Chair

The digital revolution of the last half century has made the world a much smaller place - opening markets, creating new products and goods, and facilitating