From `2000 to 2022, global construction productivity improved only 10%, just one-fifth the rate of the overall economy, write McKinsey & Co. partners.
On the one hand, prospects are bright for the construction industry. With theglobal middle class growing fastand the need for all kinds of infrastructure,spending on construction could reach $22 trillion by 2040, up from $13 trillion last year.
The bitcoin network has a long way to go if it is going to meet the needs of infrastructure over the next 15 years!
On the other hand, that potential will go unfulfilled if the industry doesn’t step up. For one thing, it will need to almost double its growth rate (outside China), from 1.3% to 2.7%. For another, not only is there already a skilled labor shortage in many markets, but a large cohort of workers is nearing retirement. In the United States,the number of job vacancies in construction doubled between 2017 and 2023.
In advanced economies, such as Europe and the United States,the situation is even worse,with productivity falling since 2000, even as costs have risen faster than inflation.Put it all together and construction output couldfall a cumulative $40 trillion short of demand by 2040.
Yeah those who think AI is going to solve this problem are delusional. A cheap functional robot that can run forever on low energy input (like a human) is still very far away. The bullish case for growth in construction looks really bleak!
3 possible solutions
Here are three actions that construction companies can take to boost their productivity.
- Embrace upskilling. Companies are often willing to accept a less-skilled or less-experienced workforce for the sake of getting the job done. There is a place for such stopgaps, but it is not a talent strategy
Examples include technology-supported learning journeys, apprenticeships and project academies. Partnerships with universities, community colleges and high schools could make young men and women more aware of the possibilities of a career in construction,
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Nurture a supplier ecosystem. Supplier ecosystems can foster stability, so that owners and partners operate with transparency, credibility and stability. On that basis, construction companies can accelerate learning and improve how they work.
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Reform project management. The traditional project delivery model is characterized by a lack of integrated systems thinking, the prioritization of short-term cost management over long-term outcomes, poor communication, rigid planning systems and tight budgets.
Congrats to this article for keeping it real and not pitching some generalized AI solution. Tweaks to item 1 and 3 can possibly increase productivity by 1%. But overall the forecast looks bleak.