COVID19

The Changes Construction Companies Need in 2020 to Ensure Survival

| December 23, 2019

By Kenny Ingram

Prediction 1: Huge 50% growth in offsite manufacturing expected

McKinsey believes modular construction can increase the speed of construction by as much as 50% and, in the right environment, cut costs by 20%. Considering the current state and rapid development of this methodology, I predict that in five years, 50% of all construction projects will use offsite and modular manufacturing or 3D printing, leading to a 40% drop in project delivery timescales and a 20% reduction in cost.

To get the most value and to truly disrupt the market with offsite construction, however, contractors will need to reduce the unique, one-off nature of their projects and pursue greater standardization. This will enable them to reduce time and cost of design and engineering, reuse standard design elements and subassemblies and deliver finished projects that are higher in quality and perform better. Standardization may also make the robotization of the offsite construction shop environment more feasible.

Prediction 2: Increased productivity over the next five years will be realized by digital leaders

The productivity of construction companies is set to increase 20% between 2020 and 2025, however, this is only going to apply to businesses that embrace new technologies and use them to substantially increase productivity. For a lot of major construction contractors, this may look daunting, but this doesn’t all have to be done at once.

First and foremost, contractors should implement business systems to proactively monitor and manage the entire lifecycle of a construction project, from contract award through to commissioning, and even provide maintenance and facilities management services after handover. This requires a move away from spreadsheet-driven project management unconnected to the accounting system of record and towards true enterprise resource planning (ERP) software.

Prediction 3: New market challengers will change the status quo

Last year, I speculated that Amazon might enter the construction market and it’s doing so in the U.S., with prefabricated design company Plant Prefab. Amazon’s idea of selling a smart home is simpler if the cabling, sensors and other equipment that make a building responsive and intelligent can be built in rather than added on later. Amazon is also selling prefabricated hospital rooms, again, taking advantage of efficient mechanicals and technology trades in a shop environment.

McKinsey asked over 300 senior construction leaders where they felt their next competition was coming from, and only 19% thought other current incumbents would be their biggest source of competition.

The question is whether established construction industry giants will lead the charge toward more effective technology that fixes these historic problems, or more progressive firms from outside the industry will play the role of the usurper.

To survive in 2020 and beyond, construction companies must diversify and become manufacturers, builders and service organizations. The investments in technology and business process re-engineering they make in 2020 will be the determining factors in whether they are still on top come 2025.

Kenny Ingram

Kenny Ingram is global industry director for engineering, construction & infrastructure at IFS.

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