9 Catalysts Changing Construction: McKinsey Report

by | Jul 9, 2020 | All, Uncategorized

Offsite production used to be a “nice to have” process. Now it is becoming essential to business survival. This statement may cause a few raised eyebrows, but it is just one reality emerging from the changes taking place in the current business climate. Before the unprecedented disruptions caused by the response to the 2020 worldwide pandemic, disruptions were already triggering an overhaul in construction industry processes.

The June, 2020 McKinsey report, “The next normal in construction,” posits nine shifts that will occur at scale to radically reshape the construction ecosystem. They are:

  1. Product-based approach – Rather than starting from the ground up, construction projects will involve standardized products that are produced offsite in factories then shipped to the project location and assembled onsite.
  2. Specialization – As companies need to distinguish themselves to flourish, they will begin to specialize in a chosen field, cultivate skills and knowledge around it and develop their unique competitive advantage.
  3. Value-chain control and integration with industrial-grade supply chains – Using strategic partnerships and innovation, companies will refine the ways they add value to their portion of the construction project.
  4. Consolidation – Specialization and technology investments are more efficient when framed in a larger scale, so consolidation of companies will continue.
  5. Customer-centric business models and branding – In order to appeal to and retain customers, companies will build brands around quality, reliability, service, and warranties.
  6. Investment in technology and facilities – Construction manufacturing will require factories, machinery and equipment. Research and development will be important for specialty branding.
  7. Investment in human resources – Developing and keeping inhouse talent, particularly digitally-savvy talent, will become more important as companies specialize and become more invested in technology.
  8. Internationalization – The global footprint of companies will increase as they grow and specialize in products that may be in demand across the world.
  9. Sustainability – To comply with ever-expanding concerns around environmental impacts, companies will be required to use different materials, supply chains, equipment, and safety measures.

Driving these shifts are two processes that will separate the winners from the losers when it comes to market share. Those shifts include changes in the market and emerging disruptions of several types.  

Changes in the market include:

  • cost pressure because of tighter public budgets and housing affordability;
  • need for adaptable structures;
  • more sophisticated owners and customers;
  • greater focus on cost of ownership;
  • more complex projects;
  • demand for simplified and digital interactions;
  • requirements for sustainability and better safety performance, both intensifying in the wake of government regulations;
  • skilled labor shortage which has persisted since the 1980s and will be exacerbated by retirements from the workforce; and
  • regulations around standardization, including building codes, to streamline productivity.

Emerging disruptions include:

  • industrialization and offsite production in controlled environments as demonstrated in the manufacturing industry for decades;
  • new construction materials like low-carbon-footprint cement, lighter steel frames and cross-laminated timber;
  • data driven decision making, for instance using BIM and collaboration on design-build projects;
  • smart construction products;
  • BIM processes for project management;
  • digital sales and distribution; and
  • corporate restructuring, new types of “players,” and new funding sources, like venture capital and private equity.

When you consider all of the pressures being brought to bear on the construction industry, it’s easy to envision how disruptions will result in a large-scale overhaul. With the unprecedented changes that have occurred over just the past four months, it really has become – as characterized in the McKinsey report – a “perfect storm.”

If your company is facing the perfect storm, you don’t have to ride it out alone. Partner with the industry experts of eVolve MEP and discover the resources and resiliency for your business to grow and thrive.

The MEP Force 2020 all-virtual event will be held August 31 to September 2. Register today for MEP Force, where you can gain a competitive edge in fabrication and prefabrication. Autodesk’s Queen of Prefab Amy Marks will be the featured keynote speaker. Then choose from over 75 breakout sessions where you can learn from other industry leaders about new technology trends that are affecting your business.

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