As Charles Darwin once famously said “It is not the strongest of the species that survives, nor the most intelligent. It is the one that is most adaptable to change”. Construction industry, being one of the world’s largest industry contributing 14% of the global GDP, is no exception when it comes to surviving. It has grown only 1% annually in the past 2 decades with Earning before Interest and Taxes (EBIT) of just 5%. According to McKinsey & Company, construction industry is observed to be a slow technology adapting industry considering the economic cycles and high risks which limits the capital expenditure for innovation.
The Coronavirus outbreak has forced all industries to improvise and adapt to technologies that might have seemed skeptical before. Innovations like Modular Construction and Wearable Technologies have grown to show great promise for the construction industry.
New construction technologies involve capital expenditures and a learning curve, which many companies cannot afford. Due to vulnerable economic cycles coupled with importance of risk aversion, adapting to digital trends has become a challenge for the industry. Demand for construction is cyclical and the price competition is fierce.
How Climate Change & COVID-19 Will Shape Construction
Government is becoming more and more aware of the risks posed by climate change and adapting to environmentally friendly options has become critical. Seeing construction sector represents 40% of the greenhouse emissions, several efforts are now being implemented to reduce the environmental footprint of the building sector. Some of the mandatory requirements are adhering to NYC emissions reduction law, voluntary certification for LEED and EDGE.
Since the Coronavirus outbreak, demand for Green Buildings coupled with Indoor Air Quality has been rising. ASHRAE and OSHA have provided a detailed guide on to make buildings COVID-19 resilient, which complements the basic prevention guidelines such as using facial masks, social distancing and sanitization recommended by the health authorities. Moving ahead into the coming years, these requirements are likely to become permanently adopted into building codes.
Customer requirements are becoming more and complex while delivering safer and efficient building, while keeping the competitive cost to as low as possible. Construction companies can use emerging technologies to meet the rising demands of the market. There is a potential annual profile of $265 billion for innovators and disruptors. Construction services will continue to be in high demand since the global infrastructure investment demand is estimated to be about $75 trillion by 2035.
McKinsey’s 9 Important Changes Forecast in Construction Industry
Mckinsey & Company, in their June 2020 report, came up with 9 key transformation that are estimated to rise in the construction industry:
Product-Based Approach: Standardized structures and services with customizable features.
Specialization: Target specific markets and develop competitive advantages based on their markets.
Value-Chain Control & Integration with Industry-Grade Supply Chain: Will be reflected in new business entities, acquisitions, mergers and alliances.
Consolidation: Major investment by large firms for innovation.
Customer-Centricity & Branding: Construction projects will no longer be generic.
Investment in Technology & Facilities: Create construction “Brands” with a product-based approach.
Human Resources Investment: Training for workforce to keep up with the industry changes.
Internationalization: Standardized construction will lower entry barriers across countries.
Sustainability: Efforts for reducing carbon emissions, climate risk mitigation, and promote a safe working environment.
Modular construction will have an important role to play for granting project owners with a much better control over the process as compared to the traditional methods. This will no only help optimize costs, but also mitigate workplace risks like Coronavirus transmission.
Modular construction innovations in material science will focus on lowering environmental footprint and reducing content of Volatile Organic Compounds (VOC). Digital tools will continue to have an important role with use of component families and digital twins.