New research from management consultant McKinsey & Company says the COVID-19 crisis will accelerate the construction transformation the industry needs if it is to move away from poor performance and low margins. It suggests that in the ‘Next Normal’ only those companies that invest in skills, embrace change and adopt new ways of thinking and production will survive.
During the last three months, the COVID-19 pandemic has forced firms across the construction ecosystem to review their financial position, while keeping employees and business partners safe and moving ahead with their ongoing construction projects wherever possible.
The findings in the report, The next normal in construction: how disruption is reshaping the world’s largest ecosystem, show that up to 45 percent of value will be at stake for incumbents in the most affected sectors.
Jan Mischke, partner at the McKinsey Global Institute, said:“While fast movers can tap into $265bn per year in new profit pools as they take advantage of nine transformational shifts that will change the way the industry operates, others will be left behind.”
Gernot Strube, Senior Partner at McKinsey, who leads the Capital Projects & Infrastructure Practice in Europe, added: “We expect to see a transformation away from a complex and fragmented construction landscape building new prototypes in every project, to a more productized, consolidated and vertically integrated construction set-up.
“The industry will move from a project- to a production-based approach, and toward increased investments in R&D, plants, talent, branding, sustainability, and digitization. In this time of reflection and reimagination, businesses have the opportunity to transform their business models, redefine the role they play in the construction eco-system and capture new value.”
In our executive survey, over 75% of respondents agreed that the shifts the research outlines are likely to occur, and over 60% believe that they are likely to happen at scale in the coming five years. Two thirds believe that the COVID-19 crisis will accelerate the transformation.
“Policy makers could support the transformation to help the industry produce better outcomes for their citizens—such as affordable housing and infrastructure; owners can benefit from improved quality at lower costs; and investors could use the foresight in the report to plan their short and long-term investment strategies,” said Mr Mischke.
The next normal in construction: how disruption is reshaping the world’s largest ecosystem depicts scenarios for future construction ecosystem value pools based on bottom-up company data analysis, expert industry insight and foresight, and two executive surveys. To read the full report, visit: https://www.mckinsey.com/nextnormalconstruction.
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