“Ours is the only industry that hasn’t seen material productivity gains across three generations. It’s time for change,” says Turner & Townsend’s managing director for global real estate, Neil Bullen.
Around AUD$14 trillion is spent on construction each year, and seven per cent of the world’s population is employed building the places we live, work and play. This makes construction one of the world’s largest sectors.
However, construction globally has suffered from poor productivity relative to other sectors. According to McKinsey, Australia is among just a handful of countries, alongside Egypt, South Africa, Greece, Belgium and Israel, that combined high measured productivity with relatively fast growth in the construction sector.
Globally, the manufacturing sector has improved its labour productivity by 3.6 per cent a year for the past two decades, compared to construction which has averaged just one percent a year globally and was flat in most advanced economies.
If productivity in the construction industry was to catch up to the progress made across the entire economy, the value to the global economy would, by McKinsey’s estimate, reach AUD$2.3 trillion a year – the equivalent to boosting global GDP by two per cent annually.
Neil Bullen is Turner & Townsend’s managing director of global real estate, responsible for strategy, growth and service delivery across a fast-growing AUD$900 million business.
Originally a chartered civil engineer, Bullen has spent the most of his career working across the infrastructure, real estate and natural resources sectors.
“I’ve been around this industry for the best part of 30 years, and we’ve always talked about disruption and the need for change. But this time it’s different. This time there is a new level of pressure on the industry to change,” he says.
“The industry recognises we have gone as far as we can with our well-established model. We have nowhere to go but to disrupt.”
Construction gets set for a shakeup
A host of trends are already shaking up the industry, Bullen explains.
The first of these is the role of real estate, which Bullen says is “fundamentally changing”. He points to the co-working phenomenon as an example, which is forcing a rethink of how we use and value space and says “corporates are starting to understand the value of real estate as a strategic asset”.
How the construction sector works together is also evolving. “Historically, we’ve had a culture that isn’t always collaborative. Certainly, when things go wrong parties often default to adversarial behaviours.”
But change is afoot, he says, and the NSW Government’s 10 point “commitment” to the construction sector is a good start. This recognises that value for money is not always about the lowest price. Instead, the NSW Government has promised to adopt a “broader, longer-term view of the need to drive quality, innovation and cost effectiveness by fostering a thriving and sustainable construction sector”.
Bullen says the NSW Government’s commitment reflects the need to “work better across all moving parts, rather than as discrete organisations”.
Despite its complex supply chains, the manufacturing sector has embraced a collaborative mindset, and construction can too, he adds.
One of the biggest disruptors will occur when the construction sector embraces integration across the lifecycle.
“We are seeing this already – a move away from the classic three silos of ‘do the deal’, ‘create the asset’ and ‘manage the asset’.” Bullen says clients are driving this shift, “as they look for a more integrated supply chain to bring new solutions”.
Digitalisation drives disruption
Construction is also “one of the least digitised industries” with “one of the lowest R&D spends as a proportion of turnover”. Data and automation will drive efficiencies and productivity gains but making the most of digital disruption demands an “innovation mindset” akin to that found in the manufacturing sector.
Digitalisation is not the “panacea”, Bullen warns, “but it can be a great catalyst to help us create a new model for the industry”.
Finally, modern construction methods – including prefabrication, modular and 3D printing– are gamechangers.
Bullen takes inspiration from Intel’s new office building in Bangalore, India. The structures for each of the nine floors were constructed on the ground, and each nearly-completed floor was hoisted into position with all the materials required for the fitout. This method slashed construction time by 50 per cent.
McKinsey estimates that some parts of the construction industry could enjoy a ten-fold increase in productivity by moving to a manufacturing-style production system. But to realise these benefits, the industry must “adopt better and more consistent standards to give the supply chain confidence,” Bullen says.
In the past, there has been no “imperative for change,” he adds.
“But in a market of strong demand and constrained supply, and where stakeholders want more for less, we can no longer resolve this within our existing model.
“It’s time to pull together. We have seen no net gain in productivity since the end of the second world war – and in many cases we’ve gone backwards.
“Great things are happening, but we need less talk and more action. We need to start driving new industry standards and new ways of working; take more risks and not be afraid of the occasional failure.“We have many of the ingredients we need – ideas, ability and leading-edge products. The foundations are there. Now we need to knuckle down and turn that foundation into a brave new model for the industry,” Bullen concludes.