Future of Construction Like The World Depends On It (Part 2)

Published: Monday, June 26th, 2017 by Lenora

Last month’s blog post about Shaping the Future of Construction, led by the World Economic Forum and Boston Consulting Group, underlined the urgency of industry transformation in construction and engineering cited by this initiative. McKinsey’s work on Imagining construction’s digital future share many points, among which:

  • Construction, infrastructure and real estate lag in integrating new operating disciplines to meet an accelerating and increasingly globalized industry landscape.
  • This new landscape is driven by the increased importance of customer satisfaction, more complex national regulatory landscapes, uptake of technology-driven efficiencies and improvements, demand for environmental sustainability, the challenge of talent attraction, development and retention and global megatrends like urbanization and climate change.
  • Uneven diffusion of technology and knowledge already poses binding constraints on market participants in construction, infrastructure and real estate.
  • Financial and investment institutions are conservative and project structures and contracts are unfit to share risk for innovation in new markets and products.

Although not the focus of these studies, these logjams pose binding challenges to developing smarter and more inclusive cities and communities, whether for affordable housing, community development or social infrastructure. Disparities between developed and emerging markets and between high end and lower and middle markets are already problematic for capital providers. Neither earlier stage venture capital, philanthropy nor government funding alone are likely to clear these log jams.

Few examples are being elevated as 21st century solutions for affordable housing and inclusive cities in developing markets. Of the WEF/BCG’s ten “lighthouse innovation cases,” only two have direct relevance to building cities for the majority. That tells a story in itself. Technology and design thinking are mostly for class A buildings.

Even so, I highly recommend reading the case studies and their conclusions across all the examples because they point the way to the future for all market participants. The most relevant examples in the WEF/BCG article are moladi and Winsun. Even the featured firms and projects with target markets far above lower and middle income segments point the way to the future, including for affordable housing and inclusive urban infrastructure.

Future of Construction: Moladi Plastic Formwork

Moladi Plastic Formwork

Moladi’s solution has been featured in this blog before (read more here). Its plastic formwork system and the company’s patented MoladiChem mortar additive allow the company to train local unskilled labor to construct a building in two days. Winsun is emblematic of the coming digital and manufacturing revolution in building – 3D printing. This technology remains a far off option for mass housing but nonetheless illustrates that industrial techniques for housing could bring cost efficiencies, design opportunities and sustainability benefits.

Across the WEF/BCG case studies, the lessons span business model innovation, organization management, partnership structuring, leadership in design, technology integration and social and environmental alignment. Among our favorite takeaways:

Business model innovation

  • flexibility to integrate design, construction and financing into a single turnkey product
  • pre-fabrication, inclusion of sustainability features (e.g. rainwater harvesting, solar panels) set as early priorities for both construction and operating cost savings
  • pre-selling with down payments linked to construction progress
  • pilots and minimum viable products used to introduce new opportunities

Organizational management

  • orientation toward mission and purpose as a means of engaging talent across disciplines
  • intentionally low waste/low emissions/low pollution on site construction practices
  • borrowing from other disciplines to introduce supply chain models that embrace alignment, incentives, collaboration, integrated teams, visible programs and limited waste
  • collaboration to break through old fashioned approaches, bringing new mindsets to organizational challenges, including training and information for stakeholders and project partners
  • introduction of continuous improvement approaches, including collaborative procurement, that bring in all stakeholders to suggest and pilot ideas

Partnership structuring

  • multidisciplinary partnership across clients, designers, developers, engineers, financial institutions and even municipal government on achieving design, sustainability and innovation goals, enabled by leadership from the top of the organization
  • central management of contracts with detailed specifications, milestones and incentives
  • close relationships with financial institutions and investors to ensure shared risk/reward and long-term orientation
  • ability to build and direct efficient local supply chain, for elements like doors and windows
  • long-term public private partnership contract that included operations and maintenance contracts for long term fulfillment of project objectives
  • ability to pivot quickly and address technological and regulatory issues during construction

Leadership in design

  • user-centered design, energy and water efficiency and occupancy flexibility integrated at the design stage
  • standardized design for room types and standard, prefabricated components for other elements like bathrooms
  • product design specifically for smaller projects and lower-income segments
  • open community space for building connections between people placed higher in priority than underutilized individual space

Technology integration

  • building information modeling and collaborative online work platforms to provide execution frameworks and to manage project complexities throughout project life
  • forethought to online systems and information (like component manuals and installation information) to ease operations and maintenance (O&M) in the future

Social and environmental alignment

  • highly efficient, climate neutral, waste minimizing goals for the final built project to maximize the goal of a healthy environment
  • durable product that feels as sturdy as brick and mortar to consumers
  • building technology that can draw from local labor surpluses

Generally, these lessons required visionary leadership, deep and appropriate financial commitment, global talent resources, close organizational relationships, flexibility and communication within a broad ecosystem of stakeholders and commitment over long periods of time.

Right now, most affordable housing developers and community builders can’t hurdle these emerging realities and opportunities regardless of geography. And yet, these are the enterprises who will be building critical infrastructure for the vast majority of the world’s urban population.

Building cities for the majority in developing markets will require many of the same resources that high end building requires, but they must be delivered and re-engineered to meet the specific needs of now excluded homebuyers and renters. The most important resources come from organizational development, appropriate technology and the right partnerships throughout the enterprise ecosystem and not from capital alone.

Stay tuned for more about what can be done and what investors think about making these ideas a reality.