Philip Collard, CEO of myConsole reviews the latest McKinsey Global Institute report on productivity in construction and zeros in on areas that will specifically improve procurement and pre-construction…
In February 2017, McKinsey Global Institute (MGI) described the current state of productivity in the industry and set out strategies to improve efficiency. Whilst McKinsey outlines seven initiatives to improve productivity we have specifically focused on the three that are directly relevant to productivity gains in procurement.
MGI suggest the construction industry globally has averaged growth of 1% per year over the past forty years. The Farmer Report in 2016 highlighted that the productivity growth in the construction industry had remained flat since 1994.
(See below Figure 1: ONS Labour Productivity, Q4 2015. Table 1 and 8. April 2016.)
The potential for productivity growth is massive
Organisations and governments across the world are looking for ways to address stagnant productivity levels. The UK government has developed a vision for the construction industry to achieve by 2025, which includes a target to lower costs by 33%. To achieve anywhere near this target, we as an industry needs to embrace profound change.
MGI states if we do not adopt digitalisation we will miss a huge opportunity to turn around the industry. “Construction-sector participants should rethink their operating approaches to avoid being caught out in what could be the world’s next great productivity story.”
How can the pre-construction sector change this picture?
The report identifies several areas that will significantly impact productivity and cost-savings (see below Figure 3: Potential global productivity improvement from implementation of best practices), three of which specifically relate to pre-construction. Making changes in these areas will deliver 13% to 18% in cost savings and could offer a rise in productivity of 29% to 42%.
- Collaboration and contracting
MGI identifies a need to move to “a system focused on collaboration and problem solving.” The tendering process needs to change from focusing on cost alone to “be based on best value and past performance.”
Visibility and transparency are paramount. “Establishing a “single source of truth” on projects for monitoring progress early, potentially supported by collaborative technology, helps to minimize misalignments and enable joint corrective action.”
This is greatly encouraging to us at myConsole as our new cloud-based collaboration platform delivers transparency and visibility across the entire procurement process . All information is accessed and updated in real-time. With everyone working from the same information, organisations can deliver a joined up approach that increases client desired outcomes and expected performance so pre-construction can innovate client-centric, value-adding solutions, which will help ensure our clients win more bids.
- Procurement and supply chain management
We comprehensibly agree with MGI that the industry needs to focus on using digital solutions to host and deliver best practice across the entire procurement cycle. Please note the following specific MGI extracts….
“…digitally enabled approaches can deliver substantial change. Improved planning and increased transparency among contractors and suppliers would reduce delays significantly.
“Best practice in areas such as digitizing procurement and supply-chain workflows will enable more sophisticated logistics management and just-in-time delivery.”
We designed myConsole to leverage benefits of 24/7 virtual team collaboration across a multitude of bids irrespective of their individual stage, we designed our integrated workflows as a core management process so users can instantly undertake pre agreed or system prompted improvement actions and complete virtual team activities simultaneously that deliver immense benefits – all visible via their own dashboards to ensure real time governance reporting across all gateways and reviews.
The report clearly states that one route to higher productivity is new technology. “..the tools for that more productive approach are increasingly available through digital technologies…”
We are greatly encouraged when reading these types of reports as it has taken our high experienced management team 18 solid months to design the wire frames and then another 10 months working with an incredibly brilliant team of software experts. We believe our platform, myConsole, is going to be the digital tool that will harness the power of work winning and pre-construction data. We also predict our clients will experience 70% increase in profitability from achieving 1:2 win rates and through each member of pre-construction gaining a 20% personal productivity improvement.
Philip Collard is currently running a series of Bid Productivity Workshops around the country, which we invite you to attend to review your current procedure – an opportunity for improvement through adopting digitalisation of back end business processes. If you would be interested in attending one of the free 15 workshops available, please register here.