Report

Reinventing Construction: A route to higher productivity

Construction is a key industry in countries across the world, but one that has struggled to evolve its approaches as other industries have done, and one whose productivity has suffered as a result. Even while other sectors from retail to manufacturing have transformed their efficiency, boosted their productivity, and embraced the digital age, construction appears to be stuck in a time warp.

In the United States since 1945, productivity in manufacturing, retail, and agriculture has grown by as much as 1,500 percent; productivity in construction has barely increased at all. This not only represents a lost opportunity for the industry but costs the world economy.

In this report, the McKinsey Global Institute and the McKinsey Capital Projects & Infrastructure Practice examine the root causes of poor productivity growth in the construction industry, explore practical ways to improve the situation, and discuss the beginnings of a shift in parts of the sector toward a system of mass production, standardization, prefabrication, and modularization—a production system—that has the potential to boost productivity by five to ten times, depending on the sector.

In the case of industrial and megaprojects, we see the need to move away from a primarily process-driven project system to a more holistic project operating system that has to be in place to turn
around the industry’s poor current track record on cost, schedule, and predictability. This research builds on previous work by MGI in conjunction with McKinsey’s Capital Projects & Infrastructure Practice and explores ways to reinvent the construction industry in order to achieve higher productivity.