Unmet demand for modern, high-quality infrastructure poses a threat to global economic growth. Closing the gap will require the infrastructure industry to make improvements in complex areas such as financing, technology, project management, and talent development. But innovative solutions to the industry’s challenges are being rapidly pioneered and refined, as I heard while co-chairing McKinsey’s 2017 Global Infrastructure Initiative (GII) Summit in Singapore.
From the onstage discussions and my collegial conversations with some of the 200 senior executives and public officials who attended the summit, I learned about a variety of fascinating advances—and came away optimistic about the industry’s prospects for becoming much more productive. Here are a few of the most compelling storylines coming out of this year’s GII Summit.
Adversarial relations among project participants can be superseded by collaborative approaches that put stakeholders’ needs first. Anyone who’s worked on an infrastructure project has almost certainly heard of, observed, or been involved in a dispute between the parties to one of the many contracts that large capital projects require. Contract disputes are a major source of friction in the infrastructure business, resulting in inflated costs and missed deadlines. But it may not be long before such disputes are rarer than they are today, if project owners adopt a more collaborative approach to the contracting process.
In particular, project owners are beginning to recognize that outcome-based procurement, which involves rewarding contractors and suppliers for meeting performance objectives, has advantages over traditional rules-based procurement: it can better align the interests of companies all along the value chain, share risks proportionally, and promote problem solving over blame shifting when things go awry, as they inevitably do. Transparency is an essential feature of outcome-based procurement. The organizations that take part in a project need to share information in real time, so that changes to a plan are broadcast to every participant right away, allowing them to adjust their activities and keep their work on track.
Advanced technologies are boosting the efficiency of every work stream in infrastructure projects and unlocking essential productivity gains. New analytics applications are enabling companies to optimize project designs so new infrastructure can be built and operated at much lower costs. Another useful technology is highly precise geolocation and surveying, which help project managers spot geological problems before they reveal themselves in last-minute surprises that trigger expensive design changes. For infrastructure financiers, big data and advanced analytics can help with pricing risk into the underwriting process. This can increase the flow of much-needed capital into infrastructure projects.
The construction phase can also benefit from better technologies: 3-D printers, for example, can now be used to fabricate large concrete structures away from a project site, which saves time and money. And once an infrastructure project is complete, Internet of Things technologies such as remote sensors can be used to monitor the condition of assets. The data they supply can be compared, using sophisticated algorithms, with historical databases on asset performance, so that maintenance can be scheduled to prevent failures more effectively, without prematurely replacing assets that still work well.
The infrastructure industry is catching up to other industries in how it invests in lifelong learning and engages diverse talent—but it still has a long way to go. Engineering and construction companies have historically made modest investments in developing the skills and capabilities of their people. For technical roles such as engineering, keeping up with the newest methods and technologies is a de facto professional requirement rather than a formal one. But many jobs are still performed much the same way they were 20 or even 40 years ago: it’s not uncommon to see construction foremen carrying clipboards rather than the tablets that have become standard equipment in heavy industrial settings.
Unfortunately, the workplace culture surrounding such positions and others in the industry is also well behind the times, particularly when it comes to women. I’m aware that some companies are ramping up their efforts to attract, retain, and reward women. What they learn from these efforts could help other businesses to do more as well. The advancement of women in infrastructure isn’t just a matter of principle. It’s also a matter of quality: companies that fail to engage women are missing out on a deep pool of talented workers. Encouraging as it was for me to see how many women were among the leaders at this year’s GII Summit, men still outnumbered them by a wide margin. My hope is that when I arrive at next year’s GII Summit, more women will be in attendance, and even more in each year after that.
Like many other sectors, infrastructure has ample room for improvement. And given that infrastructure is critically important to bettering the lives of people around the world, businesses and public-sector agencies owe it to their stakeholders to accelerate their improvement efforts. I’m confident that they are doing so, after hearing at GII about how organizations are pushing themselves to plan, fund, build, and operate projects that meet ever-higher standards for efficiency and quality.