CONSTRUCTION PORTFOLIO OF EVENTS

Reviving the construction economy

Strategies, initiatives and solutions from the CEO Forum

Six months ago, the construction industry was already struggling in the face of macroeconomic and global political pressure. Now, with the compounded effect of COVID-19, our world has become vulnerable, uncertain, complex and ambiguous – the VUCA world. In the exclusive online CEO Forum hosted by The Big 5, the region’s leading CEOs including policymakers and construction company leaders, examined the intricacies of the VUCA reality and explored the strategies, initiatives and solutions that can be employed to usher in stability and opportunities in this uncertain world.

  • Dr Fadi Bayoud, Founder, Strategic Anchors FZE (Moderator)
  • Dr Mahmoud El Burai, Vice President of International Real Estate Federation, FIABCI Arabic Countries
  • Rami Alturki, Executive Vice Chairman, Nesma & Partners Contracting, Saudi Arabia
  • Talal Al Gaddah, Senior Executive Vice Chairman, MAG Lifestyle Development
  • Andrea Scotti, Managing Director Middle East, Buro Happold
Key takeaways:
  • Collective action and aligned stakeholder buy-in is needed to manage the effects of COVID-19 on the construction industry
  • The COVID-19 pandemic has boosted the need for innovative ways to use data-driven insights in the construction industry
  • The importance of data and communication for strategy formulation and implementation
  • With the globalised supply chain model under extreme pressure, there are enormous opportunities for the localisation of the construction supply chain

Since the dawn of civilisation, change has always been present. Previously, we used the say that change is the only constant. Now, we can safely say that change is constantly accelerating. Previously, we also used to say that handling change is difficult. Now, we can safely say that handling the constantly accelerating change is beyond any change management models and frameworks that we know about. Thus, collective mind-shifting systems must be put forward to manage the compound effect of this continuous and accelerated change.

Projections for 2025 in a post-COVID-19 world 

As one of the largest industries in the world, the construction industry is heavily connected to the growth, or the non-growth, of the global GDP. Historically, the construction industry has been rather inefficient, as it has lacked in the technological development that is needed to sustain it.  However, the positive consequence of all this accelerated change is that the industry is ripe for disruption.

What will happen after COVID-19 is the million-dollar question, however, what we do know is that most of the projections show that globally, the negative effect of COVID-19, in the sense of the decrease of productivity against the base-line performance, is going to be comparable to the negative impact of World War II. Past data suggests that after a shock such as World War II or COVID-19, most industries experienced a complete revolution and began growing much faster than they were before the shock occurred.

The critical consideration here is how long the shock will last, which is very difficult to predict. However, there is a collective hope that this will be a push for the continuation of the vertical and horizontal integration process and technological advancement of the construction industry.

Case study: Dubai

In Dubai, the real estate and construction industry is looked at in three stages. The first was 2001 to 2008 when the freehold market opened, which was a time of perhaps more speculation. The second ran from 2009 to 2013 and it was a time of more regulation and disciplined growth. From 2014 to 2019, there was a gradual slowdown in terms of the price of real estate in Dubai.

In 2019, everyone was very optimistic that 2020 would be a turning point in the real estate and construction industry as Dubai prepared to host the World Expo 2020. However, with the postponement of Expo 2020 as a result of COVID-19, this should now be seen as an opportunity to be more innovative.

Today, there is a more definite direction towards digital investment, and business continuity is becoming very important. End-users are also starting to accept technology more than ever before to be able to create sustainable and healthy communities.

Maximising visibility for construction investment strategies and access to viable data

The 4th Industrial Revolution is driven by data that comes from technologies, and the whole experience of the COVID-19 pandemic has turbo-boosted the need for innovative ways to use data-driven insights in the construction industry.

There are three main drivers for the use of data in construction: From the contractor’s side, there is the need to be more efficient and reduce the number of people needed onsite or in the office, and to be able to utilise data to make better decisions. We are also seeing a trend where developers are mandating the use of specific technologies. Simultaneously, we need the regulators to come on board with accelerating the use of technology in construction by investing in the correct infrastructure, such as the use of 5G, for example, and the use of Internet of Things (IoT) in the manufacturing domain.

COVID-19 has presented an enormous opportunity to make the GCC construction industry more transparent. With the public sector sharing data and information on which factors impact supply and demand, the private sector is better equipped to make informed decisions on when and where to invest.

Investment in local manufacturing to strengthen the supply chain

The current model for a globalised supply chain is under extreme pressure. This opens up opportunities for localisation of the supply chain. The Government of Saudi Arabia, for example, has been very forthcoming and aggressive in moving towards more localisation.

For companies to invest in construction, not only does there need to be the availability of the hard and soft infrastructure, but also of the correct forms of financing such as soft loans. The government in Saudi Arabia has also taken a decisive stance in reassessing import tariffs in order to ensure the sustainability of the supply chain and to continue to grow the economy.

In the long term, using a more local supply chain for the construction industry in the GCC is a recipe for improving the economy. So, whenever possible, consultants should specify locally manufactured products. However, by producing everything locally, you cannot be best in class in everything. As we stand currently, the missing piece of the puzzle for local manufacturing and supply chain is the quality and control checks that need to be in place across the entire value chain.

Data and Communication: Endorsing new methods, functioning and thinking in construction

As a lot of our skills and resources will become obsolete in the next decade, we need to be able to build the right ones for the future. One of the key issues is the lack of unified source of accurate data in construction. This requires a new regulatory framework to make that data available, plus construction professionals need to have at least a minimum amount of technological know-how to be able to understand and utilise that data. Once there is a reliable single-source of data, we can unlock real collaboration, real integration and actual alignment on the final product.

Similarly, another ongoing challenge in the construction industry is around communication and building trust. Communication skills are crucial for any industry, especially for leadership, and two fronts must be utilised to facilitate this communication. One is technology, such as BIM for example, which can streamline the communication in the industry. The second is the improvement of human-to-human communication skills through training and development on the strategic level of the companies.

To ensure better collaboration between the stakeholders, the onus is on the owner of the project to make sure there is trust and alignment between the parties. This includes putting together a clear responsibility matrix and defining a role for everyone involved, something that should be documented and audited.

Strategic management during a crisis

Effectively choosing what you want to do and what your values are as a company is one of the core functions that a CEO and the management team must decide on and present to the board. This must not only be done once a year but rather continuously, both at a board level and on a senior management level.

The majority of strategies fail not because they are not good but because of the failure to communicate and implement them effectively. The key is to develop a strategic framework that is relevant from the top level, and it cascades all the way down throughout the organisation. And although having a sound strategy is essential, when facing issues like the COVID-19 pandemic, it is equally important to understand the market and to identify what the company needs at any specific point in time.

Summary

We can all agree that the COVID-19 pandemic is one of the many factors that have impacted the construction industry in the GCC in the past year. When the general economy is not growing, it is almost impossible to witness growth in the construction industry. And while technology will not necessarily help the industry recover any faster, it will ensure that when the industry gets there, it will be more efficient and better able to deliver successful projects and the right products. What our experience with COVID-19 has also done is highlight that although having a well-thought-out strategy is vital for a company, being able to deal with volatility in the market and to react accordingly is equally important for long-term survival in the industry.

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