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Transforming Industries through Technology, Innovation & People
© 2016 Willis Towers Watson. All rights reserved.
22nd Annual Willis Towers Watson Construction Risk Management Conference
September 13, 2016
Karen O’Leonard Willis Towers Watson
Michael Buehler World Economic Forum
Construction has changed very little in the past... C
ar m
anuf
actu
ring
Con
stru
ctio
n
Today 1920 1960
Source: BCG analysis
0
100
200
300
1985 1995 1965 1975 2005 1990 1980 1970 2010 2000
Index of labor productivity
+1.95%
-19%
+153%
As a result, productivity takes a hit
Source: WEF, OECD, IHF, Global Vantage; Compustat; Bloomberg; BCG analysis; http://www.aecbytes.com/viewpoint/2013/issue_67.html; http://www.nber.org/papers/w1555.pdf
Non-farm business labor productivity
Construction labor productivity -0.43%
Construction labor productivity in the U.S.
Productivity delta is substantial in all countries
Low adoption of new technologies is a key issue recognized by industry leaders
“The E&C industry is not even in the Third Industrial Revolution, let alone in the Fourth; a step change is required. Thanks to new (digital) technologies a new industrial revolution is feasible.”
Future of Construction session, Davos 2016
“Looking at construction projects today, I do not see much difference in the execution of the work in comparison to 50 years ago.”
John M. Beck, Executive Chairman, Aecon Group, Canada
At the same time, megatrends affecting the industry create need for action
Sustainability and resilience
Market and customers
Society and workforce
Politics and regulation
Demand in developing countries Resource scarcity Urbanization and housing crisis Complex regulatory requirements of next decade’s growth in construction will happen in
emerging countries
consumer of global raw materials is the
construction industry No. 1 people are added daily to
urban areas and need affordable and healthy housing 200k different procedures are
required for a warehouse construction permit in India 25
Globalized markets Sustainability requirements Health & comfort needs of inhabitants Stricter HSE and labour laws engineering and construction companies plan to move into new
geographies
of the solid waste in the United States is produced
by the construction industry 50% higher than outside levels
are the levels of volatile organic compounds
found inside US homes
2–5× of the workforce in a public project in California had to
come from the “otherwise unemployable”
10% 1 in 2
Bigger and more complex projects Energy and climate change Talent and aging workforce Slow permit and approval process is the length of the undersea tunnel
that will connect Dalian and Yantai
of global greenhouse gas emissions are
attributable to buildings 30% of general contractors are
concerned about finding experienced crafts workers for their workforce
50% of infrastructure could be added by 2030 if all
countries committed to specific time limits for approvals
$1.2tn 123km
Aging infrastructure Resilience challenges Stakeholder pressure and organization Geopolitical uncertainty German railway bridges are more than
100 years old
as many disasters were reported last year as the number in 1980
3× signatures were collected opposing the construction of
the Stuttgart train station 67k Turkish construction workers
were kidnapped by militants in Baghdad in September 2015
18 1 in 3
Massive need for financing Cyber threats Politicization of construction decisions Corruption annual investments are needed to close the global
infrastructure gap
of firms agree that information controls have an impact on front-line employees
90% the Portuguese government
cancelled a 165km high-speed line project as part of austerity measures
In 2011, of survey respondents believe corruption is
common in a Western European construction market
49% $1tn
65%
Source: World Economic Forum; BCG analysis
Achieving better business results: An integrated approach
10
Targeting the drivers of productivity to achieve better business outcomes
Man
agin
g H
uman
C
apita
l Ris
k
Best Talent Hiring, onboarding and
development
Winning Culture Aligned workforce, engaged
employees
Right Rewards Effective managers, aligned
rewards, line of sight
Well-being Physical, emotional, financial
Tale
nt S
trat
egy
Enabled by tools, technology, processes
Business Outcomes
Customer, financial and operational
performance
Productivity Measures
Output per
worker Rework rate On-schedule
delivery On-budget
delivery
© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential.
Assessments provide an analytical approach to hiring, development and promotions
11
Best Talent
© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential.
Individual Strengths Overview
Signature Strengths
Supporting Strengths
Lessor Strengths
Development Areas
Engagement leads to better performance
9
Source: Willis Towers Watson 2014 Global Workforce Study
Engaged employees change the bottom line
operating margin
fewer days absent
lower turnover risk
3x 6.5
% 41
Winning Culture
© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential.
Leaders and managers are critical to engagement
1
Senior Leadership
2
Clear Goals & Objectives
3
Supervisor
4
Image & Integrity
5
Workload & Flexibility
What drives employment engagement?
Source: Willis Towers Watson 2014 Global Workforce Study
© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential.
Winning Culture
Leaders and managers establish organizational culture
13 © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential.
Bias for Action
Anticipate Needs
Clarify Priorities
§ Safe to voice opinion
§ Differing opin-ions discussed openly
§ Support for workplace diversity
§ Openness to trying new solutions
§ Leaders provide clear direction
§ Leaders estab-lish priorities
§ Leaders behave consistent with core values
§ Right balance of analysis & action
§ Entrepreneur-ial leadership
§ Effective pace of change
§ Understands customer needs
§ Anticipates new solutions
§ Responsive to market changes
Diversity of Thought
Support for Risk
KEY DIFFERENTIATORS OF AN INNOVATION CULTURE
§ Trial & error encouraged
§ Ability to fail § Collaboration
on new ideas & solutions
§ Willing to take prudent risks
Winning Culture
Source: Willis Towers Watson 2014 Global Workforce Study
Differentiate rewards by workforce segment
Employee Performance
Valu
e
Proficiency Roles
Employee Performance
Valu
e
Efficiency Roles Pivotal Roles
© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential..
Highly-leveraged rewards with emphasis on
performance over the appropriate horizon
Emphasis on wealth accumulation over time with reduced
leverage
Focus on a market-based reward structure
Right Rewards
RE
WA
RD
S
Employee Performance
Valu
e
Rewards should be differentiated by performance
16
1 2 3 4 5 Performance rating
25%
50%
75%
100%
125%
150%
175%
Bon
us
At this construction firm, more than half of employees not meeting expectations received more than their average target bonus payout…
Right Rewards
© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential.
Rewards should be differentiated by performance
17
25%
50%
75%
100%
125%
150%
175%
Bon
us
…and there was not enough differentiation in rewards across performance levels.
1 2 3 4 5 Performance rating
Right Rewards
© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential.
Effective well-being programs make a difference
© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 8
Source: 2015/16 Global Staying@Work survey, United States * Global finding
Improved productivity
2x more likely to “significantly”
outperform peers
1.0 fewer days of
unplanned absence per year
Lower annual medical plan costs
PEPY $1,000
50% higher revenue per employee*
Healthier workforce
24% fewer cases with hypertension
23% fewer high Glucose
Risk
29% fewer users of
Tobacco
67% More likely to
have employees
participate in at least one wellbeing
activity
Well-being
PREVENTION § Safety § Health promotion § Prevention/screenings
§ Lifestyle
PERSONAL SUPPORT § Return to work § Financial literacy
§ Health advocacy § Care delivery § Worksite health
ORGANIZATIONAL SUPPORT § Leadership support § Flexibility
§ Resource allocation
DESIGN AND DELIVERY § Communication and
change management § Program management
Four pillars of an effective well-being strategy
19 © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. .
Well-being
Source: Willis Towers Watson 2015/16 Global Staying@Work survey
Source: World Economic Forum; BCG analysis
Industry transformation is possible, but requires action in many areas C
ompa
ny le
vel
Advanced building and finishing materials
Act
ors
Sec
tor l
evel
Processes and operations Technology, materials, and tools 2.1 2.2 (Semi-) autonomous construction equipment
Frontloaded and cost-conscious design and planning
A common framework for project management
New construction technologies, e.g. 3D printing
Digital technologies and Big Data along the value chain
Enhanced manage-ment of subcontrac-tors and suppliers
Rigorous project monitoring (scope, time, cost)
Stand., modularized and prefabricated components
Smart and life-cycle-optimizing monitoring equipment
Innovative contracting models with balanced risk-sharing Lean and safe construction mgmt. and operations
Strategy and business model innov. 2.3 2.4 People, organization and culture Differentiated business model and targeted consolidat./ partnerships
Internationalization strategy to increase scale
Strategic workforce planning, smart hiring and enhanced retention
High-performance organization, culture and incentive schemes
Sustainable products with optimal life-cycle value
Continuous training and knowledge management
Industry collaboration 3.1 3.2 Joint industry marketing Mutual consent on standards across the industry
Cross-industry collaboration along the value chain
Industry-wide collaboration on employer marketing
Effective interaction with public sector
More data ex-change, and best-practice sharing
Coordinated communication with civil society
Gov
ernm
ent
Regulation and policies 4.1 4.2 Public procurement Harmonized building codes/standards and efficient permit processes
Promotion and fun-ding of R&D, techno-logical adoption and education
Actively managed and staged project pipeline with reliable funding
Innovation-friendly and whole-life-cycle-oriented procurement
Market openness to international firms and SMES
Strict implementation of transparency and anti-corruption standards
(Future) Best practices
In particular, innovations and new technologies will have a tremendous impact on infrastructure & urban development industry
Impact-likelihood matrix of new technologies
Source: Survey among 26 SteCo and AdvCo members and selected industry experts as of Sept 2015 ; World Economic Forum; BCG analysis
Augmented Reality
Big data analytics
Wireless monitoring (IoT)
Contour crafting of buildings
3D printing of components
Prefabricated building components
Advanced building materials New active materials
Self-healing materials
Drones
3D laser scanning
Integrated BIM
Advanced project- planning tools
Real-time mobile collaboration
Extremely likely
Not likely
Somewhat likely
Like
lihoo
d
No impact
Extremely high impact
Some impact
Impact
Lighthouse innovation projects and companies provide us a glimpse of how the future might look like – 3 examples
• Fastest construction of 50+ storey skyscraper
• Leveraging manufacturing principles from other industries to take pre-fabrication to the next level
• The Edge – World's most sustainable office building
• Driving innovation in building design & construction through systematic end-user orientation
• World's first 3D-printed houses at scale
• Reducing construction waste through innovative technology that builds on company´s rich experience in building materials
1
2
3
Broad Sustainable Building: Building a skyscraper within weeks Using pre-fabrication and manufacturing principles to enhance project delivery
• Using factory-made pre-fabrication to energy-efficient buildings that are 5 times more energy
efficient, have multiple times cleaner air (compared to conventional Chinese buildings) and withstand magnitude 9 earthquakes
• Pre-fabricated elements are manufactured in huge assembly lines where elements are composed building on three basic steel elements – steel column, beam or floor platform – 90% of the final building is pre-fabricated like this
• Material innovation (e.g., honeycomb steel) to reduce weight & impr. stability for super high-rise
• Configuration guide on website allows clients to select from an array of building types (e.g., kindergarten, museum or hotel) and specifications
• Chinese construction company focusing on factory-made pre-fabrication (subsidiary of air-
conditioning specialist Broad Group) • Founder was motivated by poor environmental performance and quality of traditional buildings – 2008 Sichuan earthquake for instance killing thousands of people • Company attracted international attention through a number of pilot projects (>30) conducted within
weeks instead of months or years (filmed in time-lapse) • 2010: 15 storey hotel in 48 hours • 2013: T-25 – 25 stories-tower in 17 days • 2015: J57 – A 57-stories mixed use building in just 19 days
• Planned building of 202 story building within 90 days (+120 days pre-fabrication) – initially halted due to permitting problems, but now company received approval for technology
Innovation/Technology
Source: Broad; Press Research; BCG analysis
Watch time-lapse video
Company Background
Winsun (Yingchuang): Bringing 3D printing to the construction industry 3D printing pre-fab modules to compose entire houses using advanced building materials
• Developed 3D printing technology for construction sector and was the first company to report successful 3D printing of ten houses in 2013
• World's largest 3D printer of 6.6m height.10m width and 110 meters lengths adds up layers of special ink (mixture of glass fiber, sand, cement, hardening agents). Pre-fabricated sections of the house are then assembled on site
• Printed 10 houses in <24hours and completed the world's largest 3D printed building – a five-story apartment block and the world´s first 3D printed office in Dubai
• Technology significantly reduces construction waste by using up to 50% demolition or mining waste in its 'ìnk' and avoiding waste in the actual construction process
• High-tech company established in 2002 with a focus on advanced building materials that has ventured into 3D printing in construction
• >120 patents e.g., Glass-fiber Reinforced Gypsum that is used for the construction of 95% of Chinese grand operas
• Recently created Winsun Global (together with international partners) to expand globally
• The company is also actively pushing for regulation & standards for 3D printing
“There is nothing what we cannot print. The limit only is what you dare to think.”
Winsun´s Chairman Ma
Innovation/Technology
Source: Yingchuang; Press research; BCG analysis
Watch video
Company Background
The Edge: The world's most sustainable office building Using smart technology to improve sustainability and usability
• Energy-positive building using 70% less electricity than comparable office buildings
• Roof and South-facing facade incorporate photovoltaic panels and aquifer thermal energy storage system provides the energy required for heating and cooling
• Smart technology (e.g., ethernet-powered LED connected lighting) uses 30,000 sensors to measure and respond to occupancy, movement, natural lighting levels, humidity & temp.
• Building App that connects every employee with the building allowing to find parking spaces, free desks or colleagues and customize light and temperature
• Smart facility mgmt. (using big data & analytics) predicting occupancy at lunch & skipping unused rooms for cleaning
• 40,000m2 office building in Amsterdam's Zuidas business district
• Highest BREEAM rating (98.36%) for an office building and winner of the BREEAM Award for Offices New Construction in 2016
• Developer OVG RE, designed by PLP Architecture & built by Van Rossum BV, G&S Bouw
• Project was put on hold during financial crisis and sustainability was made explicit requirement by investor to continue to project
• OVG currently plans already "The Edge 2" which will include many lessons The Edge
Innovation/Technology
Source: BREEAM; PLP Architecture; Press research; BCG Analysis
Project Context
Agenda
Introduction
Megatrends shaping the industry
Internal Challenges
Transforming the industry
Moving Forward
Q&A
29 © 2016 Willis Towers Watson. All rights reserved.
Thank You
https://www.weforum.org/reports/shaping-the-future-of-construction-a-breakthrough-in-mindset-and-technology
https://www.towerswatson.com/en-US/Insights/Newsletters/Global/strategy-at-work/2012/a-powerful-advantage
Karen O’Leonard
© 2016 Willis Towers Watson. All rights reserved. 30
Karen joined Willis Towers Watson in 2015 as the Global Leader of Client Solutions. In this role, Karen works closely with the firm’s business units and geographies to identify topics of future importance and to bring new products to market.
Prior to joining Willis Towers Watson, Karen served as Vice President of Talent Analytics at Deloitte, where her focus was helping HR organizations build their capabilities for data-driven decision making.
Earlier in her career, Karen held senior roles in product management, research, and M&A at Silicon Valley firms Apple, Sun Microsystems, and eBay.
Karen holds a BS degree in business administration and an MBA with a concentration in quantitative methods. With this background, and 20+ years of experience, Karen brings expertise in data and analytics, together with a keen understanding of business issues, to her work at Willis Towers Watson.
Michael Max Buehler
Michael Max Buehler is the Head of Infrastructure & Urban Development at the World Economic Forum. Michael is responsible for managing strategic relationships with approximately 50 global CEOs from the engineering & construction, real estate and urban services sectors. Michael has sixteen years of international, academic and professional experience in the construction, mining and real estate industries including project management positions on major public infrastructure and public-private partnership projects. Prior to joining the Forum, Michael worked with Deloitte in the Infrastructure and Capital Projects Advisory practices in Vancouver, British Columbia. Michael managed projects for clients and industry leaders at C-suite level including major public infrastructure, mining and real estate projects as well as on capital programs and portfolios for private and public entities. Before, Michael worked for Bilfinger, a leading industry player for major infrastructure projects providing worldwide engineering, procurement, construction management, O&M and project finance services. Michael is experienced in managing project stakeholders in complex multi-contract project environments. Michael has a PhD in civil engineering, an MBA with finance and accounting specialization, is registered and licensed as a Professional Engineer in British Columbia and is a certified Project Management Professional. More details on LinkedIn ch.linkedin.com/in/mmbuehler