Nine out of 10 capital projects are late and over-budget (Bent Flyvbjerg, How Big Things Get Done). This benchmark is pretty low in any industry, and the construction industry has lots of room for improvement.

Yet the construction industry has not improved in the last several decades – there has been minimal innovation to improve productivity in the last 20 years. Projects continue to be late and over-budget today as they were 20-30 years ago. There have been minor initiatives to use new technology for certain tasks, or new ways of working to make tasks more safe, but overall the statistics on project performance have not improved.

Why is this? Why are other industries able to improve productivity, but the construction industry has not been able to make progress?

In a brief prepared by the McKinsey Global Institute several years ago, the report indicates the construction industry has an annual spending of $10 trillion, but over the last several years has only marginally improved productivity by 1% each year. Because of this, the report indicates there is a $1.6 trillion opportunity if the construction industry is able to achieve productivity gains similar to other sectors, with these seven areas identified by McKinsey as opportunities to boost productivity by 50-60%:

• Reshape regulation
• Rewire contracts
• Rethink design
• Improve procurement and supply chain
• Improve onsite execution
• Infuse technology and innovation
• Reskill workers

However, in the years since the McKinsey report was issued, none of these areas have improved to boost productivity.

So, there must be something else at play that is holding the construction industry back and stifling innovation. What could that be?

Could it be that the construction industry has a mindset problem? Could it be that the construction industry is stuck in a finite mindset? Let’s explore this concept a bit further and apply some of the concepts from Simon Sinek’s books Start With Why and The Infinite Game to see if these concepts explain the construction industry’s lack of progress. 

In the last few years, and especially since the pandemic, the business world has started to adopt the concept of purpose-driven companies. More companies have started to define the reason they exist and the purpose they fulfill, rather than exclusively focusing on maximizing profits. Some companies have had this for a while, companies like Apple that defined their purpose in the 1980s and use this to guide their decision-making processes. But more companies are now doing the same and adopting this philosophy in their approach to business, to actively pursue purpose driven initiatives in how they approach their work.

However, this purpose-driven mindset is noticeably absent in the construction industry. Some companies may say the right things, but there are very few that follow through and actually do the right thing on a daily basis on-site when working on projects.

There may be a reason this purpose-driven mindset is challenging to have on projects. Projects by nature are finite initiatives – they have a defined start, a defined middle, and a defined end. This is the definition of a finite game, so it is natural for project participants to have a finite mindset when working on projects.

However, this presents a conflicting situation that does not exist to the same magnitude in other industries. A finite mindset lends itself to making short-term decisions that may seem like the best decisions at the time, however they have negative outcomes over the long term. When capital projects span multiple years, a finite mindset does damage to the long-term outcome of projects that are completed years later. We see this all the time when short-term decisions are made during design and construction that have costly impacts later during commissioning.

Capital projects fall into a Moloch Trap, where project groups are compelled to make decisions in their own best interests that are not in the best interests of the intended project outcome. Capital projects by nature are not set up for success due to this Moloch Trap that exists on all large projects.

This situation doesn’t exist to the same degree in other industries as it does in the construction industry.  Since the construction industry is one of the largest global industries, there is just too much money in the system.  And too many incentives to play the projects game with a finite mindset and fall into a Moloch Trap. Project participants are stuck with a finite mindset playing a finite game, when instead an infinite mindset is required to play the finite game of projects.

In an infinite game, each group would be competing against their own performance to improve their own KPIs, rather than comparing themselves to others, in order to achieve constant improvement. An infinite mindset is hard to have when playing a finite game.

Now, nobody wakes up in the morning and decides they want to do bad work. Most people genuinely have good natured intentions to make a positive contribution on projects. And most people do believe that they are doing the right thing to contribute to the project’s success. I am encouraged by the number of individuals that seek out information to improve their contribution to projects. These small changes over time add up to big changes. But what’s missing are the strong leaders required to lead change at an organizational level to shift the approach to how capital projects are completed.

The list that McKinsey provides is a good start, but nothing will improve until companies start playing the capital projects game with an infinite mindset.

So what’s the solution so that we’re not talking about these same issues in 20 years from now? The construction industry needs a reset:

• A new set of rules to define a new approach to projects. Current contract structures are ineffective in aligning priorities to prevent projects from falling into the Moloch Trap
• A new set of leaders that can play the infinite game and lead the industry out of the finite mindset that is keeping it stuck.

New rules and new leaders that want to play by a different set of rules – that is what is required to fix the broken construction industry. This is of course much easier said than done.

The current capital project delivery models are broken, and they are not going to get fixed overnight. It is going to take some courageous leaders with an infinite mindset to lead the industry out of the Moloch Trap that it is currently stuck in. Several of the current leaders will not be able to break free since they are so deep in the Moloch Trap and their incentivizes are too far misaligned that they won’t be able to change.

In the meantime, there are known solutions to some of the seven areas in McKinsey’s list. Items 5 and 6 related to improved on-site execution and infusing technology and innovation are problems than have already been solved, for groups that are interested in improving their way of working. The project management processes to manage capital project completions and commissioning are well understood, but very few projects implement these processes to increase productivity. There are also over 20 CMS software vendors that offer solutions to digitize workflows for better management and tracking of the work.

With a finite mindset approach to projects, the construction industry will continue to produce late and over-budget projects. However, courageous companies that are able to adopt an infinite mindset will become dominant in the industry over time.

Fixing the broken construction industry will take time. However, the issues that we have solutions for now should be implemented to improve project outcomes, while other initiatives are hopefully developed and rolled out over time to fix other broken areas.