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The construction industry has great potential for productivity growth

Finland to become an international leader in the construction industry

The construction industry must solve the productivity challenge to be profitable. When we succeed, it will be an opportunity for all of us in the industry to do something completely new that makes Finland an international leader in the construction industry. In this blog, I present a few ways to solve the challenge.

The productivity leap benefits all parties

We have calculated that even a one per cent improvement in productivity could significantly improve the margin of a construction project. It depends on the type and scope of the project.

  • The client’s benefit is the benefit of the entire value chain and improving productivity benefits all parties.
  • The client benefits from lower costs as productivity improves, but better quality and shorter lead times.
  • The main contractor will be able to complete the projects at least within the agreed timeframe and budget with less effort and better margin.
  • Subcontractors benefit from better productivity because they earn more in less time and move to the next projects faster.

What would those means be then?

Elimination of waste improves productivity

The productivity problem at its core is waste, a large amount of unproductive work on the construction site. Available resources are not used efficiently. Up to 60-70% of the time spent on a construction project is wasted waiting for favourable conditions, repairing work done, looking for tools, and moving building materials around the site.

Good foremen are excellent at resolving on the fly situations that create waste on the site. Likewise, good project designers know how to anticipate and prepare for many sources of waste already at the design stage. However, person-dependent solutions are not sustainable. If the waste recurs, it has not actually been eliminated.

Solely eliminating waste is not enough

Suppose we really want to improve the productivity of construction projects. In that case, we need the means to eliminate the root causes of waste – the waiting will not end unless we eliminate the root cause.

  • The first step is to improve pre-production planning and integrate continuous waste monitoring into the site’s daily life.
  • The second step is to make the deviations that cause waste visible and actively address the grievances.
  • Productivity in the entire industry will improve when the same process is followed from one construction project to another.

New contract models, takt production and real-time situational awareness help improve productivity

Efforts have been made to improve productivity by refining project management and piloting various technologies, but my own view is that these have not led to long-lasting improvements. The problem is that in Finland, contract models and operating methods in the construction industry have remained largely unchanged since the 1990s. The value generated by productivity improvement must be shared with all project partners, and the process must be scalable.

The key to solving the problem is to engage all levels of the value chain – from clients to project management and construction consultants and designers and from general contractors to subcontractors and material suppliers. We need to get all parties on board and work together to improve productivity.

New contract models

Traditional contract models for construction projects do not provide incentives to improve productivity and therefore act as a slowdown, or even an obstacle, to development. We need to move more boldly to construction projects with an alliance and IPD models, as solidarity encourages investment in productivity and rewards success.

Broder shift to takt production

The dilemma in the construction industry is that management’s visions, and the reality of construction sites do not meet. The professionalism of the site managers and foremen is measured by their ability to stay on schedule and budget. Still, in the traditional operating model of the construction industry, it refers to their ability to solve problems on the fly. To focus on improving productivity rather than extinguishing fires, we need to adopt new ways of implementation, such as takt production, that promotes more systematic construction.

Utilisation of technology

Continuous productivity improvement requires scaling an efficient production control model for construction sites. Especially in takt production, site management needs a real-time snapshot of what is happening at the site. Technology helps with this, but it does not improve productivity alone. We need changes in attitude and an update in contract and operating models.

It is time to move from words to deeds

The good news is that the means to improve the productivity of individual construction projects and the construction industry already exist and can be immediately implemented.
Now is the time to act. Let’s make the productivity expertise of the construction industry a Finnish export product together!


Kari Hirvijärvi is the founder and CEO of Aiforsite Oy, whose vision is to promote the digitalisation of the construction industry and solve the productivity problem.

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