Trends and insights: How do infrastructure stakeholders feel about the future?

The pandemic, climate change, digitalization: the building and energy sectors are urged to implement a rapid and radical transformation. But where is the journey heading? As part of the comprehensive study A New Space Race, Siemens asked infrastructure experts worldwide for their assessment.

How have the past two years changed how infrastructure stakeholders feel about the future? What are the biggest risks they are concerned about, and how prepared are their organizations to face them? What are now the most important factors impacting future infrastructure projects and investments?

This article reports on research that sheds some light on these big questions. We will explore how the pandemic has shifted sentiment within organizations, the biggest risks they face, and the current hierarchy of priorities on the agendas of infrastructure stakeholders.

Tentative optimism emerging  

The Covid-19 pandemic has changed how organizations are thinking about infrastructure development and management (see Fig. 1*).

Fig.1 - Covid-19 changed how organizations think about infrastructure: While there is a positive leaning on each scale, only 15% of respondents were on the positive side of all four indicators.

(All respondents answered, n=501. Those selecting "don’t know/not applicable" are not shown, and as a result, percentages will not always sum to 100%.)

These have been positive changes for some organizations. The majority of respondents believe the past two years have made them more open to innovation (57%), compared to 20% who think the opposite. Many organizations are also more likely to invest in infrastructure assets (53%), than less likely (20%), while low-carbon targets now have higher priority for more organizations (45%) than lower (33%).

The majority of respondents believe the past two years have made them more open to innovation.

It is perhaps surprising, that in such uncertain times, respondents told us they have more certainty about organizational strategy (42%), than less certainty (28%). This may be because organizations have been forced – to a greater extent than pre-pandemic – to make and communicate concrete plans, or because the universe of options is smaller due to new constraints.

While a select group fit an all-positive profile, many more have a mixed outlook.

Combined, these leanings create an optimistic picture of organizations that have the confidence and the mandate to invest in innovative, low-carbon infrastructure projects. But while a select group fit this all-positive profile – 15% of our survey respondents – many more have a mixed outlook.

However, across these four indicators – innovation, sustainability, certainty and likelihood to invest – less than 1% of those in the survey have moved negatively for across all four, while 86% have shifted positively for at least one. 

A new era of risk management

Despite the tentative optimism, risk management is more complex than ever. Many believe the pandemic has changed how many organizations approach risk, and our survey sheds some light on how infrastructure stakeholders view the risk landscape for the next five years.

Organizations have difficult balances to strike between too much, and too little, mitigation. In good times, stockpiling, system redundancies, stress-testing, technology upgrades, and other measures can be seen as excessive if they serve low-probability, non-routine risks. An event like the global pandemic, however, can see organizations pivot too far in the opposite direction.

Respondents say they are least well-prepared for rising costs and economic recession.

Respondents rated cyber-attacks as the risk which they are best prepared for, which is a welcome result given it is a high probability and high impact risk. The digitalization of infrastructure assets, and an evolving energy system, can lead to new vulnerabilities, at the same time as the prevalence of cyber threats and ransomware attacks is increasing.

Respondents say they are least well-prepared for rising costs and economic recession, events they rate as highly probable (in the case of costs) and having high potential impact (in the case of recession). However, taking both probability and impact into account, another global pandemic is seen as the most concerning risk. On the plus side, organizations are better prepared for this than for either rising costs or an economic recession (see Fig. 2).

Fig. 2 - Five-year risk outlook for infrastructure assets: Rising costs is the highest probability risk, a new pandemic has the highest expected impact, while respondents are best prepared for cyber attacks.

(Percentages indicate the proportion ranking each risk (1) high or very high probability, (2) high or very high impact, or (3) well prepared or very well prepared. Asked of all respondents, n=501.)

Cost efficiency: the eternal priority

We asked respondents to rank several factors in terms of their relative importance to future infrastructure investments or projects. Cost efficiency is the most important factor, significantly ahead of both resilience and sustainability.

This highlights how, no matter how critical other priorities may be, companies will always need solutions that make business sense (see Fig. 3). For example, many more energy industry respondents believe the cost of available technologies is more of a barrier to the energy transition (51%) than a lack of suitable and effective technologies (30%).

It is a concern that, while cost efficiency dominates decisions, we’ve also seen that rising costs is rated as the risk most likely to bite in the coming years. Building costs have already risen in many cities, driven by supply chain issues and restrictions on the free movement of labor. Central bankers are also concerned about a new era of inflation, driven by the same forces, along with large caches of pandemic-frozen capital and savings that are starting to thaw at the same time and compete for goods and services.

Whether confident or cautious, over the past two years, decision-making has been more complex for most organizations.

The outlook for energy and infrastructure organizations is therefore somewhat delicately poised. Our research shows clear pockets of infrastructure stakeholders who are optimistic and ready to invest. Indeed, 29% say that leaders at their organizations are making less conservative, higher risk decisions than two years ago. At the same time, we also found that close to half (47%) are making more conservative, lower risk decisions.

Whether confident or cautious, over the past two years, decision-making has been more complex for most organizations. This is unlikely to get any easier in 2022 and 2023, as economics and public health appear set to remain entangled (to a greater or lesser extent) across the globe. In time though, it will be clear that some organizations are embracing too much risk, while others are too cautious – losing opportunities to bolder rivals – and leaders will need to be at their best to ensure they avoid either fate. 

Fig. 3 - Importance of key factors in future infrastructure projects and investments: While sustainability has grown in importance it remains less influential than more commercial or functional factors.

(Respondents ranked all factors from first to eighth. Percentages indicate the proportion ranking each factor in their top three. Asked of all respondents, n=501.)

This article was first published on Siemens Stories on Jan 14., 2022

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Discover fresh perspectives on the future of infrastructure!

A New Space Race is a Siemens thought leadership study about how infrastructure stakeholders view the immediate and longer-term future of our built environment and energy systems. It is based on a survey of 501 senior infrastructure stakeholders from 10 countries as well as in-depth interviews and desk research. The research covered commercial real estate (e.g. office towers, campuses, hospitals, data centers, or factories), public sector assets (e.g. community centers, transport hubs, education assets, or healthcare infrastructure), and energy assets (e.g. electricity grids, gas networks, wind farms, etc). Respondents were involved as infrastructure as owners, developers, or operators.

Read our thought leadership report online!