Tuesday, November 22, 2016

Is it Time for a Smart Built Culture?

Creating a Smart Built Culture

James L. Salmon, Esq.
Collaborative Construction

The Built Industry By The Numbers

The world spends $5.0 trillion annually to plan, design and construct new facilities and buildings and additional trillions to operate and maintain existing facilities and buildings. Separately, the McKinsey Global Institute reports the world will spend approximately $50 trillion on new infrastructure – defined as roads, railways, ports, airports, power plants, water supply infrastructure and telecommunications support – over the next 15 years. Accordingly, in the next 10 to 15 years the world will plan, design, construct and then operate and maintain an additional $100 trillion in new facilities, buildings and infrastructure.

The annual cost of operating and maintaining facilities, buildings and infrastructure generally costs an amount equal to 10% to 30% of the value of the facilities, buildings and infrastructure being operated and maintained. Accordingly, by 2030 approximately $10 to $30 trillion will be spent annually to operate and maintain approximately $100 trillion worth of buildings, facilities and infrastructure put in place over the past 10 to 15 years.

Successful use of building information modeling (BIM) and integrated project delivery (IPD) to plan, design and construct new facilities, buildings and infrastructure reduces the cost of planning, design and construction services by 10% to 20% depending on an array of factors. BIM enabled facilities, buildings and infrastructure are cheaper to operate and maintain. Smart BIM and IPD facilities, buildings and infrastructure may cost 10% to 20% less to operate and maintain.

A savings of 10% to 20% on $100 trillion is $10 or $30 trillion. If saved on planning, design and construction costs those are one-time numbers but if saved on operations and maintenance costs over time the $10 to $30 trillion begins to compound and soon your talking about real money. The compound interest earned on $10 to $30 trillion over a 60 year time frame becomes a mind blowing sum. While the foregoing analysis focuses on global numbers innovators seeking to deploy BIM and IPD need to run these numbers for institutional owners on the portfolio of existing and planned facilities, buildings and infrastructure on the books and in the pipeline for those owners. But don't just focus on the numbers.

Innovating in the Built Industry

Market analysis may motivate a few executives in the C-Suite to pay closer attention but raw economics alone cannot deliver innovation. Innovation requires much more. It requires identification of problems owners don't know they have and the delivery of solutions owners didn't know they needed. Innovation involves a Goldilocks solution – one that's just right – that brings disruptive change to an entire industry. That's what BIM and IPD are, disruptive change catalysts for the entire built industry. The image below provides a short hand look at the elements of cultural change management and metrics in a Smart Built Culture.

Wise business owners inoculate themselves against disruptive change by injecting moderate, easily controlled versions of change into their organization under circumstances they control. When delivered properly innovation creates value for customers and innovative companies that deliver cheaper better solutions to problems customers didn't know could be solved. Innovators identify the root causes of wicked problems, learn affordable effective ways to solve those problems then deliver those solutions to grateful paying customers who never realized those problems could be solved.

Disruptive change – in the form of BIM and IPD – are afoot in the built industry. Traditional business processes that worked well in an opaque design-bid-build world fail when exposed to the stark glare of transparency characteristic of BIM and IPD. Again, wise business owners inoculate their firms by injecting mild forms of the BIM and IPD virus directly into their firms before their firms encounter more virulent forms of BIM and IPD change virus on live projects.

BIM and IPD Are (SMART)X Game Changers

So how do we deliver better facilities, buildings and infrastructure faster and cheaper? Answering the question is our job as innovators. It should not be the job of the customer. Institutional owners routinely demand better facilities, buildings and infrastructure faster and cheaper. Built industry professionals routinely report that's impossible. Thus, the industry has a known problem in search of a supposedly unattainable solution. Firms that adopt, adapt to and deploy BIM and IPD provide an innovative solution to this vexing problem. That's innovation in a nutshell!

Providing simple, affordable solutions to the better, faster cheaper conundrum for institutional owners will reap the innovators who deliver such solutions extraordinary profits and increased market share. The opportunity is immense, in large part, because an enormous number of institutional clients are locked out of the lucrative BIM and IPD market by existing procurement protocols. Shackled, by law or tradition, to the antiquated design-bid-build delivery model these owners know the process is broken. The ability to deliver better facilities, buildings and infrastructure faster and cheaper – through BIM and IPD – is an innovative solution salable world wide to owners capable of adopting, adapting to and deploying supportive procurement protocols that enable BIM and IPD.

Too often built industry professionals offer owners “BIM solutions” when a simpler, more elegant solution exists. As noted above it's not the owner's job to innovate. That's the job of ... well the innovators. Accordingly, if built industry professionals seeking to deploy BIM and IPD intend to gain traction with institutional owners the BIM and IPD solutions offered must be innovative. That is, those solutions must solve a problem more quickly, more easily and at a better price than the alternatives.

To put it differently, an innovator needs to deliver (SMART)X Game Changers like BIM and IPD. Regular readers know how Collaborative Construction defines a (SMART)X Game Changer and the image below summarizes that definition.

Above we've identified the growth opportunity – delivery of better facilities, buildings and infrastructure faster and cheaper – and identified the disruptive threat, BIM and IPD. Let's now turn our attention to (BUILT)X Solutions, aka a compelling offering.

(BUILT)X Solutions

Owners want better facilities, buildings and infrastructure faster and cheaper. BIM and IPD enable built industry professionals to deliver better facilities, buildings and infrastructure faster and cheaper. So what mechanism empowers an owner to procure planning, design and construction services from a BIM and IPD enabled team, ensuring the owner receives BIM and IPD enabled facilities, buildings and infrastructure? (BUILT)X Solutions do.

In Collaborative Construction's world a (BUILT)X Solution requires an intelligent and engaged owner that's willing to invest the time, energy and resources necessary to adopt, adapt to and deploy new generation procurement processes. Such processes entail the development of new business processes and new legal frameworks that support and enable those new business processes.

With such new generation procurement processes in place owners will be empowered to complete in-house programming that supports and enables the procurement of planning, design and construction services from integrated teams. In turn those integrated teams – operating under collaborative agreements – will be capable of planning, designing and constructing BIM and IPD enabled facilities, buildings and infrastructure. Such BIM and IPD enabled facilities, buildings and infrastructure can then be handed off to operations and maintenance personnel to intelligently and proactively operate and maintain.

The image below briefly summarizes the concept of a (BUILT)X Solution.

We've now discussed disruptive change in the form of BIM and IPD as (SMART)X Game Changers – and the need to inoculate your firm by adopting, adapting to and deploying a milder version of BIM and IPD internally to ensure your firm's ability to deliver better facilities, buildings and infrastructure faster and cheaper – through the use of (BUILT)X Solutions that empower owners to create the new business processes and legal frameworks required to support BIM and IPD enabled teams.

So how do we encourage the industry to adopt, adapt to and deploy the (SMART)X Game Changers and (BUILT)X Solutions? Stated differently, how do we inoculate the industry against the disruptive effect of BIM and IPD?

We change (CULTURE$)X in the built industry by creating a Smart Built Culture to replace the built industry's fragmented, adversarial and broken culture. That will allow us to introduce the entire industry to a manageable strain of the BIM and IPD virus rather than encounting destructive and disruptive strains in the market place for the first time.

The image below introduces an analytical framework within which to think about changing culture in general and changing the culture of the built industry in particular.

Making Smart Built Cultures Profitable

Many of the most popular – and profitable – business models in the built industry depend on waste and inefficiency to produce profits. And design bid build, the predominate deliver model in the built industry, serves up heaping helpings of waste and inefficiency. Lean process consultants routinely estimate waste and inefficiency in the built industry in the 30% to 50% range. So does that mean, on a complex $100 million project that $30 to $50 million is wasted?

Not at all. That $30 to $50 million represents profits for many project participants. In other words, many entities that provide services to the built industry extract their profits from that waste stream. Business models that depend on waste and inefficiency to generate profits often fail, for obvious reasons, to deliver value. That's not to say no value is added by such entities. In many cases companies add tremendous value to projects and are paid profits for adding such value. It's just that adding value in exchange for profits is antithetical to core business models utilized by many service providers in a built industry dominated by the design-bid-build model of delivery. 

Of course, waste based business models are not unique to the built industry. For example, professional service providers like lawyers, accountants, architects and engineers often base their business models on a pyramid scheme that envisions “rainmakers” bringing in new business. Once the deal is signed, a small army of associates, staffers, junior architects and draftsmen descend on the project billing time to fill their annual billable quotas. On fixed fee projects the worker bees have little incentive to invest additional time to ensure quality but are incentivized on hourly fee projects to churn the file. These business models emerged, and thrived, in the context of projects delivered under the design-bid-build model in the built industry and other hard bid, money focused procurement methods that assume money spent on procurement best represents value.

Similarly, general contractors, trade contractors, material suppliers and unions all developed business models that take advantage of the waste and inefficiency inherent in the design bid build delivery model. Requests for information, change orders, or variances, represent the contractual mechanism whereby those involved in the physical delivery and construction process extract additional profits or seek to preserve anticipated profits. Business models evolved to take advantage of the waste and inefficiency inherent in the design-bid-build delivery model. The story of the Backwards Bike, set forth in the video below, describes the distinction between waste based and value add business models in a memorable fashion.

Key players within large institutions - that consume planning, design and construction services in volume – often operate out of silos and fail to collaborate internally. Because everyone operates out of a silo the planners don't talk to the programmers who don't talk to the procurement officer who don't talk to the project managers who don't talk to operations personnel who don't talk to maintenance personnel and vis-versa. As a result large institutions that continue to procure planning, design and construction services via the antiquated design-bid-build delivery model fail to see the value lost.

Meanwhile, designers, constructors and other built industry professionals cling to out-dated business models designed to deliver services in the design-bid-build environment because, in large part, owners continue to demand delivery of services under that model. Thus, business models that depend on waste and efficiency for profits thrive while business models that add value for profits struggle in the design-bid-build environment. The system rewards waste and inefficiency and punishes adding value. Accordingly, the built industry delivers waste and inefficiency with aplomb but rarely adds value.

And institutional owners - who insist on receiving low bids - are shocked, just shocked, to find waste in the woodshed! Many blame the legal profession as the culprits responsible for the badly broken legal framework within which we deliver professional services within the built industry. But the lawyers, like so many of their clients, make a lot of money massaging the giant ball of waste.

But how exactly can built industry professionals deliver better facilities, buildings and infrastructure faster and cheaper?

Breaking the Cycle of Failure

Conventional wisdom in the built industry dictates that the iron triangle of quality, schedule and cost cannot be broken. In other words, higher quality requires a higher cost and or longer schedule. Likewise, a faster completion date is achieved by sacrificing quality and, often, increasing costs. Lowering costs reduces quality and often extends the time necessary to complete a project. But the fact that the typical planning, design and construction processes involves 30% to 50% waste proves each leg of the iron triangle can be impacted if we adopt a smart built culture and discard the broke built culture that encourages excessive waste and inefficiency. The image below captures the Smart Built Culture concept of placing the iron triangle under intense pressure by wrapping it in a collaborative circle of quality and value.

Built industry professionals often take offense when advised that lean consultants, who usually developed their craft in the manufacturing industry, identify 30% to 50% waste in their industry. Rather than take offense stakeholders in the built industry need to take steps to avoid being run over by the knowledge train barreling down the tracks. Better yet, built industry stakeholders should take steps to catch the knowledge train at an actual station. Delivering planning, design and construction services in the knowledge economy requires an ability to deliver value and earn profits for doing so.

Understanding the power of (SMART)X Game Changers like BIM and IPD is the first step. Once an entity is armed with a basic understanding of BIM and IPD – inoculated – that entity should seek to leverage the use of BIM and IPD on actual projects through the use of (BUILT)X Solutions. That effort, in turn, requires entities to take steps to replace the broke built culture with a smart built culture. Understanding the role of (CULTURE$)X and leveraging the human element of BIM and IPD empowers entities to create a smart built culture that will be more profitable for the entire industry and will deliver better buildings, facilities and infrastructure faster and cheaper.


The Smart Built Culture Initiatives supported by Collaborative Construction and others provide just such opportunities. Sophisticated institutional owners, international design firms, international providers of EPC services are boarding the train with specialized BIM knowledge and the market power to force integration, collaboration and cooperation on their projects. Midsize and small firms need to get in the game. The Smart Built Initiatives, which include online courses, live workshops and seminars and other events, tools and materials midsize and smaller firms can leverage to their advantage. Get in the game today.

Welcome to the Golden Rule Alliance

James L. Salmon, Esq.
Collaborative Construction
300 Pike Street
Cincinnati, Ohio 45202
Summary of Services and James L. Salmon's CV

Office 513-721-5672
Fax 513-562-4388
Cell 512-630-4446

1 comment:

Anonymous said...

It helps to the project managers and accountants with advanced management tools and integrated visibility.
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