CIFE Bulletin December 2013

In this issue:

Death of Silvester Slavenburg
CIFE Welcomes New Members
CIFE Senior Management Meeting on Strategy
CIFE Industry Advisory Board
New CIFE Publications
CIFE Calendar

Death of Silvester Slavenburg

We were saddened to hear of the recent death of Silvester Slavenburg. photo of Silvester Slavenburg He was president of CIFE member Slavenburg Construction in the Netherlands.

We at CIFE miss Silvester, and we send our heartfelt condolences to his family, both at home and in his professional family at the company he headed. He had an unwavering vision for the promising future of construction. Over the past 20 years he relentlessly believed that our field would be a high tech hub for innovation. Trained as a carpenter, he went on to attain a Hong Kong university professorship and also co-teach a class on Marketing in Construction at Stanford. As the CEO of a contracting company, he took classes at CIFE, patiently completing assignments with students, to better comprehend the challenges of implementing today's cutting edge tools. He was always bursting with passion and crazy ideas; the next innovation, the next business plan and the next strategy. He loved the final product of construction, the completed building. He spent countless hours discussing components from door handles to security systems. His appreciation for aesthetics extended beyond the physical product to the process of construction itself. He rejected the idea of dusty contractor's offices and viewed contracting as a creative art. It was impossible to persuade him otherwise. Simply put, Silvester saw beauty in building.

CIFE Welcomes New Members

We are delighted to welcome two new members - Aconex and Graña y Montero Group.

Aconex developed and supports multi-party online collaboration for engineering and construction and engineering. The company provides mobile and web-based information-sharing and collaboration technologies for project management. Aconex supports more than 300,000 users and 12,000 projects globally. A privately held Australian company founded by Leigh Jasper and Robert Phillbot, the company does extensive work in Australia and the UK and has a new Silicon Valley office.

Graña y Montero Group is the first company from South America to join CIFE. The company has Engineering and Construction, Infrastructure, Real Estate and Services business areas. Celebrating the 80-year anniversary of its founding this year, the company was the first Peruvian engineering and construction company to be listed on the New York stock exchange. In the South American market, it does large plant and building projects, horizontal infrastructure, real estate development and services including IT, road maintenance and operations.

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CIFE Management Meeting on Strategy

Stanford Professor Robert Burgelman led a workshop on business strategy on October 18 that the executive-level participants engaged in energetically. Prof. Burgelman teaches strategy both for MBA students and professionals at the Business School. He described strategy as a mentality and strategic leadership as an organization-wide capability. Leaders have a major role to teach strategy and help bring it to all levels of the organization with a management goal being to create a culture of strategic leadership. He commented that strategy without culture is powerless and that culture without strategy is aimless. Since “signals of change” emerge from field operations, a measure of success of strategy is that individuals with field and stakeholder contact recognize signals of change and have an effective way to enable the organization to recognize and react to those signals that signify real change.

Prof. Burgelman shared several provocative graphical frameworks to help understand Influence-Dependence Table strategic positions. One was an influence – dependence table to describe strategic situations, shown right.

In the case of the relationships of an organization with its stakeholders, almost all AEC product and service providers have a high dependence on both partners and clients, and depending on the details and strategic commitments. They have relatively low or relatively high influence on their product and service providers and their clients, so those relationships range between subordination and interdependence. In addition to dependence and influence relationships of an organization with its stakeholders such as service providers and customers, it is also useful to look at the relationships among an AEC organization and projects. Traditionally, AEC organizations give great autonomy to projects, and projects operate quite independently of the central organization, a situation of Strategic Indifference and “utopia.” However, as we see in the discussion of the IAB participant survey discussed below, the growth of VDC both enables and requires high levels of Strategic Interdependence among central offices and projects.

Percieved Value-Delivered cost diagram Another diagram was a perceived value (PV) – delivered cost (DC) analysis, shown to the left. For the products and services delivered by a project, the marketplace has a range of perceived values and costs of providers for delivery. If an organization benchmarks its market performance, it can identify the performance frontier, shown by the curved line, and its individual position, such as the diamond that lies inside the frontier. To move closer to the frontier, the organization can then consider strategic initiatives to increase its perceived value (upward arrow) or lower its delivered costs at the same value (right-facing arrow) or a combination of both. Breakthrough methods push the frontier up and to the right. Signals from the field can suggest the shape of this curve, position on it, opportunities of strategic initiatives and both opportunities and threats from movement of the frontier from either the organization itself or the market.

To ground the discussion, Eric Lamb of DPR and Zuhair Haddad of CCC discussed some of the strategic issues and commitments they see from their perspectives. Eric emphasized strategic commitment to culture of DPR Construction from its founding more than 20 years ago to today. He saw a number of strategic forces including a continuing mix of Traditional, Design-Build, and Integrated project Delivery (IPD) projects, more interest in Lean and IPD from owners, big impacts from use of VDC and emerging challenges to do modular construction and use emerging automation technologies. He showed some dramatic examples of the use of VDC and suggested possible breakthrough capabilities that follow from its use. Zuhair discussed the multi-decade long commitment of his Consolidated Contractors Company (CCC) to technology development and its current high level of capabilities to model project designs using BIM, to do analyses such as cost estimation and detailed production planning and control, and the high value that these capabilities now give the company.

In a workshop wrap-up, participants expressed their admiration for the value and clarity of Prof. Burgelman’s discussion and their enthusiasm to continue to explore the insights and possibilities he brought to the group within the CIFE community.

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CIFE Industry Advisory Board

At the advisory board meeting, Martin Fischer and John Kunz briefly reviewed the past year, which we summarized graphically using Geoffrey Moore’s well-known “crossing the chasm” curve. We crossing the chasm curve frequently hear stories from the CIFE community of successes using VDC, delivered by early technology adopters, and the organizational commitment to move the successful practices broadly within the enterprise. Simultaneously, however, we see emerging capabilities from the broad technology world that enable new breakthrough performance and suggest the emergence of new chasms. The last IAB gave CIFE the mandate to pursue VDC development both broadly at the enterprise-level and deeply to identify new breakthrough opportunities and suggest new chasms. To elucidate some detail about these chasms, we did a survey of participants regarding their understanding of both project and enterprise performance today on a set of Outcome and Production management metrics and at least their recommended targets for 5 years from now in 2018. For today’s practice as respondents understand it, they identified current typical and best performance for measurable project outcomes and short-interval production management and control. Similarly, they identified target values for typical and best practice for 2018.

Based on the Survey results, we inferred three inferred that types of innovation are appropriate to achieve 2018 metric target values. We made these classifications based on the size gap between best current performance and 2018 target value performance reported in survey results. In general,

Enterprise-wide implement best practices process and behavioral changes can enable some metrics that now have relatively good performance. These innovations define some of the detail of what it means today to cross the early adopter-enterprise chasm for VDC. Outcome cost performance is a representative metric in the survey. The figure shows that the best 2013 performance is nearly the same as the target typical for 2018, so we infer that an appropriate innovative method is to implement best practices from successful projects across the enterprise.

Technology and possibly some strategic-level conceptual or cognitive changes will be needed to improve current practice of metrics with some but not dramatic gaps between current best and target performance. Outcome cost conformance is also a representative metric in the survey. The figure shows that typical 2013 performance needs to be improved significantly for 2018 although the best 2013 performance is nearly the same as the target typical for 2018, so we infer that an appropriate innovative method is to improve current methods and implement emerging best practices across the enterprise.

Significant conceptual or technological innovation will be required to develop innovative new methods for metrics with big current-target gaps. These innovations represent new chasms for VDC practice. Cost conformance to weekly budget is another example metric, this one for ongoing production management. The figure shows that there is a dramatic gap between best 2013 and typical 2018 target performance, so we infer that innovation to achieve this breakthrough performance will require development of new technology and probably new methods.

Each of the graphs of these metrics charts illustrates the common pattern in most of the metrics results that the target fraction of projects that meet or beat typical performance is significantly higher in 2018 than 2013. This improvement will happen for organizations that manage to significantly reduce the variance in their project performance, which is in general a risk-lowering and a performance-enhancing target.

We are highly gratified and inspired by the fact that many CIFE meeting participants were able to complete the survey, that subsequent discussions suggested to all that these initial results are already highly meaningful and informative and finally that we should continue to make this kind of survey to identify trends over time. This kind of public discussion of performance is a promising example of the process of “expose, monitor and challenge” carefully modeled and measured performance that high reliability organizations have learned to practice. That we were able to do the exercise and members found it helpful suggests that we can bring this kind of evidence-based practice into the CIFE community, which is a fundamental mechanism to enable our vision that VDC is the use of models of products, organizations and processes to support business objectives.

The table below summarizes our questions and classification of types of innovation to reach 2018 target values based on participant responses about their 2013 actual performance and 2018 target performance. This short table provides a good summary of the description of the current VDC chasm to cross from successful demonstration project to highly reliability enterprise-wide use and of emerging chasms, which we interpret as the Implement Best Practices and Improve Current Practice tasks. It also suggests emerging chasms, specifically the Develop Innovative new methods tasks.

Implement Best Practices	Develop Innovative New Methods
Cost performance (Outcome)	Milestone conformance (Outcome)
Quality conformance to specification (Ooutcome)	Use of metrics (Outcome)
Latency 1 (% inquires wtih respons <=2 work days)	Sustainability (Outcome)
Field generated RFIs	Cost conformance to short-interval production plans
Quality conformance to short-interval production plan	Quality conformance to short-interval production plan
Improve Current Practice	Schedule conformance to short-interval production plan
Safety (Outcome)	Rework volume of field construction work
Cost conformance (Outcome)	Design versions during design and construction planning phases
Latency 2 (% inquires wtih respons <= 30 minutes)
Staff trained in VDC
Use of metrics (production management)

We will publish a CIFE technical report to summarize these survey results when we have completed the analysis. We encourage readers from CIFE member organizations to take the Survey (password is CIFE).

Participating members reviewed a number of options based on the survey results and voted on their preferences, as shown in the table below:

Votes	Research Topic
9	Redefine metrics around the work-stream, metrics that focus on the whole, including value
8	Identify facility management needs
7	Understand and benchmark value as perceived by clients; Collaborative process strategies
6	Optimize production plans from BIM data Move from physical big rooms to virtual big rooms
5	A new planning paradigm; Share insights between CIFE members
4	Articulate VDC value throughout project team, especially middle management; Create a learning organization (knowledge sharing)
3	Risk modeling/analysis for prefab and 3D printing; Integrated VDC supporting whole-team collaboration for design/build
1	Professional development for projects and across the enterprise
0	Outreach to design community