What the Future Looks Like for the AEC Industry

A new way of looking at an old problem.

Thursday, February 4, 2010

The Medium is the Message

What is the Real Crisis?


Symbolic
Realistic

Conceptual
Contextual
(Hack/Mod)


Oral
Holistic, Circular, Symbolic,
Interdependent
Print
Linear, Sequential, Rational,
Autonomous
Broadcast
Fluid, Fragmented, Emotional,
Isolated
Digital/Interactive
Holistic, Non-linear, Whole-Brain
Systems Thinkers, Interconnected

Digital Immigrants Digital Natives


2008
Boomer
50%

Over 65
6%
Millennials
6%

GenX
38%


2018
Millennials
43%

GenX Boomers
33% 24%


Different Seas

Different Ships

The Vertigo of Disruptive Change

•Acceleration
•Interconnection
•Complexity
•Intangibility
•Convergence
•Immediacy
•Unpredictability
•Scale


Results of an Old Hammer

• $300-$500 billion annual WASTE
(buildingSmartAlliance)

• 50%+ Waste in the System
(buildingSmartAlliance and Lean Construction Institute)

• 70% Over Budget and Late
(Egan report)

• 48% of Green House Gases
(Energy Info Admin Statistics and Pew Climate report)


Uncovering the Hidden Waste
• Labor = 50% @ 30% efﬁciency = 35% waste

• Materials = 40% @ 70% efﬁciency = 12% waste

• QTO = up to10% of the cost

• Bidding = 5%+ of the cost of a project

• Change orders between 2-10% of the cost

• Contingencies up to 7%

• Team Learning Curve = 1-2%

• 3-7% is lost in project cost reduction by not
maximizing Construction Tax Planning

2 Camps
Finding the New Normal
or
Hoping for the Old Normal


New Operating Principles (imperatives)

Integration
Expanded Horizons
•Value
•Care
•Time
•Relationship
•Thought


Magnitudes of Change/Impact
Paradigms
Goals
Teams System
Rules
Meta-Tools
Processes
Tools
Feedback Loops Parts
Bottlenecks
People


15 Words for Snow
Snowflake
Frost
Fine particle
Drifting particle
Clinging particle
Snow on the ground
Soft deep snow
Crust on fallen snow
Fresh fallen snow
Snow floating on water
Snow bank
Snow block
Snow cornice
Blizzard
Severe Blizzard

Emerging Terms with Few Words

Green
IPD
BIM
Relational Contracting
Lean
Outcome Based Incentives

Financial Alignment: Outcome Based


Nine Keys (4 Principles, 4 Tools, 1 Hidden Opportunity)

• Trust-based turnkey teams
• Early collaboration
• Built-in sustainability (quality)
• Transformational leadership
• Big BIM (Building Information Modeling)
• Integrated Project Delivery
• Shared risk/Shared reward
• Leverage Offsite Fabrication
• Improve Workplace Performance!


The ROI of Trust
• LogicaCMG study of 1200 contracts: 20% to
40% difference on service, quality & cost

• Profitable Partnering for Lean Construction:
strategic partnering delivers up to 30% in
cost savings of construction

• Speed of Trust: distrust creates a 50% tax
on work

• Edelman Trust Barometer: 20% higher ROI
over a 10 year period

• Warren Buffet: Handshake deal for McLean

Trust: From Deficit to Dividend
Trust Tax -80% -60% -40% -20%
Environment Hated Toxic Stressful Worry
Focus Conflict Escalation Pre-emption Process
Relationships Anger Hostile Disrespect Indifferent
Process Open defeat Sabotage Hidden agendas Chain of command
Behavior Punish Micromanage CYA Do my job
Outcomes Grievance or Law-suit Gotcha Politics Slow
Systems Disintegrated Dysfunctional Distracting Hassle
Ethics Your ruin Your harm Self-interest Compliance

Trust Dividends Neutral 20% 40%
Environment No worries Positive Uplifting
Focus Scope Outcome Mutual success
Relationships Cordial Cooperative Collaborative
Process Task at hand Keeping promises Making it easier for others
Behavior Respect Partnering Transparency
Outcomes Efficient Learn from mistakes Improve
Systems Does not get in the way Supportive Adaptive
Ethics What is expected What is right What is good


Select Teams not Players

2004 2008


Novartis - Memorandum of Understanding


The Value of
a Promise

Guaranteed Price
Guaranteed Move-in Date
No Change Orders
2-Year Warranty
1 Page Contract


Ideas for Expanding the Value Horizon
Freemium - free BIM work for gain sharing
Free green retrofit for performance compensation
Cutting original move-in timeline by 70%, with guarantee = big bonus
Achieve under 5 year payback for high performing green retrofits
Guarantee on-time, on budget, no change orders, 2-year warranty and
one page contract
Equity stake as part of the compensation
Guarantee 10% less than open bid results
Tie design model through to CAFM and create new role as BIM integrator
Partner with steel fabricator to design a pre-fab rebar frame for shotcreet
walls. Cuts 16 weeks and $750k in general conditions

What does Better Together look like
under the new operating imperatives of
integration and extended horizons?


Call To Action
•What is a next step for teaming?
•How do we explore different models for taking on
risk and creating value?
•Where can we ﬁnd and partner with Fed Up or Early
Adopter owners for proof of concept?
•How do we engage Millennials to accelerate our
learning curve?
•How do we move our organizations out of a 500 old
year mindset?
•What do ships look like that can sail digital waters?
•What does the next hammer look like? (hint: ask)

rex@rexmiller.net
214-498-3055
•Speaking
•Training
•IPD Strategies and Implementation
•Designing New Value Propositions
•Market Repositioning
•Creating Integrated Alliances
•Business Development
•Educating Owners
•Change Management


What the Future Looks Like for the AEC Industry

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