Reflections on 2014...

The Christmas break is alway a good time to reflect on the previous year and to see what progress we have made and what has changed in 12 months.

We entered the year with the recession still very much in everyone's minds. The market was cautious particularly in the regions. London remained largely unaffected with concerns around costs and resource being talked up.

2014 was a really tough year for tier one contractors with their cash positions being eroded, balance sheets weakened and margins challenged. To survive the recession some tier one contractors had taking on work at low margin only to find subcontract costs increasing. They were also more gun ho when it came to risk during recession only to find things unravel during construction.

A number of Chief Executives unfortunatley lost their jobs as shareholders looked for scapegoats.

During the keynote at BIM Show Live I mischievously suggested there was a revelution looming and that baby boomers should take note. This was all a bit of fun to stimulate discussion however in some ways this has become a reality. Some of these Chief Executives were undoubtedlybaby boomers and who paid for decisions made during recession. At the time I commented that these senior figures can't have all have made mistakes and we should look more at the culture of our industry to find long term answers.

Not only have there been job losses at a senior level there has been a move in attitude. Digital construction is increasingly accepted with clients want to see objective risk management tools.there has also been an increase in the linkages between construction, albeit small steps at this stage.

 Consultants are now adopting digital tools as a matter of course and main contractors are looking at how new technology effects their workflow.

Subcontractors have been effected by delayed payments throughout the year from tier one contractors which has, in some cases, prevented long term investment. Manufacturers are also considering their investments but remain cautious.

Yet again as our industry has moved back into growth the skills issue has risen its head. I've been in the industry for over 20 years now and this just keeps recurring. Not enough bricklayers...not enough bricks! The discussion raised momentum towards the back end of the year so hopefully this can build during 2015.

In the regional market fee levels remained very tight. This suggests that work has not reached the levels of pre recession and companies are still looking for revenue.

On balance 2014 was not a bad year for construction but neither was it great. There were no big winners but a few losers. It was a year of transition but fortunately the momentum is upward.

Here's to 2015...

What will 2015 bring?

Having reflected on 2014 the next thing to do is predict what will happen in 2015...

Slowing of market due to election.

A huge part of 2015 is undoubtably going to be the general election. Not only will we be tired of hearing about it this year it will effect our industry. Public sector projects will slow due to perda  followed by ministerial uncertainty afterwards.mIn the private sector this will lead to some uncertainly which will generate a slowing effect.

For what it's worth at this stage My prediction is we will have a Conservative Government again in a coalition arrangement. Even if I'm wrong it is unlikely there will be any change in public spending.

Continued skills and resource issues.

The skills debate will continue throughout the year. Unfortunatley there is no quick fix so we will see salaries increase in some areas where skills are short.

Increasing momentum of digital construction.

The move towards digital construction will continue right across the project lifecycle. We will see not only clients, designers and constructors adopt new methodologies but also manufacturers, subcontractors and maintence providers.

The long awaited digital plan of work will be released in 2015 providing clarity across industry. This will encourage innovation and new thinking. 

Growing interelationship between capital and revenue investment.

As our connection between data improves we will be able to consider the relationship between capital and revenue and how they effect one another. Energy use and carbon are no longer only the demise of specialists and campaigners. These issues are real and are important to emerging generations. Solutions and responses to these issues will need to become mainstream.

New Methods of Construction.

Offsite construction has very skilfully been repositioned as new methods of construction. Off site suggests temporary or of a lesser quality. Portiacabin or McDonalds spring to mind to the majority of people. 

During 2015 we will see a growing percentage of new buildings being delivered using the componetisation of materials. Already a large percentage of M and E installations are deliver in this way and we will see an increasing percentage of building components being developed this way.

Continued competition in the regions.

Traditionally a large percentage of regional work was generated from the public sector. This gap has not been filled by the private sector meaning companies are still hungry for work which ultimately means fee levels are very low. This will continue through 2015 not helped by the slowing of what public sector projects due to the election.

In London the issue will be a lack of the right resource. A large percentage of new build commercial projects in the capital are being delivered in BIM. These resources are not available in design practices meaning alternative approaches will develop. This may include outsourcing or large recruitment drives. It is likely therefore that salary levels in London will increase as demand grows.

The Power of Procurement

I had a really interesting discussion with a client over the weekend around procurement. Many procurment departments rely on cost beings a good metric of value. Particularly when appointing a main contractor for works.

In the north of England in particular many clients and procurment department are still keen to use single stage tendering. In London, it seems there is now a greater use of a two stage approach. What is not known however, is whether two stage is preferred in London because the market is busier or that cleints believe it offers better value.

This particular client I was talking to had been forced into a single stage tender from his procurement department. The projects was hugely over budget largely because the constructors had priced the risk.

A two stage and open approach would allow the risk to be clearly visable to all and to be managed and costed appropriately. The easy and expensive way is to just pass the risk to the constructor. This can be expensive in a rising market.

The clients procurment team does not wish to move from a single stage approach and therefore has limited options. The reality is the contractors can look at some cost reductions but with most of the additional cost being in risk if he wants his building as designed he is going to have to find the additional money. Whilst the procurment department will believe this provides value in reality they are paying way over the true cost.

In a retracting market clients can win when risk is priced too tightly by the contractor. However over an extended period which includes boom and recession I would suspect it balances out.

It would be far better if our industry was built on trust and a long term open book arrangement. Over several years I would anticipate that everyone would come out winning. We would however have the added benefit that with a steady profit we could all invest in continuous improvement.

My top 10 Business Books

I am an avid reader of business books and in particular business biographies. I have been asked several times for my recommendations. Recently one of the team specifically asked for my top ten so I spent a little time going over my library to find the books which I had found most useful and had influenced me.

The following is my top ten.Not all of them are traditional business books however they tell stories which I have found useful.

We can learn from the past and all of these people have been exceptional in what they do. I have looked back over 100s of books I have read and after considerable deliberation these are the most influential. There are a few others on the fringe which didn't make the cut.

They are not necessarily ranked in order of preference but more in the order to read them.

I've mixed lighter books with heavier books and left some of the more challenging stuff to the end.

Just the best book on how business works. Backed up with facts:

Good to Great

Jim Collins

The sequel talking about how businesses can be sustainable:

Built to Last

Jim Collins

This book is more about the man than the company. Great integrity and values:

Who says elephants can't dance

Louis v gerstner

How to look at the world and its markets differently:

Purple Cow 

Seth Godin

How business was done:

Jack 

Jack Welsh

An amazing story of innovation, tenacity and culture:

Creativity Inc

ED catmull

A very practical book on business issues:

43 mistakes business's make and how to avoid them

Duncan bannatyne

How to build s culture from nothing:

Bill and Dave

How Hewlett and Packard built the Worls Greatest Company

Michael S Malone

This guy influenced so much you need to understand him:

My life and Work

Henry ford and Samuel Crowther

For me the ultimate business man. A genius. Unlikely to be repeated or replicated but we can learn some small things

Steve Jobs. The exclusive biography

Walter Isaacson 

When you have read this lot you will be sick of you life.To cheer you up stick your head into the two Danny Baker Auto Biograhies as well as any book by Peter Kay. They will have you laughing out loud without fail!

10 Construction bosses leaving their roles in 2014 so far. Is this a crisis?

In 2012 the construction industry in the UK contributed £83.0 billion in economic output, 6% of the total. 2.15 million jobs or 6.5% of the UK total were in the construction industry in Q4 2013.

The top 30 contractors in the UK by revenue, turn over around £26 billion. During 2014 10 of these organisations have lost the senior leaders of their business. The majority have been sacked with some resigning or retiring. An industry which contributes 6% of the UK output which then loses such a large percentage of its leadership must be in crisis. 

During the banking crisis of 2008 the banking industry did not lose this many Chief Executives. Most of these directors have lost their jobs due to drastic financial loses. Like with the banking crisis now is the time to look at the reasons what we have found ourselves in this position and more importantly how can we stop it happening in the future.

These directors are not necessarily bad leaders but have found themselves at the top table at the wrong time and are therefore scapegoats. The issues are not with individuals but with the system.

Culture is the fundamental issue with our industry. We do not collaborate, we are not open and honest and we do not invest long term. 

The top 30 contractors by revenue are listed below. The 10 bosses who have moved on are identified.

Kier

Kier chief executive Paul Sheffield stepped down at the end of June after a career spanning more than 30 years with the contractor.

Balfour Beatty

Balfour Beatty chief executive Andrew McNaughton quit "with immediate effect" at the same time as the firm issued a profit warning for 2014.

Morgan Sindall

Mace

Carillion

BAM

Galliford Try

Galliford Try boss Greg Fitzgerald plans to retire after 33 years at the firm before the end of next year.

Interserve

Costain

Wates

Paul Drechsler the long term boss left Wates in January.

ISG 

ISG’s construction managing director Alan McCarthy-Wyper left the firm after just 18 months. McCarthy-Wyper was brought in from Balfour Beatty Rail by ISG chief executive David Lawther in May 2013.

Laing O Rouke

Willmott Dixon confirmed that divisional chief executive of its capital works division will step down at the end of this year.

John Frankiewicz has worked for the contractor for 30 years and will return as a non-executive director in 2016 after taking a year-out from the industry

Lend Lease

Brookfield Multiplex

Skanska

Booker Vessels

John Sisk

Bouygues

Bowmer & Kirkland

McClaren 

McLaughlin & Harvey

Keepmoat

Buckingham

Vinci

Vinci Construction UK revealed a new senior management team after a recent reorganisation.

The reshuffle followed the departure of chief executive John Stanion and his replacement by Bruno Dupety, former boss of Vinci group business Soletanche Freyssinet.Vinci Construction UK managing director Andrew Ridley-Barker and commercial director Paul Tuplin also exited.

Shepherd

Shepherd Construction managing director Phil Greer left the company earlier this year.Phil was a Shepherd veteran having occupied a string of senior positions since joining the company 35 years ago.

Robertson

Lagan

Sir Robert McAlpine

Vince Corrigan suddenly left the firm. Corrigan, 53, was a main board director and London and South East region boss.

JRL

10 directors is 10 months must be a crisis. All of these bosses could not have all become bad leaders overnight. The issue is not the individuals biput the system and culture which exists across constructiin.

It's time to rethink!

 

What have the the Red Arrows and Aston Martin got to do with construction?

The answer is absolutely nothing! Maybe that is the problem we have in construction.Both organisations are acknowledged for their excellence. 

 

I came across these organisations at the Kent Construction Expo today where I was speaking about digital construction.What made this event special was the fact that on the same site in the same day was the Kent manufacturing expo. 

 

There was a stark difference between the two. The manufacturing event was very digital and had machines doing all sorts of clever things on show. There was even a real car which was beautiful. The construction aspect was less impressive regretfully with mainly service business rather than products or technology. 

 

The talk from the red arrows pilot was fantastic. He talked about highly performing teams and how, through briefing and de briefing in every single flight, they strived for excellence. EverY flight is recorded on video from the ground and then reviewed. They do three runs every day and every one is de briefed before the next flight. They have an openness about performance and are objective about their own errors. 

 

Can you imagine this level of commitment  to excellence and performance in construction. 

 

I then listened to the purchasing director from Aston Martin. They have 140 supply chain partners. They are real partners and they support one another. They are looking for innovation all of the time but they measure performance of their supply chain constantly and and provide ongoing feedback. There is incredible openness and every quotation must be totally broken down and transparent. 

 

How different is this to the culture in construction. I'm sure we have all struggled to get even the simplest schedule of rates or a preliminaries breakdown in the past. 

 

The issues in construction are all cultural. Today another tier one boss lost his job for poor performance. T Clark posted a profit warning and Royal Dutch BAM made 650 people redundant. 

 

These issues are no one individuals responsibility but are down to all of us who have worked within this environment. We must challenge now for a better and different way of doing things. We can build an industry with a sustainably future. 

the PLC Problem...

We have watched the public scrap between Balfour Beatty and Carillion over recent weeks. Both of these companies are listed on the stock exchange.

At the same time we have seen Tesco struggle the meet shareholder expectation and again this week has announced a further profit warning. Tesco is also also issued on the stock exchange. 

Balfour Beatty and Tesco are on completely different sectors the suffer similar challenges. The stick exchange demands revenue and profit growth at all costs. Ian Tyler and Terry Leahey were Chief Executive at this companies through a boom time when profits and market share increased for both companies. 

Both Chief Executives have been praised for their strategies at these companies which can be denied. They both jumped off at the middle of recession. They both were astute enough to realise that they were already three or four years late on establishing a new strategy for changing times. 

Both were fixated with profit growth demanded by the city and didn't start to sacrifice profit growth for investment in new strategies. Both Chief Executives were replaced by their deputies and both if these deputies have now lost their jobs. Neither of these men can take any blame. Their fate was already set when they took in the role. Balfours and Tesco should have committed to radical strategies three or four years earlier. 

A truly great chief executive is five years ahead of the business and is able to make bold decisions which may effect short term shareholder return. Both ian Tyler and Terry Leahey had one strategy which worked in a booming market. What they couldn't do was change business direction for long term growth. 

Long term sustainability is difficult in a PLC environment when shareholders want growth year on year. Balfour Beatty fell into this trap and bought revenue and profit from acquisitions such as Mansell. More importantly the cash generated from construction was used to fund investment in PFI.

When investment opportunities reduced and growth slowed it became clear Balfours had not integrated any of these businesses into a single group entity. The company was carrying unnecessary overhead and was not benefiting from scale.

Carillion have faired slightly better as they have integrated their acquisitions such as Moslem and Alfred McAlpine 

Additional evidence of long term thinking is the level of investment Teir 1 contractors have made over the years. 

A report published by the government identified that tier 1 contractors invested a meagre 0.1%. By contrast Google spend 14% and Microsoft  13%. I'm not suggesting that construction invests this level of capital but it does show the difference between sectors which are developing and those which are not. 

The point here is that long term sustainability in any sector needs a long term and evolving strategy. The strategy must change and adapt to it environment and the larger the company the longer it takes so the Chief Executive has to be way out in front. Strategies built on growth and profit such as those developed by Ian Tyler and Terry Leahey will ultimately fail. A business must be aligned to the market and the needs of it customers. 

I wonder if the fact that Ian Tyler was and accountant and Terry Leheay a marketeer rather than a builder or a retailer is relevant. 

Ian Tyler had an outstanding strategy for growing profit and revenue and that can not be questioned. But if the objective was for long term sustainability would someone with a passion for improving the construction service have been better long term. 

An interesting contrast would be Laing O Rouke. Ray O Rouke had been driven by changing construction. He has invested hugely in technology and even a manufacturing facility.He is driven by delivering a better value product and changing the perceptions of construction. 

They did not make the profit of Balfour Beatty through the boom, probably because much of it was invested. Today LOR continues to make profit and is well place to adapt  to the evolving sector. 

RIBA: An organisation for the Artisan or the Buisnessman.

The role of the Royal Institute of British Architects is one of my favourite subjects. Firstly I must declare I am a fully paid up RIBA member and have been for the past 20 years.

However I believe this institution has become increasingly elitist and out of step with the future direction of the wider construction industry. The institution itself can't be blamed as the institution is made up of its members and it is they who are steering the profession on its current direction.

Our profession continues to have an eroding influence and impact on the industry.

My main frustration is that architects are actually absolutely critical to the success of the construction industry as it is they who have the skills to design ,problem solve and communicate better than others in the industry. Construction is about to move into another period of growth and we find ourselfes faced with yet another skills shortage. This suggests to me we are training people with the wrong skills.

Architecture today has moved away from buisness or craft and has become an art form aligned more with painting and sculpture within Universities rather than the built environment. Obviously there is a place for this however construction needs pragmatic designers who can solve problems and work as part of the team.

Architectural practice has become a cottage industry and very artisan. The vast majority of architectural practices in the UK employ fewer than 5 people. These same practices complain that they do not get a share of the large projects being advertised by the public or private sector. This can be no surprise. Which organisation would take a multi million pound risk on a small under resourced buisness. To be able to invest in training, infrastructure and research and development architectural practices have to generate a reasonable level of turnover.

Only 3% of UK of architectural practices employ over 50 people. This means there are likely only 30 UK architectural businesses of a scale able to respond to the needs of the industry. It is therefore little wonder that the status of the architect in the design team is being eroded as project managers and BIM coordinators along with other professions look to fill the roles normally the domain of the architect.

The most successful architectural practice in the UK on any metric has to be Foster and Partners. This is a creative business with a global reach which is operated as a business. I have calculated that this one organisation is responsible for 8% of the total architectural revenue in the UK.

It seems to me that architects and the RIBA have given up on 21st century business and prefer to be associated with artists and sculptors.

This is not the profession I studied all of those year to be a part of. I want to make a difference to as many peoples lives as possible. I want to improve the industry and innovate so we can deliver more and better buildings.

I believe there is now an opportunity for a new profession for those who still want to make an impact and invest in the long term future of the profession and industry.

How about Robs Instutute of Business Architects?

Holiday reading....Creativity, passion and change.

It's that time of the year again where I get the chance to read the books I've amassed over the previous months. My reading choice is pretty one dimensional and for a lot of people would be considered boring.Im fascinated by business stories and the people who make business happen.

Every business has a great story. On this holiday I have an excellent line up. For some reason there has been a wave of new business biographies, most of them with a digital theme.

I usually like to run the parallels between construction and the book I'm reading. In the past this has included everything from Henry Ford to Tesco.

The fist book I've finished is Creativity, inc by Ed Catmull.This is the story of Pxar. The book tells how the company went from being a division of Lucas film to in effect being the animation studio of Disney.

It works because of the balance of skills across the three founders. One leading technology, one leading creativity and the other being Steve jobs. Steve jobs is very much a side story in this book but I am absolutely convinced that this man was a genius. 

The book is one of the best I have read in relation to how to truly develop a creative culture.Pixar lives and breathes creativity. When contrasted with what the Disney studio had become it is clear the difference culture makes to the success of an organisation.

The other major take away was the similarities in the digitising of construction. Obviously no one at Disney believed in digital animation and believed it had no future. They therefore ignored it and did not innovate. Pixar spent 20 year investing in the technology and proved how dated an analogue approache is. When Toy Story was released it was the beginning of the end for the traditional animation studios.

This is similar to those businesses who are not adopting digital technology at present in construction. The reality is analogue design and construction businesses will become artisan type organisation. This may work for some but at Space Group we want more. We want to rethink our world and make it better. To achieve this we believe digital tools and data are essential as Pixar did.

In the end Disney ended up paying nearly $8 billion dollars for Pixar with the additional embarrassment of the Pixar CEO and VP taking over the leadership of both studios. Interestingly with fresh creative leadership Disney studios has recovered with recent box office hits such  as Tangled and Frozen.

Pixar has also continued to be a success. A great read for anyone interested in creativity and real change.

After reading the Pixar story I was compelled to read the Walt Disney story. Another great visionary and someone who had a burning passion for animation. He seemed to have little interest in business and was more interested in ideas. The business and money followed. Reading between the lines his brother Roy was the steadying influence in the business and gave his brother the space to be creative and to follow his dreams.

Two great stories about creativity, vision and passion.

Results from a bold Strategy

Laing O Rouke issued their company results last week.

What I love about LOR is their vision and their boldness in rethinking construction. They disregard everything which is established as a tier one constructor. They have looked to where they can add value and most importantly invested heavily.

Even the fact they their CEO is a woman is a great statement in itself in a narrow minded industry.

LOR see themselves as an Engineering Enterprise and look for clients who see the value in this approach. This may mean they have to travel the world to find them.

Their Design for Manufacturing Assembly is a bold strategy. They invested in their concrete plant just at the wrong time when the market dipped. They continued to hold firm to their strategy and funded the factory through recession. I have no doubt that this strategy will catapult them ahead of the field over the next decade.

They have a fantastic programme in investing in their people and teaching them new skills which is often talked about but not acted upon in construction.

In the notes to accompany the results Anna Stewart made some great comments which I feel sum up the vision of the business. If any Teir 1 contractor is going to achieve vision 2025 it is LOR.

The following is an extract from the CEOs notes which for me give a clear articulation of where they are going.

"We are confident that following our strategy for Design for Manufacturing and Assembly and transferring as many activities away from construction sites into controlled factory environments, will ensure we are less impacted by the skills shortage in traditional trades and will not be driven to engage a lower skilled inherently less safe workforce."

Music to my ears!

Generation Z

Regular readers will be well aware of my interest in the differences between the generations from Baby Boomers, through to generation X and Y. 

The next generation I'd generation Z which due to their age there is little information.

"There is an increasing number of people starting to research this generations and set out some initial thoughts. This week there was and excellent article in the Times about this very subject. I have copied it here...

Get ready for Generation Z: a more driven, less vain, more puritanical cohort that is poised to make its mark on the world.

Precise parameters are disputed, but “Gen Z” is broadly said to include those born after 1995, a group that includes two billion people worldwide. Brought up in the shadow of 9/11 and amid a great recession, they were raised, say researchers, “in a socio-economic environment marked by chaos, uncertainty, volatility and complexity”.

The challenges seem to have moulded a new maturity: studies suggest this group is brimming with prudent, if rather puritanical, socially-aware, self-starting entrepreneurs. They have also been called the “first tribe of true digital natives”, or “screenagers”.

Gen Z members, it is said, are smarter than the baby boomers born in the wake of the Second World War. They also appear quite distinct from the slackers of Generation X — born roughly between 1960 and 1980 — characterised as “stuck in a terminal cynicism”.

A report by Sparks & Honey, a US advertising agency, highlights a number of defining Gen Z characteristics. It suggests they are more driven and less narcissistic than the millennial generation, or Generation Y, born between 1980 and 2000. Most say they would rather save money than spend. They drink less and smoke less cannabis than their elders, get into fewer fights at school and have less “risky sex”.

They plan to change the world for the better: 60 per cent of Gen Z “want to have an impact on the world” through their job, compared with 39 per cent of Millennials. A quarter of America’s Gen Z are already volunteering. More than 70 per cent would like to start their own business. A separate survey of 11,000 Gen Z children, cited inMaclean’s magazine, found 69 per cent would rather be smarter than better looking.

Sparks & Honey suggests that the 16-year-old activist and author Adora Svitak fits the Gen Z profile perfectly. Her writing ability made her a media star at the age of six, and she has campaigned to promote literacy and feminist values. A talk she gave, entitled, “What Adults Can Learn From Kids” has been viewed more than 3 million times online.

Other prominent members of Gen Z include Malala Yousafzai, the Pakistani 17-year-old who defied the Taliban to go to school and was shot by them – only to emerge as a globally recognised activist. Logan Laplante, 13, also fits the profile: while being homeschooled in California he designed his own progressive curriculum. A talk he gave on his “hackschooling” philosophy has been viewed more than 5 million times.

Meanwhile, researchers have suggested that The Hunger Games is the perfect Gen Z film. Depicting a dystopian future where teens get slaughtered, it reflected their bleak post 9/11 world – and the need for coping mechanisms to deal with it.

“Gen Z is already being branded as a welcome foil to the Millennials, who have been typecast as tolerant but also overconfident, narcissistic and entitled,” said Maclean’s magazine.

However, it also warns that their aptitude with technology means that “this is the first time in history kids know more than adults about something really important to society”.

The result, it suggests, “could well be the most profound generation gap ever” -- between parents at odds with the internet the their kids who driving a new type of digital society."

So who pulls the So who pulls the strings?

I wrote an article recently titled "No more boom and bust." In it I referenced the problems companies such as Balfour Beatty and Sir Robert McAlpine had had with difficult projects which subsequently have impacted upon business perception and performance.

I talked about how the culture of the industy was wrong and how we have been approaching things in the wrong way for too long.

The article has been published in a few places including my own blog and on linked in.

The response has been phenomenal. So many people took the time to support and add to the article. I even had responses from senior directors at Balfour Beatty supporting the sentiment of the article.

Also when I deliver talks or speak to people generally there is huge support for change.

What is puzzling me is that if there is so much support where is the support and drive coming from for how we do things now. Who is pushing for the adversarial approach? Who is promoting disjointed procurement.

It seems to me that actually no one really believes how we do things now is the right way. I suspect there are thousands of people in the construction industry who keep doing what they are doing and what they know day after day. The reality is they neither agree or disagree they just do their job.

 

I think it's fair to day they suffer from chronic apathy. This apathy was rife in the 90s and 2000s when it was easy to do things as we had always done them particularly when this made money.

What is different now there are people passsionate and supportive of change. There is little resistance as there aren't any supporters of our current culture

There is a new breed in the construction industry today who are passsionate about a better way and who will not tollerate current behaviours

We need to continue to disrupt the industry and grow adoption by example. Those who are apathetic will then change or die.

?

I wrote an article recently titled "No more boom and bust." In it I referenced the problems companies such as Balfour Beatty and Sir Robert McAlpine had had with difficult projects which subsequently have impacted upon business perception and performance.

I talked about how the culture of the industy was wrong and how we have been approaching things in the wrong way for too long.

The article has been published in a few places including my own blog and on linked in.

The response has been phenomenal. So many people took the time to support and add to the article. I even had responses from senior directors at Balfour Beatty supporting the sentiment of the article.

Also when I deliver talks or speak to people generally there is huge support for change.

What is puzzling me is that if there is so much support where is the support and drive coming from for how we do things now. Who is pushing for the adversarial approach? Who is promoting disjointed procurement.

It seems to me that actually no one really believes how we do things now is the right way. I suspect there are thousands of people in the construction industry who keep doing what they are doing and what they know day after day. The reality is they neither agree or disagree they just do their job.

 

I think it's fair to day they suffer from chronic apathy. This apathy was rife in the 90s and 2000s when it was easy to do things as we had always done them particularly when this made money.

What is different now there are people passsionate and supportive of change. There is little resistance as there aren't any supporters of our current culture

There is a new breed in the construction industry today who are passsionate about a better way and who will not tollerate current behaviours

We need to continue to disrupt the industry and grow adoption by example. Those who are apathetic will then change or die.

No more BIM

The term BIM or Building Information Modelling has been in "general circulation" since around 2006/7. The term has done wonders for moving the construction industry towards a digital revolution. We have benefitted from improving hardware and software and emerging generations who don't see technology as an add on but a necessity.

 

Whilst the term BIM was not first used by Autodesk they invested in the term and promoted it as it very effectively communicated what they were trying to achieve with technology. Clearly with a better understanding of the value of their software and its value sales would increase.

 

From someone who has spent a career fighting against many of the things considered acceptable in the construction industry BIM and all of the associated software was music to my ears. We bought our first copy of Revit parametric software back in 2000. This was even before Autodesk had bought the company.

 

The marketing of the term BIM pushed everything up a level with the final vindication being in May 2011 when the then Government Chief Construction Advisor Paul Morrell mandated that a 3D coordination and data or BIM should be included in government projects by 2016.

 

Coupled with the mandate the government invested in the BIM Task Group who helped to define the specific requirements and what level 2 actually means.

 

Within the public sector it is still work in progress however huge strides have been made within early adopter departments such as the Ministry of Justice.

 

The private sector has identified the value itself and has embraced new technologies and processes largely off the back of the good work carried out by government.

 

However now the term BIM is far too generic and can cause confusion. It is so commonly used now that it can lose impact. This is similar to the term Partnering which was adopted in the late 90s. Many people used the term but how many people truly understood it and worked in this way.

 

We have all heard people and organisations say yes we do BIM or can you do BIM. The term is now working against the vision and objective and we must be far more specific and less generic.

 

What BIM actually was, was the catalyst for change across the construction sector. We are now in the middle of a revolution to Digitise the Construction Industry. We have to be more specific about what we are doing and what we are trying to achieve.

 

For example we will author models or federate them. We may extract data which can be used in the operation of the building. We may use the federated model to extract quantities or link elements to the programme. All of this could be referred to as "BIM" if we adopt the term how it is currently used. We often end up with lots of debate about what is BIM and what isn't or is this level 2 or level three.

 

Who cares? This is all theory. We are digitising the Construction industry so we can improve our product, process and perceptions. We must deliver better value to our clients and demonstrate we understand their business and their issues and that we are able to respond intelligently and positively.

 

 

How mad is the construction industry?

Balfour Beatty announced another profit warning to the stock exchange this week for £30million only 8 weeks after the last one.

Balfours are a great business with a fantastic heritage and some great people.I know better than most having worked with them over the past 20 years.What is happening to them is a symptom of the boom and bust of the construction industry. The challenges which Balfours are facing is why we want to "rethink your world" at Space Group.

We can't go on like this as an industry, swaying from boom to bust, gambling on who will win and who will lose. It is ridiculously expensive, stressful and means we lose any consistant improvement or skills development.

If we want to change we need to change something! 

The industry needs to fundamentally rethink its whole culture. It has nothing to do with BIM or technology but is all about culture, procurement and contracts.

I have written extensively about the different generations and their impact on change. The baby boomers have held the reigns for many years now and it is time for them to hand over to the young gen X and emerging gen Y.

If we take the Balfour Beatty story as an example to demonstrate what the construction industry goes through. In 1997 a new Labour Government was elected and on the back of a financial boom and growing tax receipts there was a public sector building boom.

By the late 90s clients had been convinced that a design and build contract reduced their risk and improved value. Builders became "contractors" The clue is in the name. It was all about the contract and the sub contracts and how these were played out rather than the process or product. Main contractors built pre construction teams who were excellent at bidding and winning work.Their delivery teams managed the subcontractors as they jettisoned their direct labour. At the same time their commercial teams grew. The risk moved to the main contractor from the client and design team which meant they held the power.

As public sector spending grew through the 2000s main contractors started to win the construction gamble. D and B is all about risk and with large budgets from government they were making huge profits. Sub contractors were squeezed so we had little skill development or investment in the industry but main contractors we becoming cash rich as they held onto cash as profits grew.

These cash piles were then invested into PFI and again they won big when clients wanted bidders to take interest rate risk. With falling interest rates PFI became hugely lucrative. This was a fantastic business model and through the 2000s shareholders of companies such as Balfour Beatty did very well.This was more of a financial model than a construction process. At Balfours Ian Tyler,accountant rather than a builder, was in charge and helped Balfours to grow revenue and profit,

However when the spending slows and the cash reduces the strategy falls apart as it is not a sustainable  model. An early example of this was Jarvis who were using cash receipts from rail work.

Construction companies have burned through their working capital over the last few years and have not been able to invest. To cover overhead projects have been bought with low margin. Again this is a  gamble and unfortunatley it is more likely you lose in a falling market. It is particularly tough on subcontractors who are squeezed at both sides. This is what has happened to the Balfour Beatty M and E business. They have gambled and lost. 

The mad thing is, that for Balfours to keep going they are selling their assets. These are the PFI assets they invested in during the boom. So by the end of this decade Balfours will have sold all if the assets which they amassed through the 2000 and will be back to where they started 20 years ago.Boom and Bust!

So who has won and who has lost.

The winners are the shareholders through he 2000s. The losers are the great staff of Balfours who unfortunatley have been through all of the pain of the past 5 years. The other loser is the construction industry. We have not moved forward, we have not improved and we have lost skills.

There is a different way. I think I will leave that for a future blog.

Rethink your world.

BIM Reality.

Every year we attend BIM Show Live and we all leave motivated and sure that the future of construction is rosy and we are returning to our day jobs in the perfect world.

There is a significant flaw in the BIM Show Live community however and that of the UKBIMCrew on twitter.

If you decide to pay money and give up time to go to an event such as BIM Show Live you are obviously committed to a different way of approaching things. This community has grown from around 100 to 700 paying delegates in three years. The flaw is that this is only one side if the argument. For those of us who attend we only see the positive aspects of change. We miss the issues or challenges because we believe so passionately in the fact what we are doing is right.

Im not changing my view in relation to BIM and I passionately believe the industry will benefit hugely in the future. However we do operate in the real world and 700 delegates at BSL it is only a tiny fraction of the industry.

The BIM technologies team are working on many live projects across the UK across a range of sectors with different clients, consultants and contractors.

Whilst we left BSL in April all enthusiastic about the future it didn't take long for us to bump back down to earth. Several projects which we are working on continue to be challenging.

The technology is straightforward, our  issues are always with standards and consistency across a design team. Design businesses are used to having control of their own standards for their own purposes. Every consultant will have their own approach and expectations. When an Information Manager is appointed they are unhappy about using a project standard which differs from their own.

The biggest challenge at present is demonstrating why this additional effort is necessary and where the benefit will be realised. Much of this data will not be used until the  operational stage and at present we can't show or quantify the benefit.

We are asking design teams to invest upfront without being able to show the benefit to either them or the project.

A simple example is the use of Uniclass 2 and NBS create. Traditionally we would produce a drawing and at a later date develop the specification. There is now a new workflow. When you add a component to a model you ensure it has it's Uniclass reference. This means that the object can be automatically linked to the specification. This is a fundamental change and means adding the reference early. 

Some consultants have become used to pushing responsibly further down the programme. Much of the detailed specification is carried out by the trade. Effective BIM brings this forward and asks for an earlier commitment. 

Clearly this is not how consultants have operated for several years and is potential additional work they had not anticipated having to complete.

The same is true of asset management. Traditionally at the end of construction information and data is added retrospectively. We are now suggesting this can be done more efficiently at the early stages. Again no fee allowance has be made for this so there is kickback from consultants. Without being able to demonstrate benefit clearly it is always a challenge to convince clients and consultants of the value.

Construction has traditionally be a disjointed process. To achieve an integrated workflow we need to rethink who does what when. Clearly by the nature if this some will end up doing more and some will benefit more.

There are no easy answers to the challenges we face. Those passionate about the benefits of BIM must also listen to the challenges others face. We need to find ways of minimising impact to the various groups. 

Critically we must hold our nerve in what we believe and should take time to invest in demonstrating the long term benefit. 

At times there will be a need for us to carry out activities to support the argument. This may mean taking onboard tasks which others should be doing themselves. This way we can demonstrate that the barriers are not technical or procedural.

Many barriers are more about culture and reluctance to change from what teams are used to. Whilst the argument around the benefits of BIM may be won academically there is still a long way to go to embed the technology and workflows into what we do consistently across industry.

Those passionate about making a difference need to understand this and we must realise this is a change which will take time to implement. We will continue to face negativity from industry. We have to listen and to find ways around the challenges.

No more Boom and Bust!

Balfour Beatty has just announced that yet another top executive is stepping down after yet another profit warning. Sir Robert McAlpine, another of the UK’s biggest and best contractors, has revealed £38m losses for the year. Five years ago, Balfour was a great builder, and our biggest customer. Now it faces break-up and a possible sale.

These firms’ misfortunes stem from problem contracts, but why is itthat so many contracts are going wrong?

I believe the problem lies in the way the industry is organised and the way that its top managers think. The industry is divided into professions whose members are

taught from a young age to regard a stranger in a rival camp as an enemy they haven’t shafted yet. When I was training as an architect, I attended seminars in legal self-defence, because I was taught that the contractor is going to try to do you over. I was also told that architects are better than everybody else, and that clients were just the people who commissioned buildings on our behalf.

Meanwhile, the contractors carry on with main contracting looking to make their profit targets by squeezing their supply chains and extending their payment terms by another 30 days. They spend almost nothing on research and development, and it seems that whenever something goes wrong, their only response it to throw another chief executive to the shareholders. The result of this are businesses like Balfour that are great when they’re riding a wave of public sector investment, but struggle when the bad times come.

Set up to fail

I should say here that I’m not blaming anybody. The fact is that the system is set up in such a way that people are encouraged to behave in a selfish way. True collaboration springs from a shared goal, and in construction we tend not to have that. If I’m the architect, my goal is to get my drawing out as quickly as possible and get my fee; I’m not really bothered about helping out the M&E guy because I just want to get my bit done. If I’m a contractor, my goal is to get the building up as quick as possible, while reducing the risk and making as large a margin as I can. And if I’m a subcontractor, all I care about is getting the next job and try not to take too many beatings from the main contractor. A subcontractor has no interest in a common goal; they just want to get through the process and get their last payment.

So, how to you break the cycle of boom and bust? How do you change attitudes and organisations in an industry renowned for sticking to what it knows, even though it also knows it doesn’t work? I believe the answer is to think in a completely different way. I believe we have to start with the product and then work out the process that will best deliver it. In an industry that is driven by costs, it means focusing on value.

Let’s try it another way

The good news is that there are powerful drivers for change in the industry. The government has played its part with its plans to use regulatory and economic power.

 There are other forces at work as well, though. There is a generational change, and that is bringing a different approach to providing a product. One part of it is technical. When Sir John Egan produced his report in 1998, I was using a Rotring pen to design buildings. He talked about technology, but most of it wasn’t quite there.

The government’s Construction 2025 is, I believe, the Egan Report with a different cover, and this time the technology has transformed everything. The iPad generation are using Twitter and other social media to discuss building information modelling 24/7. They are coming together around BIM regardless of what they do, or which company they do it for. I would go so far as to say that BIM has allowed the rising generation to create Construction 2.0, which has the potential to bring together the spirit of youth and the wisdom of age. And with that comes a radically different approach to the construction process. Instead of designers, builders and building engineers, BIM divided the work into define and validate, design and prototype, manufacture and assemble, operate and maintain. And with that comes a new intolerance to skips full of waste and court rosters full of construction cases. The opportunity is there to redesign the design process and rebuild the industry around shared goals. I only hope this cultural change comes quickly enough to secure some of the great construction businesses of the UK.

 

Easter Reading

Regular readers  will know that I usually head of ft to he sun every three or four months for some family time and some time to think. This gives me the space to consider new ideas and strategies and not be disturbed by the issues of day to day business.

On this trip I'm in Cyprus which has become a regular favourite.

When I'm away I read, which is one of my greatest pleasures. Between breaks I spend time scouring the book stores for business stories  and biographies. There can't be many I havnt read and it gets harder every trip.

On this trip I am reading the Amazon story. This is not the usual overnight technology business success story. Jeff Bezos is a clever visionary but it has taken him 20 years of hard work to get the business to where it is. He is clearly an aggressive leader and is more Generation X than Generation Y.

Also on the list is Coming up Roses which is the Kath Kitson story. I'm always interested to hear about women in business as there just aren't enough.

There are a few others on the list which  are a little more obscure!

We are Space Group.

This month we re aligned our websites and updated some of the branding of individual businesses across Space Group. This has been a gradual process to reflect the ever evolving nature of the construction industry.

We are clear about our purpose as a business; To make the world better. 

Our culture is built around our people and we have reflected this in the statement We are Space Group.

Our group message is Rethink your world. This reflects the ethos of the business which has evolved in recent years. We do not accept the status quo and challenge the norm. The word rethink is upside down to represent how we like to turn things upside down and back to front before making a decision.

As well as innovation we focus on technology and sustainability. We are not a technology business but a business which uses technology to deliver improved value to our clients and customers. We believe sustainability is an obligation on us all for future generations. The construction industry in notoriously wasteful so we want to lead by example and  reduce the resources we use every day.

The Space Group journey is an ongoing one and is in its sixth decade of the story. The business started as Waring and Netts Partnership in 1957 as an architectural practice. Located in the Gosforth suburb of Newcastle, the practice grew steadily over the following decades. 

The Partnership was an adopter of construction technology with a six figure investment in a GIS system in 1970s . Unfortunately it wasn't possible to generate the value from the technology and the hardware was ultimately thrown in a skip. 

This ultimately meant the business was scheptical of the emergence of CAD in the 1980s meaning they were a late adopter.

In 2000 a new software platform called Revit appeared in the UK and by 2005 the first building had been produced by Space using the software and by 2010 the whole group was working in 3D.

In 2003 the partnership incorporated to become Waring and Netts Limited. The business had started to diversify from just architecture into interiors, building surveying and construction management.

In 2007 after 50 years as Waring and Netts the business re named itself to Space Group and moved to a new 35,000 sq ft headquarters in Newcastle supporting its 4 regional,offices. The renaming of the group reflected the greater diversity of the business and allowed flexibility in the future.

From 2007 to today the group has continued to evolve and respond to a changing marketplace. In 2008 the global recession effected the construction market particularly badly. The business focused on its key values as it looked to secure the long term sustainably of the group.

Today the space way is at the core of the group and all of our businesses have a single purpose to make the world better.

Pas referred to above we h  ethos which is focussed on innovation, technology and sustainably. We want to lead in these three areas so we can differ existed ourselves in the marketplace.

Whilst initially Waring and Netts Partnership was an architectural practice focussed in the design aspects of the construction process we now believe to achive the best value for our clients we must have a total view of the project Lifecycle.

We developed BIG BIM in 2010 which provides a 4 stage framework for us to build the group upon. 

Space architects are regional architects with offices across the north if England. They are focussed on delivering the best results for clients to suit their needs.

BIM technologies provide BIM services with BIMstore being the leading website for BIM content in the UK. We also operate campus which is focussed in improving technology skills and 

knowledge across the construction industry. 

Our volula business designs building which can maximise performance and value through a joined up design,procurement and delivery approach.

Through rethinc.it we operate BIMcrunch.com and BIm show live to share ideas across the industry.

In 1957 Waring and Netts was an architectural practice. Today Space Group is a Building information Business. Only by developing and learning from this information will we able to make the world better.

We are Space Group.

Rethink your world.

Keep look to the future...

One of my fascinations is looking for future trends and innovations. I am always excited by new technologies and how this can improve the things we do now. I'm not particularly intrigued by technology for the sake if it but more what change and improvement it can bring.

Obviously I have a particular interest in the built environment due to a career in construction and wanting to be an architect from the age of 4. Recently we have seen worlds collide with the real and virtual through the proliferation of the internet.

My fascination with Building Information Modelling is largely based on a passion to find better ways of doing the things we have done for so many years with little improvement.

A recent article on Enrepenuer.com suggested that we would not be using traditional software packages to design buildings and is more likely to use gaming technology to design buildings using programmes such as minecraft.

Emerging generations will influence the development of hardware and software. The days of desktop PC and laptops are numbered. They only survive today because people like me are used to using them. Emerging generations are born with an iPad in hand and are far more comfortable manipulation geometry this way rather than using a pencil on paper.

We only have to look at the advances in digital animation and the quality of the images generated by filmmakers a as Pixar to understand where technology could take construction. Software is becoming increasingly powerful and hardware is reducing in price making progress very possible.

Coupled with the advance in software and hardware is the advancement in 3D printing. Every day a new machine is released. The latest I have seen is a machine which can print carbon fibre.

It is not unrealistic to imagine large scale printers producing full size components for buildings in the future. This is likely to increase building performance as tolerances improve but will also significantly reduce waste.

The link between businesses, urban environments and the internet is also a fascinating area. Business is now multi channel with the most successful retailers being those who have responded quickly and understood the changing profile of the high street.

Companies such as John Lewis have a strong online presence with a complimentary in store offer. When this is developed together with an online community it can be very powerful.

For example Urban Outfitters have a strong retail presence online but have also built a community online. The shops and online offer are aligned and interrelate. They have taken this concept to the next level at a 6.5 acre site in Devon Yard Philadelphia where they are developing an Urban Outfitters lifestyle based environment with not only a retail offer but a coffee shop, restaurant and even a boutique hotel. This is the ultimate link of a brand between virtual and physical environments.

IKEA are developing a car free friendly neighbourhood in London.

There is no doubt the lines are blurring between the real and the virtual and it is clear that these are most effective when the support on another.