Wednesday, January 12, 2011

Business Case for Building Information Modeling (BIM), Lean, Green and IPD - What we can learn from an Economist?

Vijay Govindarajan recently caught attention for his recent book "The Other Side of Innovation: Solving the Execution Challenge" published by Harvard Business Review and his work on "Designing $300 Home". He is called the strategic innovation Guru and he is also the Earl C. Daum 1924 Professor of International Business at Dartmouth’s Tuck School in US. He believes that perspiration is more important than innovation i.e. execution of an idea is more important than only coming up with the idea itself.

I will try to explain the advantages of BIM, Lean, Green and IPD by his theory of strategic inovation. He talks about three boxes that large organizations operate into (or where organizations' projects fall into)-

Building Lean and Green using BIM and IPD fall under Box-2 and Box-3 that is selectively forgetting the past practices and creating the future (and here we are talking about 20 years from now i.e. about 2030).

Hear is his talk with Harvard Business Review -

Although, Vijay Govindarajan talks about the strategic innovation in all big companies such as GE, IBM, P&G and considers Google, Amazon and E-bay as the fillers that came into existence because rise of internet and lack of innovation in existing players, the question for us is what AEC industry can learn from his work?

I want to focus this post on more fundamental issue for today's AEC firms - the industry leadership in 2030. I believe that companies listed in BD+C's survey report "Top firms by BIM Project Revenue" and corporate members of Lean Construction Institute (LCI), among other industry innovators excelling in Lean, BIM, IPD and Green & Sustainable construction, have already realized the challenges of industry leadership in 2030. Their business strategies are focused on retaining the existing 'performance engines' and developing the 'innovative execution teams.'

Lets elaborate little more on developing the 'Innovative Execution Teams.' The following illustration serves a good example to explain this concept - adopted from the following talk by Vijay Govindarajan at Dartmouth’s Tuck School -

The following graph shows the four different High Jump Styles (business models) used by Olympic Gold Medal winners in last 100 years.

1) Scissors
2) Western Roll
3) Strabble
4) Fosbury Flop

The most interesting fact is that all new Hight Jump Styles were invented by new athletes and not the existing high performers - meaning athletes expert in "Scissors" did not invent "Western Roll" and so on. One of the reasons for failure was that "Scissors" needs the exercise of different muscles than "Western Roll." For AEC industry, building Lean and Green using BIM and IPD need exercising different muscles (skill sets) than the traditional way of doing things.

If we compare the High Jump Style (business model) innovation explained above with the business models that successful AEC firms are using today, then we come to the conclusion that new innovations will belong to new players in the industry. Interestingly, it is not very strait forward. Companies with a strategy for innovation, that takes into consideration all three boxes shown in the figure-1 above, could still lead in the future.

The solution Vijay Govindarajan presents in his book is "Forget-Borrow-Learn." That is, companies need to forget the rules of the core business, borrow selectively from the existing business model and learn to operate in new entrepreneurial space.

These corner stones of strategic innovation are equally true for AEC firms. Adopting new ideas, business practices and technologies (BIM, Lean, Green and IPD) require a little more attention than the attention given to the core business (the performance engines) but these companies need to develop the 'Innovation Execution Teams' for future competition along with maintaining the present competition.

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