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FMI Quarterly ISSUE FOUR
Innovation and Transformation: Paving the Way to Tomorrow Innovation and Transformation: Paving the Way to Tomorrow
By Chris Daum
dvances in technology and innovation in the engineering and Aconstruction industry have been historically slow to catch on. Today, that is no longer the case. From innovative construction materials to new processes and emerging technology platforms, every corner of the industry is feeling the impacts and pressures of these developments.
In addition to the rapid adoption of new technologies, our industry is also using new manufacturing and prefabrication techniques, both of which are starting to shape and impact all aspects of the construction value chain. One example is the changing business model of general contractors and construction management firms: These companies are reinventing themselves and looking for new ways to add value by offering innovative “non- fee” services.
The most innovative firms are taking a more proactive approach to the innovation and transformation that’s impacting the industry. Rather than being led by these changes, these firms are leading the charge in these areas. Over the years, FMI has seen several industry leaders thrive in their roles during times of highly innovative and disruptive shifts in their businesses. In this edition of the “Quarterly,” we present unique insights from such suc- cessful industry leaders (DPR, Thornton Tomasetti and the APi Group) on the different ways in which they have led innovations and positive disruptions.
Value has moved beyond bricks and mortar and traditional control processes to the totally integrated smart building and smart home. Our authors provide insights in these market sectors, where recent M&A activity indicates that many of the players are crossing over and entering adjacent markets via acquisition to gain an edge in this rapidly evolving landscape. For those companies that can stake their claim and find ways to own and influence build- ing owners, the rewards will be great.
Lastly, we take a deep dive into how leaders can drive organizational success by using more effective practices in succession and leader selection. With the baby-boomer generation retiring at a rapid rate, and with skilled, experienced labor becoming more and more dif- ficult to find and retain, E&C firms must take a more strategic approach to identifying and selecting their future leaders.
At FMI, we think that the competitive forces that are driving transformation and innovation inside our industry reflect a long-term trend that will continue to accelerate. In future editions of the “Quarterly,” we’ll continue exploring how technology, demographics, busi- ness model changes and other competitive forces are driving transformation and innovation in our industry.
Chris Daum is the president and chief executive officer of FMI Corporation. Chris oversees the management of all FMI busi- nesses and services and leads the firm’s strategic growth efforts. He may be reached via email at [email protected]. Leading Innovation: Insights From Industry Executives (Part 1)
By Kim Jones and Ron Magnus
MI often hears stories about innovations and positive disruptions occurring in and around the engineering and construction industry. FThese new ideas are often associated with project-related processes, systems or technologies. And while some ideas and technologies stick, many others seem to fail.
FMI’s Center for Strategic Leadership (CSL) has been observing innovation trends with a slightly different lens that is focused on how leadership positively or negative- ly impacts the innovation process. We have seen many leaders struggle to navigate and truly lead their organi- zations through disruption—whether it’s by introducing a change in their business processes or adopting new ways Thomas Z. Scarangello, P.E. of thinking. Chairman and CEO Thornton Tomasetti Along the way, we’ve discovered that the influence of leadership in this process has a more profound impact than most would think. In fact, several key leaders in our industry have thrived in their leadership roles during times of highly innovative and disruptive shifts in their businesses. Witnessing these shifts caused us to pause and reflect on what we saw. We began by asking ourselves Russ Becker questions like: CEO and President APi Group, Inc.
What types of leaders successfully drive innova- Industry Disruptor Profiles tion? What differentiates them from their peers? What have they learned over the years of leading innovation? How can FMI help spread their knowledge to current and future leaders in our industry? Atul R. Khanzode, PhD Director of Construction Technologies DPR Construction FMI Quarterly Q4 2016 | 2
These questions led us to orchestrate an intimate, one-day “think forum” with three leading industry disruptors: Russ Becker (APi Group), Tom Scarangello (Thornton Tomasetti) and Atul Khanzode (DPR Construction). Each of these leaders has led inno- vations and positive disruptions within our industry in different ways. To share what we’ve learned from our in-person conversations, we will develop a three-part series in which we will highlight:
1. The traits of successful innovation leaders 2. Lessons learned leading organizations through innovation and disruption 3. The influence of culture, talent and leadership in the innovation process
Trends in innovation and thought-provoking ideas from these leaders will be sprinkled throughout the series. This first article describes what it takes to successfully lead in- novation in our industry. The traits, characteristics and worldviews that were discussed by Russ, Tom, Atul and FMI are outlined below.
Six Key Traits of Innovative Leaders When people think about innovative For the purpose of the onversation e loosely leaders, they envision someone who has used the follo in definitions to differentiate the latest technology gadgets and who disruption and innovation constantly discusses new product intro- Disruption ductions and trends. While this may be Interrupting and changing the trajectory of business, pro- true in some cases, there is more to the cesses and systems story than just technology. To effectively Challenging traditional methods drive innovation, leaders in the engineer- ing and construction industry must focus Addressing a market or client in a significantly different way on more than just the way they design and build structures; they must harness Innovation Introducing a new idea, technology, method to a market or very different characteristics than what system stereotypes and tradition would tell us. According to Russ, Tom and Atul, the Improving processes, products, services or technologies following traits are common to those who Creating new value (or capturing new value) for internal lead innovation and disruption well: and/or external customers
Focus on people and culture first—the rest will follow Identify the opportunity in every situation Have the courage to take a risk and face the tough questions Share ideas as often as possible—both internally and externally Continually push your own thinking Understand your own limitations
1. Focus on People and Culture First—The Rest Will Follow
During our one-day think forum, the main focus of our conversation was on how lead- ers actually lead the business to drive innovative thinking and execution. There was strong agreement that a leader’s chief responsibility is to lead his or her people and organizational culture first. As we dug into this further with the group, a few common worldviews around this topic emerged:
Spend your time, energy and resources on your organization’s people and culture. Helping them learn and grow in their thinking, experiences and competencies will pay dividends later when you need an innovative shift. Shortcutting people development never pays off. FMI Quarterly Q4 2016 | 3
Recognize that the power of your culture is stronger than you think. Toxic, negative or close-minded cultures chew up new ideas and spit them out. Cultures where ideas are valued and heard provide a safe harbor for people to speak up and share different—and sometimes radical—new ideas that could forever change the trajectory of your business.
Don’t expect the leader to come up with all the innovative ideas. Every role in your business has a different perspective on how things could be done better. Provide an inclusive way for all voices to be heard—and then listen.
Build a culture that encourages frequent conversations around continuous im- provement and better ways of doing things. Create a safe place to talk about failures, learn from those mistakes and teach others in the future.
Create space for nontraditional employees to join your team. External experi- ences and perspectives often bring some of the most influential shifts in our industry. Just because you don’t have a traditional role for them doesn’t mean they can’t find a place to thrive.
2. Identify the Opportunity in Every Situation
Leaders have a choice each morning regarding what type of lens they wear to work. Some choose a pessimistic lens while others choose a skeptical lens, and few choose a highly optimistic lens. We all (Russ, Tom, Atul and FMI) agreed that leaders who choose to wear optimistic lenses each day see the business in a different light that often leads to positive disruptions in their businesses. It’s much easier to focus on what is not working or what is wrong with a situation than it is to find the hidden opportunities. When we’ve observed innovation leaders in our industry, they are all consistently dili- gent (and sometimes emphatic) about balancing reality while finding the opportunity in every situation.
Tom explained how some of the most creative solutions in Thornton Tomasetti have emerged from leaders who are problem solvers versus problem identifiers. Rather than focusing on the challenge at hand, the most innovative leaders found the opportunity that solved the problem.
We also discussed how leaders find opportunities and innovative solutions during moments of crisis. Each of us has witnessed a moment of crisis where leaders were able to pause and see the situation differently than most. Russ stated, “Crisis is what drives people to change.” And we all agreed that some leaders change in a healthy, productive manner and others change in a damaging and nonproductive manner. Innovation lead- ers don’t waste moments of crisis; they see them as opportunities and act upon them accordingly.
3. Have the Courage to Take Risks and Face the Tough Questions
It’s not surprising to hear that innovative leaders demonstrate the courage to take risks. In fact, one of the quintessential elements of the innovation process is venturing into unchartered territory without certainty of success. Courageous leadership in those moments is not easy, so we asked the question, “How do you do that well as a leader?” We got the following responses: FMI Quarterly Q4 2016 | 4
Listen to new ideas and assess them for validity, implications (good or bad) and the opportunity.
Clearly identify the benefit of trying something new, and then communicate it as broadly as necessary.
Lead others well so that they can create a plan for testing the idea, learning from the outcomes and trying again. Leaders shouldn’t be doing this in a vacuum.
Clarify roles and responsibilities associated with the innovative risk so expecta- tions are clear all around.
After you’ve listened to others, ask yourself if you are willing to take the risk on behalf of the organization. At some point, you have to trust your knowledge, experience and intuition.
Innovative leaders also create a vision for innovation for their organizations. Clearly communicating why innovation is part of the organization—and what the future en- tails—helps clarify why risks are being taken in the first place. This communication acts as a guiding light for innovators across their organization and clarifies what risks the organization is (and isn’t) willing to take.
A clear vision also helps innovative leaders face the tough questions head-on and open the tough dialogue with others, even when they’d rather avoid those conversations. We discussed how avoiding those tough conversations often leads to anxiety, doubt, cynicism and other negative behavior within their cultures—none of which is worth the risk in the long run.
4. Encourage Idea Sharing as Much as Possible—Internally and Externally
When a new concept or thought emerges, oftentimes people try to keep it as close to the vest as possible in fear that someone may steal their ideas. Ironically, Russ, Tom and Atul agreed that talking about ideas, sharing insights and building on each other’s cre- ativity are the best ways to lead innovation. Leaders who create a culture in which ideas are not shared tend to see poor results from their innovative efforts. Conversations—both internal and external—can spark a brand-new thought that would have never entered their thought process in the first place.
Innovation leaders also dedicate time to teaching their peers and other future leaders about what they are seeing and learning in the marketplace. Spreading knowledge across the industry can ignite a disruptive change faster than trying to compete with one an- other for ideas. The group agreed that if the industry can figure out a way to build a sense of team rather than competition when it comes to innovation, the rate of positive disruption increases exponentially.
5. Continually Push Your Own Thinking
It’s extremely rare for leaders of innovative organizations to be stagnant and complacent in their expertise, thinking and leadership. True disruptors in our industry are contin- ually evolving as individuals and as leaders of their businesses. As we watched Russ, Tom and Atul discuss their insights and lessons learned about leading innovation in the industry, it was clear that all of them consistently pushed their own thinking in these ways: FMI Quarterly Q4 2016 | 5
They Read Extensively—They are lifelong learners. Whether it’s reading daily newspapers, industry trend reports, global economic articles, books (nonfiction and fiction) or innovation publications, these leaders constantly discussed new headlines and trends they were seeing in the marketplace. Industry disruptors are all extremely well-read, and they know how to apply that newfound knowl- edge to their own businesses and the industry.
They Listen for Understanding—They listen to stories, insights and viewpoints (both internal and external to the industry) as often as possible. They slow down enough in order to deeply understand what is being said while applying the lessons learned to their businesses and/or thinking. Slowing down to listen has spurred many new, different and disruptive ideas that have been implemented in real time for these three leaders.
They Discuss Ideas With Everyone—They love to push their own thinking by discussing lessons learned, new ideas and new concepts with other people. Like sharing ideas above, they know that different perspectives and points of view influence their own leadership style and approach to innovation every year.
Pushing your thinking as a leader helps you make better decisions related to innovation. A strong foundation of knowledge and expertise in the industry can influence how you assess risk and where you invest your time, energy and resources as an organization.
6. Understand Your Own Limitations
Humility and self-awareness were glaringly obvious traits among Russ, Tom and Atul. At one point, each of them said something along the lines of, “I don’t think I’m person- ally a disruptor in this industry.” Those characteristics are not common across most industry disruptors, but we did agree that the best leaders of innovation understand their own limitations. They are willing to admit when they are out of their depth and they lean on others. They are also willing to admit when they are personally falling behind on trends in innovation or other relevant factors related to their business.
Understanding your own personal limitations creates positive boundaries around what individual leaders should or should not be focusing their energy on. They know that others around them are smart, capable individuals who can backfill where they are deficient. They also realize that their own strengths can backfill the deficiencies in others. Self-awareness, teamwork and support for one another are common traits we have all observed in innovation leaders.
The Next Step In our conversations with these three innovative leaders, we gained valuable insights around what it takes to be an innovation leader. Like most leadership traits, the char- acteristics of innovation leaders discussed are teachable, which is great news for current and future leaders within our industry.
We will continue this journey in Part Two of this series, where we will outline the lessons that Russ, Tom and Atul have learned over their years of leading innovation and dis- ruption in our industry. Kim Jones is a consultant with FMI’s Center for Strategic Leadership practice. Kim designs customized solutions that address a wide variety of leadership issues including: organizational development, cross-cultural leadership, developing strategic thinking, talent development and retention. She also serves as a facilitator at FMI’s Leadership Institute and other training programs that help leaders reach their peak performance. She may be reached via email at [email protected].
Ron Magnus is a managing director of FMI’s Center for Strategic Leadership. He founded the Center for Strategic Leadership, which has focused on developing the strategic capability of leaders worldwide Many of the largest engineering and construction firms in the world are clients and friends of the CSL. Ron also serves on Boards as a director and trusted advisor. He may be reached via email at [email protected]. Cultivating the Next Generation of E&C Technical Talent
By Priya Kapila
he E&C industry is undergoing a technology revolution that is Timpacting how firms find, train and retain top technical talent.
With information system innovation at an all-time high, the engineering and construc- tion (E&C) industry is experiencing dramatic changes right now. New technological advancements, combined with demographic shifts in the workforce and owners’ demands for cheaper, faster and better projects, are resulting in heightened pressure for E&C companies to continuously improve and advance.
Augmented reality, 3D printing and scanning, building information modeling (BIM), virtual design and construction (VDC), prefabrication and even unmanned drones are helping E&C companies work smarter, boost productivity and improve collaboration across project teams. But these innovations also pose challenges, particularly when it comes to finding, developing and retaining the right talent.
In this article, we explore the impact of technological influences on today’s E&C labor practices, discuss what new skills and competencies will be required in the near term and provide recommendations on how to develop a workforce of the future.
The Merging of Design and Construction Over the past decade, we have witnessed a significant increase in firms adopting BIM/ VDC systems in all aspects of the design-build process. This includes modeling, cus- tomer decision mapping, estimating, virtual building, prefabrication, site analysis and coordination, construction resource utilization and field work planning, among others.
With the growing use of enhanced BIM/VDC systems comes the demand for specialists to employ these tools effectively. In one extreme example of how BIM/VDC usage is impacting the industry, we can look to Broad Sustainable Building, a Chinese construc- tion firm that last year brought new meaning to fast-build projects by completing a 57-story skyscraper in Changsha in just 19 days. While this prefabrication feat was as much for notoriety as it was to meet housing demands in south central China, the FMI Quarterly Q4 2016 | 2
project highlights the current prevailing expectations for efficient design-build engage- ments, which will rely heavily on effective BIM/VDC tools and a technically proficient workforce.
Early adopters of BIM/VDC processes now have a performance record that proves the operational gains that may be realized using innovative modeling and virtual planning systems. Mortensen Construction, for example, analyzed 18 projects completed between 2004 and 2014 and identified the following benefits resulting from their VDC process:
Average schedule reduction: 32 days Productivity increases: 25% and greater Average direct cost reduction: 2.95%
As the positive impacts of BIM/VDC are noted across the entire E&C industry, it’s clear that such innovations are revolutionizing project delivery. Some of the key areas of innovation include:
Prefabrication. With the ability to better plan and model construction projects, E&C companies anticipate the expansion of prefabrication work, which has the potential to significantly reduce project timelines. Automation. Where possible, firms are seeking to implement automation pro- cesses already highly utilized within the manufacturing industry. This is criti- cally significant from a safety standpoint, as the use of robotics could limit the exposure of workers to site safety hazards. Virtual Collaboration. The ability to liaise in real time with customers and other project stakeholders using mobile devices and related technologies is in- creasingly cited as advantageous to project design and decision-making, partic- ularly for health care clients.
Technical Talent Wanted Naturally, the expanding utility of BIM/VDC tools has driven the need for specialists that can effectively apply these systems. FMI Compensation has collected staffing and salary data from E&C companies for BIM professional jobs since 2009. Our longitudi- nal analysis reveals several key observations:
1. Growth of the Profession The number of companies that report having a BIM professional on staff has increased significantly over the last two years. In FMI’s“ 2016 Construction Professional Compensation Survey,” we noted an increase of 68% in companies identifying at least one BIM professional within their workforces. Our survey findings also indicate the greatest growth of incumbents at the senior BIM profes- sional level—a trend we expect to see continuing in the coming years.
However, our research also shows a slight decline in entry-level BIM specialists, which seems out of line with the overall trajectory of BIM/VDC adoption and deployment. There could be several explanations for this observation, including:
Demand for experienced BIM/VDC professionals is overwhelming and leaves little motivation for newcomers to enter the field. The economic downturn led to layoffs and hiring freezes that stifled the recruit- ing of beginner BIM/VDC professionals. FMI Quarterly Q4 2016 | 3
Training efforts, as well as employer expectations for rapid skills development for BIM/VDC specialists, are great, so employees are improving their knowledge and skills quickly and, therefore, moving beyond “beginner” status to higher steps on the career ladder in short order.
2. Increases in BIM/VDC Staffing FMI’s survey data suggests that companies are hiring more BIM/VDC professionals. In 2014, E&C firms participating in the Construction“ Professional Compensation Survey” indicated that, on average, they employed slightly fewer than four individuals in BIM/VDC professional positions. In 2016, the average staff count rose to nearly five BIM/VDC employees. The largest staff increases involved higher-level roles, suggesting the increasing need among E&C firms for highly skilled professionals who can facilitate coordination and collaboration among multiple stakeholder groups on complex projects.
3. Gradual Salary Increases For the past 15 years, FMI’s Compensation Group has been tracking six key benchmark job families, including business development, project management, project superintendent, estimator, general foreman and BIM (the latter has been tracked since 2009). Exhibit 1 shows the base pay trend for each job family and reveals that, in general, pay levels have been increasing since 2001. Although employment levels may have receded during the recession, those jobs requiring specialized skills and knowledge have experienced steady pay increases.
Construction Professional Pay EXHIBIT 1 Trends and Projections
1 0
160
140
120
100