Lean Construction: What's To Come?

Lean Construction: Only One Variable in the Capital Project Value Formula

By Charles Spina

Director, Corporate Client Relationships

eZsigma Group 

There are few sectors where Lean and its cousin, Six Sigma, can have a more conspicuous beneficial impact than construction. The end-to-end value streams are phenomenally extended, yet the decomposed streams have historically been de-coupled from each other. What are we saying here? Let’s first look at what we are not saying. We are not saying that  project smarts are not being applied, that smart people are not behind the projects, that some of these projects are actually delivered on-time and on budget and on spec. What we are saying is that value stream integration, true collaborative planning and re-planning, and a little Lean skill can dramatically improve the processes intended to be housed in the buildings being constructed, shorten timelines, improve safety and increase profit margins.

It is sometimes claimed that when it comes to best practice, Canada lags other countries. If we look at construction, even the least objective of us must admit that with all of the sector’s monumental accomplishments, when it comes to process efficiency, the claim has merit.

Yet are we being myopic if we limit our view of process improvement opportunities only to the construction phase of capital projects or to the constructors themselves? We think so, because we believe that the quest for optimization must encompass the constituent processes managed and otherwise owned by the other players in the capital projects value chain: owners, funders, architects, functional programmers and sub-contractors.

It Comes Down to Time and Customer Value

We are not about to insult our readers with oversimplifications; even modest capital projects are complex, but if we were to isolate a single measurable to be managed in such projects, it would be the elapsed time measured from design concept to the first customer service occurrence. A customer service occurrence could be triggered by an emergency room visit, or in the case of a courthouse, a first trial proceeding, so non-value added time is not only money, it is social cost and it is opportunity cost.

If Lean is about understanding the voice of the customer and about translating it into experiences that can be monetized, constructors certainly have their contribution to make to the customer experience by completing earlier, and in a DBFM context, designing from inception for flow and motion. Indeed, in a future entry in this series we will give the constructor’s role its due emphasis. In this entry, however, with the time measure as our backdrop, we are going look at the role of public and private sector project owners.

Public Sector Project Owners

Government-sponsored projects, such as those for municipal buildings and hospitals having service fulfillment mandates, necessarily have long lead times, owing to the requisite community and stakeholder consultations, partnership formation (particularly in this era of DBFM) and funding and regulatory approvals. Lean practitioners who are familiar with the sector view this pre-construction cycle as a value stream in its own right, and one that is in need of much attention. To be sure, it is composed of a certain amount of distributed value-added activity - after all, the job eventually gets done- but it is performed over a waste-laden timeline.

Private Sector Project Owners

The private sector project owner is interested in minimizing his or her cash-to-cash gap; that is, the time from the commencement of capital outflows to the time cash from revenue generating activities starts to materialize. If a hospital first opens its doors six months after scheduled completion, it’s certainly a human impact problem, but above all, it’s a political problem. When the turbines of a power plant start spinning six months late, however, it’s a financial problem: for lenders for sure, but also for the investors holding units in the infrastructure fund that took a $100 million bet on the project.

An Ounce of Lean Knowledge Sheds Pounds of Waste

Owners need not take more than a day to orient themselves to Lean principles and methods for them to be empowered to identify projects’ winning pre-conditions and how those conditions can be embedded in RFPs and contracts. According to one distinguished Lean practitioner, just by operating in Canada, owners already have a cultural advantage.    

“In general… levels of collaboration seem to be higher. Canadian contractors often work with the same suppliers and the same subs over multiple projects. That makes ideas like lean construction easier to bring in. There’s a baseline of trust in the beginning.”

(Dick Bayer, Executive Director, Lean Construction Institute)

Canada has world class architecture, construction materials and constructors. Yet, if we isolate the construction value stream in the capital projects life cycle, we need not look farther than the typical contract to see that risk, lateness and uncertainty are embedded in them and priced accordingly. The impetus to re-invent process can come from two sources: owners who demand best value for money and constructors - in their quest for competitive advantage.

The extent to which Lean construction methods are being adopted, at least south of the border, can be gleaned from Dassault Systèmes' seminal 2013 survey. The continuous improvement mindset and the deployment of its corresponding methods and tools requires leadership. Canadian constructors can either lead its deployment and thus influence the entire project life cycle, from concept development, to design, to modeling, to contracting, resource engagement, construction and commissioning, or be led by others. Given the choice, we know where we would stake our ground….and our brands.

eZsigma Group is pioneering the usage of Lean Six Sigma in the construction industry. Contact us for more details about how we can help your organization perform better.

Strategy Deployment: The Top Down Approach and What's Wrong With It

Not long ago, the movement for a better understanding of strategies and how managers deploy them was a hot topic, to say the least. While great efforts were put into the exercise of creating strategies in which the entire organization would understand and benefit from, not all persons involved in such exercises were clear as to what exactly these strategies, to begin with, really meant to deliver.

Early adopters of the Balanced Scorecard created by Harvard professors Norton and Kaplan were sure to see an organization that undoubtedly would create more synergies among processes, more engagement from their employees, and of course, more profits as the result of a better aligned organization. Whilst academics and practitioners around the globe focused their efforts on polishing the methods to deploy strategies, little has been done to study the inclusion of various stakeholders in the development of such strategies. 

As many methods will teach the practitioner, strategy must be developed at the top, by senior leadership and by those who indeed know “what the best for the organization is”. It is at the top of the organization that major decisions are made, that resources are allocated, and strategies are created. But how does one organization go from creating strategies without the involvement of those who will in fact execute it? Are we to assume that the communication that flows through the various layers of organizations will not get corrupted? Can we attest that the vision and objectives defined by the C-suite (positions that start with the letter C such as CEO, CFO, COO, and so on) can be clearly understood by mid level managers and operators? And how does one go about measuring such understanding? Let us look at figure 1 for a moment. It shows the traditional way of creating and deploying strategies. In its most simplistic form, strategy is created by the top leadership and then simply “deployed” through the various layers of the organization. In this example, I have only considered four layers: senior leadership, mid level managers, supervisors, and finally operators.

Figure 1 – The traditional strategy development and deployment process

                

Traditionally, and as abovementioned, strategy has been one of the tasks that senior leadership performs in organizations. Leaders develop strategies based on the organization’s mission, vision, and values, or mandate – not necessarily a new practice. In developing strategies, these strategists consider a vast array of factors that influence and provide input to the organization’s path to achieving success. These factors can be of an external nature such as the economy, market (segment) conditions, available labour, legislation, and the environment to name a few. Other internal factors may be the organization’s own available human resources, its financial situation, its product (or service) line, its production capabilities, its margins, and its desire to penetrate into a new market. In short, to shape the strategy, leaders look into different areas of concern in order to create a robust direction for the organization. But leaders are, in most cases, away from operations. They receive input about it from their direct reports and through managerial meetings that not always portrait the real feeling from those who are in fact executing the strategy.

A modified strategy formulation process, developed in contrast to the traditional way depicted in figure 1 is shown in figure 2. In this model, the development of the organization’s strategy does not strictly flow only one-way from top to bottom. The process actually starts with operational input and for as long as the strategy per se is being developed, operations are in constant touch with top leadership and mid-level managers.

Figure 2 – The development of the strategy through operational input

In absolutely no way, shape or form does this suggested model ignore the fact that top leadership always has far more information available at a macro level (economics, global trends, and so on). Instead, this model suggests that the operational department (be it a manufacturing or a service provider), the entity responsible for executing the strategy, knows what occurs at the micro level of the organization’s core better than top leadership. The inclusion of operations in the development of organizational strategies simply demonstrates that macro and micro levels can be aligned in a way that the entire strategy, or strategies, can provide employees with a more meaningful work life - they get to understand what they do at the end of the day. The joint effort proposed herein not only provides the organization as a whole with a much richer input for the strategy development process but also directly affects how employees perceive the strategic effort and how employees understand and work towards the organization’s main mandate. The core of this message is the alignment between what senior leadership intends to deploy as strategies and what employees at floor level perceive as being deployed as strategies.

In short, the first step in accomplishing such alignment between top leadership and operational level is to ensure that both parties - as well as the other levels of management (as depicted in figures 1 and 2) – are in sync when it comes to developing what the organization’s future is bound to be.

eZsigma Group has recently launched its Strategic Management program in which we look at the organization's strategic mandate to find the best fit for continuous improvement initiatives such as our Lean and Six Sigma programs. Contact us directly for more information on how we can help your organization be a better one.