As the first half of the year ends, it’s a great time for a quick retrospective on your New Year’s Resolutions. If you are like me, you set some ambitious goals for the year, and your business probably did the same.
Often, those resolutions are stated as goals (lag) vs. targets (lead). So what if we set some quantifiable improvement targets for our capital projects, like 10% faster and/or for 10% less without compromising safety, program or quality? Imagine the impact this could have on your business. Could you begin collecting revenue sooner? Could you reinvest those savings to create a more engaging workplace? As you imagine these exciting “what-ifs,” it’s also worth asking yourself, “What if some of my peers and/or competitors were already enjoying some of these benefits?”
That may seem like an intimidating proposition, but it’s a necessary one to examine. In 2016, I had the pleasure of sharing new empirical evidence on why projects excel to various stakeholders in the design, construction and infrastructure businesses across the United States. The findings were based on two separate research studies sponsored by the Lean Construction Institute I was privileged to participate in:
- Dodge Data & Analytics surveyed1 81 owners and 162 projects to benchmark owner satisfaction and project performance by analyzing best and typical projects along with an assessment of project (team) organization, commercial (terms) and operating system (management methods)
- University of Minnesota (UMN) performed a study2 of ten projects that all used multi-party agreements to better understand IPD and Lean motivation and means to achieve better project outcomes
What is Lean and what are the benefits?
There are a lot of definitions circulating about Lean, but I’ve always believed it can be boiled down to the following formula: people + continuous improvement = more value (for customers) with less effort. Regardless of project type, regulations or prior Lean/Integrated Project Delivery (IPD) experience, the UMN case study research found a striking uniformity of success for all the teams in the study and that Lean and IPD fostered and cultivated “project first cultures”. The numbers from the benchmarking study reinforce the business case for Lean; Dodge found projects with higher lean intensity (adopting more lean methods) were statistically:
Figure 1: Three times more likely to complete ahead of schedule and two times more likely to complete under budget
This ‘Business Case for Lean’ empowers each of us with a simple value proposition, based on empirical evidence, to communicate the benefits of adopting Lean methods to speed adoption in our industry and improve delivery of our projects. This business case is focused on time and money since Owners continually cite “schedule and cost performance” as most valuable in delivery of a capital project.
How do we know the impact of Lean with statistical confidence?
With these primary metrics in mind, researchers took their cue from Jim Collins’ ‘Good to Great’3 and compared the differences between ‘best’ projects and ‘typical’ projects. Dodge found that 24% of ‘best’ projects finished ahead of schedule compared to only 6% of ‘typical’ projects, and 46% of the ‘best’ projects finished under budget compared to only 10% of ‘typical’ projects (Figure 2).
Figure 2: Schedule and Cost Performance from Approval of Capital Project
We learned why some projects prospered while others faltered by studying the organizational, commercial and management methods used to deliver each project. The following are the major differences between best projects and typical projects:
- Best projects build a foundation for success: Dodge found that 76% of ‘best’ projects engaged key stakeholders before or during conceptualization, giving them an advantage over the 42% that did not do so until the design development phase or later.
- Best projects promote collaboration: Dodge found that ‘best’ projects used more collaborative delivery methods and contract types, such as Construction Management at-Risk with Guaranteed Maximum Price, Design-Build or IPD with Shared Risk & Reward. On the other hand, most ‘typical’ projects used Lump Sum Design-Bid-Build.
- Best projects implement more Lean methods: Best projects had a higher usage of specific Lean management methods than typical projects. When looking deeper into the best of the best projects, researchers found that high Lean intensity projects were more likely to finish ahead of schedule and/ or under budget.
How do you get started?
I often get asked how and where to start. While there is no one right answer the key is to adapt for your business constraints, get started then learn and adjust as you go. The results from both research efforts are remarkably complementary and I would suggest the following tactics as you initiate your next capital project:
- Establish and communicate the owner’s business case and goals
- Build the team prior to/ during conceptualization using a best value selection process
- Learn as a team to increase adoption of Lean methods
- Support the team with collaborative contracts (IPD creates a pull for Lean)
Personally, I’m excited about the value Lean and IPD are bringing to our industry, and at Balfour Beatty, we’re already observing their potential to revolutionize the building experience for our people, clients and partners. What is your organization doing to achieve its resolutions in 2017? How can we further challenge the status quo to make “A” team results a reality on every project? I look forward to hearing from you!
1. Lean Construction Institute (LCI). (2016). “Why do Projects Excel? The Business Case for Lean” In: 18th Annual LCI Congress. Available at: www.leanconstruction.org/learning/research
2. Lean Construction Institute (LCI) and Canada’s Integrated Project Delivery Alliance (IPDA). (2016). “Motivation and Means: How and Why Lean and IPD Lead to Success”
3. Collins, J. C. (2001). “Good to great: why some companies make the leap ... and others don't”. New York, NY, HarperBusiness.