Making Construction a Service Industry
Managing risk through servitization
Revisiting a smart Harvard Business Review article got us thinking about how we, as an industry, can better mitigate risk. People perceive construction projects as perpetually running over budget, blowing timelines and being full of frustration and uncertainty. In 30 years, why hasn’t this reputation changed?
Despite having been published in 1989, the truth of the article remains: having a bird’s eye view of a project from the get-go is essential in managing all knowns and unknowns throughout a project.
Over the next 8 weeks, we’ll discuss some key issues in the HBR article and share lessons learned to help anyone engaging in a construction project reconsider risk management.
Building as a Service–
Building a facility for your business can be a confusing process; governed by complicated contracts and multi-level relationships. Most companies don’t go through it often: projects carry significant financial and/or operational risk, construction skills aren’t typically part of the repertoire, and coordinating the work of subcontractors, suppliers, trades and general labourers while directing the services of architects, engineers, and/or consultants can feel like herding cats (with a lot more liability!).
With the appetite for service now outweighing the appetite for product, servitization is becoming the ‘new normal’. In other industries, we see a shift to providing services with product: GE’s healthcare division now offers installation, post-installation performance maintenance and monitoring of their large medical devices.
How can we, as an industry, start looking at building as a service?
Over the years we’ve begun to approach the challenge of taking the lifecycle performance of the buildings we create into account, constantly providing a higher level of service throughout the project, and we’re starting to see a slow shift towards an Integrated Project Delivery (IPD) approach.
What makes IPD different from traditional design and construction methods is a focus on shared responsibility, stakeholder engagement throughout the project life cycle, and shared financial risk. There is a single contract and the entire team, including the owner, and the project either succeeds or fails as one; with the whole being greater than the sum of its parts.
The benefit of each team member’s experience is likewise compounded at multiple stages; leading to enhanced revenue, sustainable growth and, paramount to everything else, an increased level of customer satisfaction. Companies want their structural assets to be productive long into the future, and taking a service-first approach bakes the builder-client relationship into every stage of a project – from design, through delivery, and into ongoing service.
Contract a builder and they’ll help you navigate the building process.
Collaborate with a builder and they’ll help you make design, building, and ownership part of your business model.
By design, having a team dialogue helps mitigate risk by addressing concerns early, especially when dealing with large, complex builds. Moving forward, failure to adapt to a service-oriented model means failure to engage in a service-oriented world.
We need to collectively evolve away from the tangle of big egos, one-sided contracts and us-vs-them hostility that has plagued the industry for ages. The onus should not be on the client to ask all the right questions right off the bat. Accountability is, after all, a team sport.