We’re about to embark on a series of 20 separate postings or “reports” discussing the changing nature of Development, Design, Construction and Facility Management of capital projects and the significant level of innovation currently underway. For simplicity, think of these different professional areas as the “Development Industry” — and know that much of it is about to change.
The majority of my experience is in the commercial side of capital projects, such as office buildings and light industrial properties. I have managed large Industrial developments, complex Federal projects and full campus developments for higher education, so these discussions will deal with the broad range of issues those building types are facing. These discussions will also take an International viewpoint, as the innovations and changes are occurring worldwide.
The name of these posts, or “reports,” Gordian Views, is meant to underscore how pervasive innovation has been throughout human history. The story of the Gordian Knot recounts how Alexander the Great had to “think outside of the box” to solve a knotty (pun intended) problem. The full story is quite interesting and can be found in Wikipedia at http://en.wikipedia.org/wiki/Gordian_Knot . It is a good metaphor for the enduring nature of innovation over thousands of years.
The difference between that early story of innovation and today is the speed with which innovation and change is now occurring and how pervasive change has become. The Development Industry has resisted much change for the last 40 years, and only in the last few years have we seen innovative changes being introduced at such a rapid pace. A simple example is the Building Information Modeling of systems and materials using programs such as Revit by Autodesk. That program has rapidly evolved from a 3-dimensional model, to 4,5 and 6 dimensions with the addition of time, cost and operating costs to the analysis. You can get a good idea of the complexity of the newer systems at http://www.autodesk.com/products/revit-family/overview .
Another example of rapid evolution of materials and processes can be found in a recent New York Times article which is the story of a Chinese firm that “printed” ten new homes; http://rt.com/news/155220-3d-printer-houses-china/ . While the basic 3-dimensional “printer” technology is now several years old, the applications continue to grow and the equipment continues to scale. It is not surprising that it can be used at whole house scale.
The Twelve Disruptive Innovations
In 2013, The McKinsey Global Institute published a report on “Disruptive Innovations”. In the intervening two short years that term- “disruptive innovation” – has become commonplace and a bit overused. The original report lists 12 areas of innovation that will be, and are, changing our world. That includes the Development Industry. The twelve areas of innovation that McKinsey included are;
1- Mobile Internet;
2- Automation of knowledge work;
3- Internet of things;
4- Cloud technology;
5- Advanced robotics;
6- Autonomous and near-autonomous vehicles;
7- Next generation genomics;
8- Energy storage;
9- 3D printing;
10- Advanced materials;
11-Advanced oil and gas exploration and recovery;
12- Renewable energy.
The McKinsey Global Institute (MGI) report can be found at http://www.mckinsey.com/insights/mgi/research/technology_and_innovation . The Institute has done an exceptional job of documenting why they have chosen each of the industries and has taken an additional step in detailing how much impact each of these technologies will have as they gain acceptance. The net is that MGI expects their impact to be profound and firmly in place by 2025.
The Plan Ahead
I have been part of the Development Industry for over 40 years, starting as a graduate Engineer working on projects across the globe, and up to today, having completed over $215M in new development projects in the past 14 years as Development Manager. The projects and work have been challenging and each project has presented a unique set of problems to be solved. My objective has been simple— I have looked for projects with difficult challenges in technology, schedule, and funding. Staying focused on projects with problems has narrowed the field of competition, but it has also ensured I could accomplish something worthwhile with the time I invested. The Development Company included a single employee and the intent was to test the amount of leverage one person could bring to a complex process. In the past 14 years we have won two “Project of the Year” awards from the Downtown Denver Partnership; we won the Governor’s Award for Downtown Re-Development; we had two office buildings that sold for record prices in the Downtown Core; and won several Professional commendations. My sense is the time was well spent.
Throughout my career there has been considerable change, but nothing close to the pace and range of change underway today. If asked to begin a new project today, with a simple four year development horizon, I am not certain how I would even quantify the risks we would be facing! For example, what type of office needs will the emerging Millennial Culture demand in four years? How much parking would you need to include? How will the Financial Industry need to underwrite the development? What type of Energy use should I project? What type of structure makes sense? How will the Municipal Codes need to change? —- etc, etc.
Because the change is so pervasive, and the risk hard to quantify, I have elected to take a short break and research as many of the areas as I can tackle in the coming quarter. My plan is to provide the results in the form of a blog— this blog— with at least two new entries each week. Over the past 8 weeks I have been interviewing professionals in a wide range of areas that impact the Development Industry and their comments and planning for the future will form the core of each report. I also have a number of additional interviews to complete.
I plan to publish Information in the following key disciplines though not in this order:
1- Architectural Design— design is a critical component and often is the core of a project’s success. How do you find great design when knowledge work is being automated?
2- Engineering —across a range of disciplines— How do you ensure your systems use current technology and are not 1 to 2 years out of date?
3- Prefabricated systems and how they will be impacting each project?
4- Insurance and Risk Management;
5- Legal- how will contracts, agreements and disputes need to be handled in an industry that continues to change? How do we establish entitlements?
6- Financing new work, paying subcontractors timely, accommodating the manufacturing model for prefabricated materials;
7- Construction— Is there a need to bring a manufacturing management overlay to the construction industry;
8- Building Codes- How do you work with the City to ensure their timely acceptance of new technologies?
9- Changing Client expectations. How do we serve our clients in this rapidly changing business and meet their expectations/ needs?
9- The changing Client base— who will be looking for new or updated facilities and why?
10- Development— how does the Development Manager need to change?
11- How do projects address Lean methods, TQM, JIT, Optimized Logistics support, LEED, ISO, COSBIE and related standards?
12- What roles do autonomous vehicles play in project logistics, managing 24/7 delivery schedules, employee transportation, etc?
13- Is there a role for agile robots working with your work force? How would this impact current labor agreements?
14- Can we source materials and systems internationally without violating existing agreements?
15 How do we reinforce continuing employee education? What role will MOOC’s play in this continuing education? How will we evaluate online education for future employees?
— and more.
I hope you will find these “reports” useful as you plan for the future of your companies and your careers. I also appreciate any and all input. This is one of those unique moments when the entire Development Industry must contribute if we are to arrive at an understanding of how to use this fast-paced change to serve our clients and customers better— and continue to produce projects that will serve our clients and endure.
I hope you will join me in this journey.
James (Jim) McGibney
I have both worked with Jim (the author of this blog) for many years as well as had many conversations with him about the impending changes that we will be seeing in the construction industry. For those who don’t “see” the changes that are coming and wish to still do things as we have over the past couple of decades will quickly find themselves unable to compete in the market. All other major industries are embracing and incorporating the new technologies in order to build a better and more economical product, however so far in the construction industry we have not gone as far. I will be interested to see what the opinions are of the experts as Jim continues to look into these disruptive technologies and how they might affect my chosen industry.
Disruption is often viewed as negative distraction. However if you spend any time in the Silicon Valley you will quickly realize disruption is the driving force behind the greatness of the companies in that area.
I recently attended a conference and the Internet of Things was a major discussion focus. The HVAC manufacturer putting on the conference has already developed products that have put into practical application what Jim has identified. Two specific areas are HVAC equipment maintenance and Building Automation Systems. The days of having to send all of your employees home early because the air conditioning doesn’t work are over. The IoT allows us to predict failure and replace a part before it shuts down the air conditioning.
The next generation of HVAC technology is here. Its going to be exciting disruption!