Transcript TUBITAK_SR-DAP

Middle East Technical University – Civil Engineering Department
CE 726 Strategic Management of Construction Companies
INNOVATION
As a Source of Competitive
Advantage in Construction
Özge Bican
Murat Ayhan
Sertaç Arslan
METU
26/12/2013
OUTLINE
METU

What is Innovation?

The Meaning of Innovation

Framework For Analysıng Innovatıon In Constructıon

Types of Innovations
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Why Innovation is Needed?

Developing the Innovation Process: Innovation Models & The 4 Dimensions
Prior to Innovation Design
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Drivers of Innovation
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Obstacles to Innovation
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Case Studies from the Literature
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Example Cases of Innovation in Construction: A Process, A Management
& A Product Innovation
2
WHAT IS INNOVATION?
METU
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The word innovation originally comes from Latin word 'innovare'
that means "to make something new".

a process of creating a new product
or
service,
new
technologic
process, new organization, or
enhancement of existing product or
service,
existing
technologic
process and existing organization.
3
WHAT IS INNOVATION?
METU

‘A technological product innovation is the implementation/
commercialisation of a product with improved performance
characteristics such as to deliver objectively new or improved
services to the customer. A technological process innovation is
the implementation/ adoptation of new or significantly improved
production or delivery methods. It may involve changes in
equipment, human resources, working methods or a
combination of these.’
OECD, 1997
4
WHAT IS INNOVATION?
Construction Industry

METU
‘Application of technology that is new to an organization and that
significantly improves the design and construction of a living
space by decreasing installed cost, increasing installed
performance, and/or improving the business process.’
(Toole, 1998)

A new idea that is implemented in a construction project with
the intention of deriving additional benefits although there
might have been associated risks and uncertainties.
5
THE MEANING OF INNOVATION
METU

Terms like innovation, improvement, invention, and creativity
are often used interchangeably.
6
THE MEANING OF INNOVATION
Innovation - Improvement
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METU
An ’improvement’ that only meets the market standard.
Introducing an improvement that does not significantly
differentiate the company from its competitors and also can be
easily copied.
An ’innovation’ is about creating that breakaway differentiation;
it’s about creating superior economic returns.
7
THE MEANING OF INNOVATION
Innovation - Invention


METU
An ’invention’ is an idea, a sketch or model for a new or improved
device, product, process or system. It has not yet entered to
economic system, and most inventions never do so.
An ’innovation’ is accomplished only with the first commercial
transaction involving the new product, process, system or device.
It is part of the economic system.
8
THE MEANING OF INNOVATION
Innovation - Creativity
METU

Creativity represents an opportunity to create new appearance,
content or process by combining existing inputs or factors of
production.

Inventiveness is a process of creating something new, which
assigns a contribution to the level of overall mankind knowledge.
Innovation is linked to the definitive marketing of the new product,
service or technologic process, which is a result of the
inventiveness.
9
FRAMEWORK FOR ANALYSING INNOVATION
IN CONSTRUCTION
METU
Hansen & Birkinshaw (2007)
10
TYPES OF INNOVATIONS
METU
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Innovation refer to

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Radical
Incremental
changes to

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

production
service
process
management
11
TYPES OF INNOVATIONS
METU
Exploits existing technology
Explores new technology
Low uncertainty
High uncertainty
Focuses on cost or feature Focuses on products, processes
improvements
of
existing or services with unprecented
processes, products or services performance features
Improves
competitiveness Creates dramatic change that
within current markets or transforms existing markets or
industries
industries, or creates new one
12
TYPES OF INNOVATIONS
METU
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innovations in production – development or enhancement of a
specific product
innovations in services – offering new or enhancing of existing
services
innovations in process – finding of new ways of organizing and
combining inputs in the process of production of specific products
or services
innovations in management – creating new ways of organizing
business resources.
13
TYPES OF INNOVATIONS
METU

According to Drucker (1993),



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Incremental Innovation – Doing more of the same things you
have been doing with somewhat better results;
Additive Innovation – More fully exploiting already existing
resources, such as product lines extensions, and can achieve
good results.
Complementary Innovation – Offers something new and
changes the structure of the business;
Breakthrough Innovation (Radical Innovation) – Changes
the fundamentals of the business, creating a new industry and
new avenues for extensive wealth creation.
14
WHY INNOVATION IS NEEDED?
METU

This century has been full of innovation. New technologies, new
products, new services, whole new industries have emerged.

Lots of companies have made new investments.
WHY
15
WHY INNOVATION IS NEEDED?
METU
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Improving quality
Creation of new markets
Extension of the product range
Reducing labour costs
Improving production processes
Reducing materials
Reducing environmental damage
Replacement of products/services
Reducing energy consumption
Conformance to regulations
For competition
16
WHY INNOVATION IS NEEDED?
Competition

METU
‘For firms, the way to achieve competitive advantage is to create a
competitive strategy that is consistent with trends in the firm’s
industry and appropriate to the firm’s resources and capabilities
which can be achieved through innovation.’
Porter, 2006
17
WHY INNOVATION IS NEEDED?
Competition
METU
Firms innovate to defend their existing competitive position as well as to
seek new competitive advantages.

A firm may take a reactive approach and innovate to avoid losing
market share from the innovative competitors.

It may take a proactive approach to gain a strategic market position
relative to its competitors.
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WHY INNOVATION IS NEEDED?
Competition

METU
The list of innovation with whom an organization can gain
competitive advantage on the market;
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Operational innovation
Organizational innovation
Supply-side innovation
Core-competence innovation
Sell – side innovation
Product and service innovation
Product and service innovation
19
DEVELOPING THE INNOVATION PROCESS
METU

Successful innovation is mainly dependent to a company’s ability
to find solutions to:

technical changes

economic changes

social changes
by designing and establishing efficient innovation processes in time
How do processes for innovation should be
designed so that their results create
competitive advantages?
20
DEVELOPING THE INNOVATION PROCESS (2)
METU

Simple Model of Firm-Level Innovation (Seaden et al., 2003)
Focuses on:

Business Environment
Determines the need for innovation (Process Birth)

Business Strategies
Block or unblock innovation processes
21
DEVELOPING THE INNOVATION PROCESS (3)
METU

Integrated Model of Innovation Management in Construction
Companies (Girmscheid and Hartmann, 2001)

A successful innovative company should assess its complete
structure by considering its special attributes

Similar to SWOT Analysis
Benefits:

Company identifies weak/strong points within company’s
innovation activities and processes

Reduce the effects of weak points

Improve effects of strong points
22
DEVELOPING THE INNOVATION PROCESS (4)
METU

Integrated Model of Innovation Management in Construction
Companies (Girmscheid and Hartmann, 2001)
For this analysis, a company should answer the following questions:
1.
Which innovations does the market require? Is it possible to
introduce them with the services and technologies at one’s
disposal and with the present structures of the company?
(characteristics of the sector and market)
2.
Which actors have to be taken so that the innovations will be
successful on the market?
(company strategies)
23
DEVELOPING THE INNOVATION PROCESS (5)
METU

Integrated Model of Innovation Management in Construction
Companies (Girmscheid and Hartmann, 2001)
For this analysis a company should answer the following questions:
3.
Are the norms and values respected within the company suitable
for introducing the desired innovations?
(company culture)
4.
Which tasks have to be fulfilled in order to introduce the
innovations? How do these tasks have to be divided and
coordinated within the company?
(organizational structure)
24
DEVELOPING THE INNOVATION PROCESS (6)
METU

Integrated Model of Innovation Management in Construction
Companies (Girmscheid and Hartmann, 2001)
25
DEVELOPING THE INNOVATION PROCESS (7)
METU

1.
There are four dimensions to be considered prior to design of
innovation:
Company-Related Dimension
- Open to innovation
- Ready to take risks
- Willing to co-operate and communicate
- Ready to give its staff freedom to innovate
- Possessment of necessary organizational culture
- Compatibility with the aims and strategies of the company
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DEVELOPING THE INNOVATION PROCESS (8)
METU
 There are four dimensions to be considered prior to design of
innovation:
2.
Object-Related Dimension
- Service/Process/Product Innovation
- Small Improvement/Radical Change
3.
Phase-Related Dimension
- Stimulation of Idea
- Generation of Idea
- Assessment of Idea
- Realization of Idea
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DEVELOPING THE INNOVATION PROCESS (9)
METU
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4.
There are four dimensions to be considered prior to design of
innovation:
Person-Related Dimension
- The ability of staff
- Willingness of staff to innovate
- Willingness of staff to co-operate and communicate
28
DRIVERS OF INNOVATION
METU
Asad et al. (2005)
1.
Clients
- by applying pressure on the supply chain partners with the
aim of improving the overall performance
- by helping the supply chain partners to develop strategies to
overcome any challenges
- by demanding high standard works
- by identifying specific novel requirements for a project
2.
Procurement Method (Ex: Design-Build Contracts)
3.
Attitudes and Processes
29
DRIVERS OF INNOVATION (2)
METU
Manley (2006)
1.
Clients (due to competitive nature of construction industry)
- Highest rate of investment in R&D
- Highest rate of adoption of advanced practices and technologies
- Best return on innovation
- Changing needs
2.
Crises (require effective reactive innovation)
Manley and McFallan (2006)
1.
Business Strategies
2.
Business Conditions
30
DRIVERS OF INNOVATION (3)
METU
Tatum (1989)
1.
Organization Structure
- Innovative firms used small organizations with limited hierarchical levels
- Small teams of engineers, technicians, designers to develop products
- Types of organization structures that facilitate innovation (Little, 1985):
(1) task teams or small groups focused on new product development
(2) venture teams or small groups focused on new product dev.
(3) isolated development groups focused on one subject
(4) new venture division or business start-ups as development
groups that are physically separated from the parent company
31
DRIVERS OF INNOVATION (4)
Tatum (1989)
2.
METU
Organizational Environment
- Elements of organizations that support innovations (Little, 1985):
(1) policies and objectives for innovation
(2) interpersonal skills that support integration
(3) longer term perspective & willingness to wait for major returns
(4) ability to provide appropriate environment for innovators
(5) high levels of communication and coordination
- Successful innovative organizations should:
(1) expect failure in large portion of new product initiatives
(2) separate the organization into subgroups for intensive focus
(3) encourage internal competition
(4) support communication and cooperation
3. Role of Key Individuals
32
OBSTACLES TO INNOVATION
METU
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Competitive nature of construction industry based on cost & duration
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Limited resources due to limited cost & duration
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Not enough time before starting a project to review and assess
innovative ideas and alternatives
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Innovations require multi-disciplinary approach
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OBSTACLES TO INNOVATION (2)
METU
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Technical innovations vs. project based-industry & uniqueness
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Lack of technical capability
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Lack of innovative organizational culture
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Top management’s & organization’s approach to innovation process
34
CASE STUDY 1: CLIENT AS DRIVING FORCE OF INNOVATION
METU
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Client: Highway Agency
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Joint Venture: AmeyMouchel

Project: Improvement of a road section (open to users)
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Driving Force of Innovation: Client

Client developed a new procurement method

Get the best value through partnering
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Early contractor involvement
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Openness

Collaboration

Particular Conditions to facilitate innovations
35
CASE STUDY 1: CLIENT AS DRIVING FORCE OF INNOVATION
METU
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Factors considered during development of innovation process:

Innovation management improved by decreased bureaucracy

Current best practices are considered by a team involving client,
supply chain partners, independent experts, dedicated facilitators,
and documentation team

Establishment of innovation culture by encouraging employees to
express their ideas and opinions

Communication enhancements

Transparent decision-making process
36
CASE STUDY 1: CLIENT AS DRIVING FORCE OF INNOVATION
Designed Innovative Process
METU
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CASE STUDY 1: CLIENT AS DRIVING FORCE OF INNOVATION
Examples of Innovative Ideas Established Using the Process
Alignment with Client Aims
Quick
Win
Y/N
Business
Case Y/N
CAT 1 Marker
Flags
Y
N
Major Incident Text
Messaging
Y
N
Communications
Vehicle
N
Y
Cathodic Protection
N
Y
Emergency spill kits
N
Y
Folding Road
Closure Sign
Y
N
IDEA
Informed
Travelers
+
Safer
Roads
+
Area of Operations Improved
Reliable
Journeys
Quality
+
+
+
+
+
+
+
+
+
+
+
+
METU
Env.
Health
and
Safety
Overall Benefits
+
Faster rectification of defects
+
+
Faster deployment of
resources and reduced
incident times
+
+
Reduced Incident Times
Reduced costs and disruption
+
+
Faster deployment, reduced
impact, reduced incident
times
Reduction in disruption and
more satisfied road users
38
CASE STUDY 1: CLIENT AS DRIVING FORCE OF INNOVATION
METU
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Outcomes of the Case:
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The role of client and procurement method is significant in
promoting innovation
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Contractor-Client cooperation promotes innovative thinking
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Reduced bureaucracy, feedback to idea originators about the
progress, identifications of the responsibles who can take the
process further, and rewarding the idea originators

Better quality, health & safety, and environmental outcomes
39
CASE STUDY 2: UNDERSTANDING THE FACTORS THAT
MAKE FIRMS TO INNOVATE
METU
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Study: Survey
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Respondents: 335 Australian road industry companies
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Ranking the innovativeness levels of companies: 46 advanced
technologies and practices considered as innovative actions
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CASE STUDY 2: UNDERSTANDING THE FACTORS THAT
MAKE FIRMS TO INNOVATE
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METU
Business Strategies: 18 strategies that high innovation adaptors use
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CASE STUDY 2: UNDERSTANDING THE FACTORS THAT
MAKE FIRMS TO INNOVATE

METU
Outcomes of the Case:
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High innovation adopters prefer youthful staff instead of older staff
that might not be as creative and flexible as young staff.
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High innovation adopters give importance to introducing new
technologies to processes. It shows that high innovation adopters
give importance to research and development.

Enhancing the organization’s technical capabilities as such
capabilities comprise the technologies and technical skills that
empower the firm to adapt quickly to opportunities.
42
CASE STUDY 3: IDENTIFYING DETERMINANTS OF
CONSTRUCTION INNOVATION
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Study: Interview
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Respondents: 12 completed projects (range: $13000-$112 million)
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Projects: Non-residential buildings
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
METU
Energy Cost Savings in 5-Star Office Building
Clever Planks at Sports Stadium
Port of Brisbane Motorway Alliance
Fire Engineering at National Gallery of Victoria
Fiber-Reinforced Polymer Bridge Deck
Ground Penetrating Radar and Defective Bridge Beams
Managing Storm Water with Storage Gutters and Infiltration
Saving On-Site Remediation Costs
Post-Tensioned Steel Trusses for Long Span Roofs
Twin-Coil Air Conditioning at the Art Gallery of South Australia
Better Project Outcomes with Relationship Management and 3D CAD
Using Recycled Tyres to Construct an Access Road over Saturated Terrain
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CASE STUDY 3: IDENTIFYING DETERMINANTS OF
CONSTRUCTION INNOVATION
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Innovation Definitions
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Drivers of Innovation on Projects
METU
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CASE STUDY 3: IDENTIFYING DETERMINANTS OF
CONSTRUCTION INNOVATION
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Identified Obstacles to Innovation
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Main Obstacle Encountered during Innovation on Projects
METU
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CASE STUDY 3: IDENTIFYING DETERMINANTS OF
CONSTRUCTION INNOVATION
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METU
Outcomes of the Case:
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Main innovation driver: Client
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Crises can be used as facilitator to innovation processes
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Majority of the obstacles encountered during innovation: nontechnical aspects
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Non-technical aspects can be removed by appropriate training of
managers and employees in non-technical areas
46
EXAMPLE CASES OF INNOVATION IN CONSTRUCTION
METU
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Case # 1: A Process Innovation Example
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Case # 2: A Management Innovation Example
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Case # 3: A Product Innovation Example
For each case, with;
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reasons behind the need for such an innovation,

its concept and proposed improvements,
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benefits and/or drawbacks of the innovation.
47
Case # 1: A Construction Process Innovation
METU
2D Design
+
Gantt-Charts & Critical Path Method (CPM)
A New Project Implementation Process
+ Time =
Design
Modeling
(Schedule)
48
Case # 1: Why 4D (Modeling) Planning ?
METU
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It is known that;
Effective planning is one of the most important aspects of a construction
project and influences the success of a project.
(Chevallier & Russel, 1998)

However,
The outputs of traditional planning techniques are very difficult to
communicate and validate as the complexity of the projects increase.
(Marasin et al., 2007)

Yet,
4D planning provides a new opportunity for the presentation of
construction scheduling, which could advance the principles of planning,
past the Gannt chart…
(Richmoller et al., 2001)
49
Case # 1: How is 4D-Modeling practised?
METU
Traditional 2D-CAD
 Objects are formed using simple lines
and curves
 Colored layers for different sets
of elements
3D Parametric Modeling
 Objects have semantics
i.e., each object inherits its unique properties
(dimension, location, material properties)

Much better visualization
50
Case # 1: How is 4D-Modeling practised?
METU
On top of 3D-Modeling, Schedules are embedded:
Using software packages like:
51
Case # 1: Benefits of 4D-Modeling
METU
► Earlier and more accurate visualization of a design
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Case # 1: Benefits of 4D-Modeling
METU
► Visual aids for site logistics planning
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Stock locations
Concrete pump boom operations
Tower & mobile crane positions
Scaffoldings
53
Case # 1: Benefits of 4D-Modeling
► Awareness of clashes and collaboration between
METU
disciplines while preparing the schedule (through 3D visualization)
► Improved quality of the design
► Reduced uncertainties during construction
► Earlier & quicker decision making
All leading to Cost & Time savings..
54
Case # 1: Drawbacks of 4D-Modeling
METU
In contrast to Automative and Aerospace Industries,
there still is a resistance in Construction Industry towards 4D-Modeling.
Some of the reasons for such a resistance may be listed as follows:
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Lack of skilled employees on necessary softwares,
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Investment cost (software & hardware),
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Fragmented industry (no strong drivers),
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Lack of clients’ demand,
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Technical challenges (interoperability issues),
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Insufficiency of time available before tenders,
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Resistance to change.
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Case # 1: A Remark
METU
In 90’s the AEC Industry resisted also to…
…leave light tables & blueprints
and
adopt 2D CAD.
56
Case # 2: A Construction Management Innovation
METU
Traditional Project Delivery Methods
Design-Bid-Build (DBB) or Design-Build (DB)
A new Project Delivery Method
Construction Manager at Risk (CM@R)
Major difference from DB or DBB:
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Constructor signs both preconstruction and construction contracts.
57
Case # 2: Why 2 Contracts?
METU

Constructor is involved in the Project at early design phase.

Preconstruction Contract is coordinated with Designer’s Contract
to maintain a high degree collaboration
between CMR and Designer
(also improves constructability)
BECAUSE
The owner and CMR will negotiate on a GMP
Granted Maximum Price (GMP) :

Established during design process when the CMR can minimize the
contingency for scope creep (generally when % 50-70 of design is completed)

Provides risk allocation for the owner
58
Case # 2: Advantages of CM@R
METU
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Improved quality of work

Due to constructor’s input in the design
through constructability reviews & design validation


Due to owner’s control over the design
Accelerated Schedule

Contractor doesn’t have to wait for the whole design to be completed
Completed Design Packages
Lead to
Separate Bid Packages

Earlier cost certainty than DBB
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Cost control with Granted Maximum Price (GMP)
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Biddability for subcontractors (detailed design documents)
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Even suncontractors may participate in the design phase
59
Case # 2: Disadvantages of CM@R
METU
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Difficulty in reconciling different agendas of CM@R and Designer
during design stages
Because:
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CMR acts cost-focused,
while
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Designer conforms to codes, laws, regulations and technical issues.
Owner needs to administer 2 contracts as opposed to DB
60
Case # 3: A Construction Product Innovation
METU
Road Repairs
ASPHALT
CONCRETE


Till 1980’s, concrete was not a suitable product to use for road
repairs in U.S.A
In 1986, a 10-cm concrete overlay was first applied to 11 kms of U.S
Highway 71 in Iowa
WHY & HOW ?
61
Case # 3: Aspahlt Repairs vs Concrete Repairs
METU
For Road Repairs;
In comparison with Asphalt Overlays
Traditional Concrete has 2 main disadvantages:

Higher initial construction cost

The need for a lengthy cure time of 5-14 days
road closure causes inconvenience to the public
(asphalt needs 6-12 hours)
However;
Concrete has

More load capacity

Lower life-cycle cost
62
Case # 3: Trigger for an Innovation..
METU
During 1980s in Iowa
All interstate, primary and municipal road networks were completed
Concrete Paving Contractors experienced a serious market reduction
So they began to feel an urgent need to develop something new
TO SURVIVE
63
Case # 3: Trigger for an Innovation..
METU
In October 1985, an informal group of 30 people including

Concrete paving contractors,

Cement producers,

Admixture suppliers,

Equipment manufacturers,

Managers and engineers of Iowa Dept. of Transportation (DOT)
set the goal of developing concrete pavement that can be built

Fast,

With unequalled quality,

Without causing significant traffic interruption.
64
Case # 3: Innovation of Fast-Track Concrete
METU
During 8 months

Several meetings had been held,

A series of experiments had been done for the right mix design,

A couple of trial projects had been done.
And eventually
FAST-TRACK CONCRETE was developed and officially used on a
running highway’s repair by July,1986.
Traffic was allowed onto the road in only 24-hours.
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Case # 3: Innovation of Fast-Track Concrete
METU
Actually the concept Fast-Track Concrete was not new to U.S
Construction Industry.
A similar – but too expensive to be applied to road paving – product had
been used for small batches before.
However this time;

Little additional cost was achieved,

Fast-setting of concrete with internal chemical reactions was first
accomplished!
66
Case # 3: Outcomes of the Case
METU
Contributions of Fast-Track Concrete Innovation: (C.H. Nam & C.B. Tatum, 1992)

Many projects involving fast-track concrete paving followed in U.S,

Concrete Paving Contractors could have survived against Asphalt,

Cement producers were forced to improve quality of type-III cement,

Some university researchers began to investigate the mix design,

The FHWA started investigating the min early concrete str. for traffic.
67
Case # 3: Drivers of Fast-Track Concrete Innovation
METU
This case provides an example of innovation that occured;

in response to market demands [shrinkage],

as well as to competition with asphalt [another] technology.
(C.H. Nam & C.B.Tatum, 1992)
However,
The contractor became an innovator with his product-oriented strategy
while others focused mainly on cost cutting.
Authors also point out to

highly cooperative government-industry environment in Iowa, and

Iowa DoT’s effective implementation of long-term procurement policies.
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METU
THANK YOU!
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