Analytics vs. Intuition – Stages of Analytical competition

I have read quite a few books and articles on Analytics and I find the subject fascinating, maybe because of my background in physics and Mathematics and my early work in statistical simulation of nuclear reactions. (How did I get in the Field of IT, well that will be the subject of a different Blog….)

For the last couple of years I have been trying to make sense of all the different information silos that exist in any Construction Firm, as you all know the Project Delivery lifecycle consists of the following stages:

• Estimate and Bid
  
• Procurement
  
• Project Execution, including closeout
  
• Back End Business Management
  
  • Cost
    
  • Financials
    
  • HR, etc.
    

All these processes are managed with the help of different technologies and Applications handling their own datasets, and most of the time with little or no integration between them, which means that decision making at any level requires the use of multiple Reporting and manual intervention.

Thomas H. Devenport in 'Competing on Analytics' describes the 5 stages of Analytical competition as follows:

1. Stage No: 1 Analytically impaired
   
2. Stage No: 2 Localized Analytics
   
3. Stage No: 3 Analytical Aspirations
   
4. Stage No: 4 Analytical companies
   
5. Stage No: 5 Analytical competitors
   

In my opinion most of the Construction Companies are in a combination of Stage No: 1 and Stage No: 2

In order to gain competitive advantage Construction companies have to move from Stage No 1 – Analytically impaired- which is the scenario that I described above to stage No 5 – Analytical Competitors.
The path is not an easy one and requires buy-in and support from the senior Management.

Some of the pieces of the puzzle that need to be put in places to accomplish Stage 5 are:

• Software Applications
  
• Data
  
• Technology
  
• Processes
  
• Metrics
  
• Skills
  
• Culture
  
• Sponsorship
  

It is up to Management to decide how to make decisions: Based on facts and Analytics or gut feeling and intuition

I will agree that it is more likely to be correct when making decisions based on strong facts, instead of using intuition.

What do you think?

Stay in tune, I will come back to this topics in future Blogs.

 

 

 

 

Getting it right the first time, everytime !

It is widely known that project-driven construction companies running multiple highly complex projects face a clear problem in managing the business successfully. Industry experts say that the industry wastes billions of dollars due to out-of-control delays, cost overruns and other inefficiencies.

Traditionally, in the AEC  environment because of the  project-driven approach of doing business, all decisions are made at that level, and it is very difficult to aggregate information across multiple projects due to the Technologies that are being used to manage them. The only intersection that these projects have is the Financial System, where Invoices are paid and cost is allocated, but no actual Project work takes place. At that point at best only reactive action or mitigation can be undertaken.

Construction Companies that want to get in the path of competitive advantage have to start thinking about introducing enterprise-wide technologies, and start the process to standardization.

The American Institute of Architects (AIA) and other defined Integrated Project Delivery (IPD) as follows:

It's a Project delivery approach that integrates people, systems, business structures and practices into a process that collaborately harnesses the talents and insights of all participants to reduce waste and optimize efficiently through all phases of design, fabrication and construction

In my opinion, the path to IPD has to start with standardization wich will provide firms with the multilevel view that they need to better manage their projects and proactively fix any problems when they arise and minimize the impact on project performance and profitability.

Some of the benefits of standardization are as follows:
- Maximized and codified efficiency
- Visibility
- Collaboration and cimmunication
- Improved Compliance
- Retained intellectual capital
Some technology companies like Microsoft, Oracle and AutoDesk have developped applications and tools that address standardization and ultimately IPD.

In conclusion, Getting it right the first time, everytime will require some rethinking on the way Construction Companies operate. 

How to compete on Analytics

The construction industry is a very difficult business , and running a profitable business requires not only best practices in General Construction but a very fluid understanding of what's going on in a daily basis.

A study by FMI concluded that best-of-class contractors using the following KPIs (Key Performance Indicators)

1. Liquidity indicator
2. Schedule variance indicator
3. Work-In-Progress (WIP) Reporting
     - Margin variance indicator
     - Project and Cash flow indicator
     - Unapproved Change-Order indicator
     - Committed Cost indicator
4. Backlog Indicator
5. Scorecard Indicator

All these KPIs in conjuction will give managers at any level from the project level all the way to senior level with the tools to manage their business and make the necessary adjustements if needed.

Are Construction businesses following these indicators ?

They probably are, one way or another, may be some of the KPIs, but in my experience, putting all this information together is very conversome and time consuming, and managers have to go through an enormous amount of reports, spreadsheets etc. just to gather the Information. This is due to all the disparate systems that exist in these Organizations ranging from Estimating, Project Management, Accounting, HR, Cost, Procurement, etc.

Is the value of these Metrics is understood, then in order to gain competitive advantage the business senior management has to invest in Information technology.

Either look for an integrated solution with processes in place that will capture all the information required to generate these metrics , or secondly create an integration tier with all data from dissimilar applications and systems is manipulated  and presented.

In my opinion the second approach is just a "quick fix" , a tactical solution that will not scale to a company growth.

If we assume that all Contractors have the general construction know-how and follow best practices to carry out their projects, then in my opinion competing on analytics will create a competitive advantage. 

"Must have" and "Nice to have"

Investments in IT should be based on strategic priorities, hence the concept of Governance. Company senior leadership has to have a true understanding of what the strategy is and how to allocate funding based on strategic goals. In absence of true leadership it will be very difficult to differentiate between "must have" and "nice to have" IT technologies.

IT funding in the Construction Industry is very tight, I have seen cases of less than half of a percent of the Company revenues, so in order to decide between Projects like:



- Server Virtualization

- Disaster Recovery Platform

- Analytics

- Application Development

- Infrastructure, etc.


Sound business case must exist otherwise no IT funding will be allocated.

Generating Value out of Information Technology

Below is a chart that I found during some Research that I was conducting on IT Governance for a Report that I need to submit to Management. As you can see the only road to generate value from IT is through governance. Without it , IT will remain reactive to the needs of business - "A cost Center".



Information Technology alone cannot advance in that path without the help of the Company's senior Management. If there are not clear business goals, or a clear business strategy, then IT is of no help, and it will be always a Cost Center.


Executive Management has to be very clear and precise as to what the business goals and to achieve them. Only at that point we can start talking about how can IT help,



The following questions have to be answered:


1, What IT Decisions must be made ?
2. Who should make those decisions ?
3. How will those decisions will be made and how will they be monitored ?



Effective IT Governance will answer those questions.

Sometimes good technology is just not enough

To generate value of new IT Projects, good technology alone will not do it. IT is not just technology , but technology behind business goals, so IT and Business Leadership have to be aligned, without this alignment any IT Project is doomed to fail.




Below are some key issues that have to be looked at for successful IT implementations


- The right mix of people have to be involved in the Project for it to succeed.
- Business processes have to be understood in order to apply new technologies
- Buy-in has to exist from Corporate sponsors
- Proper Training has to be implemented
- Skilled staff to manage the day to day activities of the Project have to be procured
- The right supervision to properly measure the advancement of the project needs to be in place



If these conditions don't exist more than likely the Project will be a failure and will be added to the 70% of failed IT Projects statistics

The case of solving your Company immediate IT needs

I have been thinking about this topic for quite sometime, and now that I have some time in my hands, I want to write about it and perhaps I can get somebody's opinion.

Often times when you work for a small or mid size company, your everyday job is about dealing with tactical issues instead of looking at the overall strategical aspect of IT.

Managers come to Us with different ideas and business cases for new products, services or applications and we, IT people have to look into requirements, pricing, deliver the system, training, etc.

This tactical approach works fine when you are working for a small company , but it will not scale with company growth. You will end up with multiple systems each one hosting their own set of data all wired together like the case of a cold plate of spaghetti.

I personally lived this scenario, and although I tried to bring to the attention of the Executive Management about the limitations of this approach, I was unsuccessful at communicating it. Reversing these misfortunes is not solely the work of IT , but the work of the Management Team and more so if IT does not have access to the decision making process. 

A decision making framework has to be created where you can prioritize, control, measure and fund IT projects and portfolios. This is the case of a Governance or Steering Committee.

only then you will be able to drive value from IT otherwise you are on the path of the IT Liability.

I'm no longer with the Judlau Companies

It has been almost a month and a half that I departed ways with the Judlau Companies. It was a long run. I had the opportunity to build the IT function from the very beginning. It was a long way paved with a lot of excitement, learning experience and personal growth. 

I started with Judlau as a Project Scheduler in March of 1997. After a week or so of employment I had a Meting with Tom Iovino the founder and owner of Judlau Contracting (in those days he would personally meet with all the new hires), and I mentioned him my idea of creating the IT function, he was very excited and he told me that the sky was the limit at Judlau. 

Fast forward to present times, in the last few years Judlau Contracting grew to be one of the most respected companies in New York and the flagship of the Judlau Companies, a series of trade contractor companies under the Judlau Companies umbrella. 

I attribute my Departure of the Judlau Companies to what we call "Growing Pains", although I don't agree with that premise. I will be blogging more about this in the future.

The question that I have for all of you reading this post is:

How do you deal with the contradictions  of being loyal to a company or keep looking for better opportunities ?

I have been reflecting on this issue for quite sometime and it appears to me that in order to further your growth you have to move horizontally instead of vertically, at least this is one of the conclusions that I came out with after my 13 years at Judlau.