1.133 M.Eng. Concepts of Engineering Practice Fall 2007 ......• In the economy of the future, the...
Transcript of 1.133 M.Eng. Concepts of Engineering Practice Fall 2007 ......• In the economy of the future, the...
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MIT OpenCourseWare http://ocw.mit.edu 1.133 M.Eng. Concepts of Engineering PracticeFall 2007 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.
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STRATEGIC MANAGEMENT ISSUES
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ROLE OF THE E&C INDUSTRY
• Through planning, design, construction, operation, and maintenance activities, the E&C Industry transforms resources of labor, capital (money, materials, & equipment), and knowledge into the physical facilities required to meet a broad range of social and economic needs.
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A BASIC PREMISE
• In the economy of the future, the civil engineering profession is ideally positioned to take on an expanded role in the traditional engineering and construction industry; and to conceive and implement innovative business ideas in the future.
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SCENARIO PLANNING
• Scenario:Description of plausible future business environment
• Scenario Planning: Testing of the Business Idea against multiple, equally plausible futures (scenarios)
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SCENARIO PLANNING
Understanding theEnvironment(Scenarios)
Understanding theOrganization
(Business Idea)
StrategyWorkshops
Strategic Insights & Options
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THE BUSINESS IDEA• An organization’s mental model of the
forces behind its current and future success.• Success= Establishing value
– Create surplus for stakeholders– Create the expectation of being able to create a
surplus and grow in the future– Reference: “Scenarios: The Art of Strategic
Conversation”; Kees van der Heijden; John Wiley & Sons; 1996
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GENERIC BUSINESS IDEA
UnderstandingEvolving Needs
in SocietyEntrepreneurial
Invention
DistinctiveCompetencies
Competitive Advantage
Results
Resources
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ENTREPRENEURIAL INVENTION
• Discovering new ways of creating value for customers
• Bringing together a combination of competencies which creates this value
• Creating uniqueness in this formula in order to appropriate part of the value created
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DISTINCTIVE COMPETENCIES
• Definition: Unique, hard to emulate individual organizational capabilities or combinations of these capabilities
• Categories:– Institutional knowledge– Embedded processes– Reputation & trust– Legal protection– Activity specific assets
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COMPETITIVE ADVANTAGE
• Differentiated product with premium price
• Low cost commodity product
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DIFFERENTIATED PRODUCT
• A differentiated product which cannot be matched by the competition and for which the customer is prepared to pay a superior price
• Differentiation requires deep understanding of what creates value for customers
• Profit potential derives from the premium price
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LOW COST PRODUCT
• A unique low-cost way of creating or making available a non-differentiated product (commodity)
• Commodity: Open market has created a standardized and clearly defined product for which there is a continuing market
• Profit potential derives from cost leadership
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RESULTS (PROFITS)
• Purpose of Strategy Development– To feed expectations of future profits and
growth• Actual Profits
– Earned by the quality and efficiency of day-to-day operations
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GENERIC BUSINESS IDEA
UnderstandingEvolving Needs
in SocietyEntrepreneurial
Invention
DistinctiveCompetencies
Competitive Advantage
Results
Resources
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CONTRACTING BUSINESS IDEA
Reputation
Contracts
CompletedProjects
Profits
Investments
Training
SkilledWorkforce
Qualityof work
Responsiveness tocustomer needs Flexible
contract conditions
MotivatedWorkforce
Communications
Cohesion& loyalty
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SCENARIO PLANNING
Understanding theEnvironment(Scenarios)
Understanding theOrganization
(Business Idea)
StrategyWorkshops
Strategic Insights & Options
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THE FUTURE BUSINESS ENVIRONMENT
• An Economy in Transition• Changing Nature of Organizations• Strategy Options
– Business as Usual– The Master Builder Of the 21st Century
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THREE WAVES OF ECONOMIC CHANGE
• Agricultural Wave• Industrial Wave • Information Wave
– Information Age– Knowledge Economy– Digital Revolution
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ECONOMIC PROSPERITY
• Dow at least 21,500 & likely higher• Sources of economic strengths
– ability to deliver customized products and services to consumers at increasingly affordable prices and convenience (direct producer-to-consumer)
– success of Brand name products in the global market place
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FEATURES OF THE INFORMATION AGE
• Rapid Technological Change– Just-In-Time Supply Systems– New Delivery Systems– B2B Electronic Market Place– Mobile Telephony
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INFORMATION AGE
• Global Market– Operations, Shopping, Productivity
Improvements• Government Driven Changes
– Deregulation/Privatization– Trading blocs– The Decline of Communism– China as an Economic Power
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INFORMATION AGE• Changed Face of Competition
• Industrial Age characterized by planning,control, hierarchy, materials, processing methods, optimization, volume, scale, low cost
• Processing of Knowledge vrs resources• Competitive Advantage characterized by:
observation, positioning, flat organizations, missions, teams, cleverness, psychology, adaptation, speed, innovation, service, customization
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CHANGING NATURE OF PRODUCTION
Producer Driven Consumer Driven-Top down command/control, -Consumer needs backfunctional skills focus-Standardized products/services -Customized, choice,
personalized-Assembly line methods -Network methods-Unskilled workers -Skilled workers,
knowledge workers-Automation of physical work -Automation of routine
thinking work
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INFORMATION AGE• Changed Patterns of Employment
– 1970’s: 90% of work force worked for organizations; career-based jobs
– 1990’s: downsizing, reengineering ,etc.– 2000+: part-time work, self-employment,
independent actors (jobbers, pieceworkers, consultants, facilitators, temps, etc.),
• Responsible for career development and continuing education
• Emphasis on contributions and results
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INFORMATION AGE
• Knowledge is the Key Economic Resource– Embedded in systems and databases– Made widely available in an organization– Knowledge is being systematically
accumulated, shared, and purposely deployed to build distinctive competencies
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CHANGING NATURE OF ORGANIZATIONS
-Fast -Slow-Responsive -Inflexible-Customizing -Standardizing-Entrepreneurial -Highly managed,
planned, & coordinated
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NETWORKS OF SMALL FIRMS
• The “dinosaur” corporation of the late twentieth century was just a transitional form. In looking back we are most aware that the tiny “mammals”-entertainment production companies, construction project teams, and consultant workgroups-which operated without much public notice back in the 1990’s, were in fact the prototypes of today’s modern organization.
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NETWORKS (cont’d)• Today (2010), nearly every task is performed by
autonomous teams of 1-10 people, set up as independent contractors or small firms, linked by networks, coming together in temporary combinations for various projects, and dissolving once the work is done. When a project needs to be undertaken, requests for proposals are issued or jobs to done are advertised, candidate firms respond, subcontractors are selected, and workers are hired largely on an ad-hoc basis.
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THE NETWORK ORGANIZATION
• Consists of leaders, guiding entrepreneurs, and self-managing teams in a chaotic real-time process that is organized around the ever changing needs of individual customers.
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THE NETWORK ORGANIZATION
• They are fast, responsive, customizing, and entrepreneurial in contrast to assembly-line organizations which are slow, inflexible, standardizing, and highly planned, managed, and coordinated
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KEY FEATURES
• Leadership at the Center• Front-Line Browser Teams Organized
Around Customers• Back-Line Servers Teams (Experts &
Specialized Products)• The Radical Elimination of Bureaucracy• An Internal Free Marketplace
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STRATEGY OPTIONS
• Business As Usual• The Master Builder of the Future
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BUSINESS AS USUAL
• Competitive advantage based on cost leadership
• Consolidators as sources of opportunity– Buyouts– Innovations in engineering and construction
processes– Access to national and international
accounts
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BUSINESS AS USUAL (cont’d)
• Distinctive Competencies– Global outsourcing of engineering activities– Participation in B2B marketplaces to reduce
supply chain, logistics, and inventory costs– Improved on-site materials and labor
management processes– Increased use of off-site prefabrication
methods
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THE MASTER BUILDER OF THE 21st CENTURY
• Competitive advantage based on differentiated services at premium prices
• Outgrowth of design/build processes• Horizontal integration to combine
specialty construction tasks• Vertical integration to include strategy
planning, design, and operations & maintenance management
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FACILITY PROJECTLIFE CYCLE*
MARKET DEMANDSOR
PERCEIVED NEEDS
CONCEPTUAL PLANNING &FEASIBILITY
STUDIES
DESIGN &
ENGINEERING
PROCUREMENT&
CONSTRUCTION
STARTUPFOR
OCCUPANCY
OPERATION&
MAINTENANCE
RENOVATIONCONVERSION
ORDEMOLITION
* Adapted from: “Project Management for Construction”; Chris Hendrickson & Tung AuPrentice Hall; 1989
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MASTER BUILDER OF THE 21st CENTURY
• Distinctive Competencies:– Entrepreneurship/Technological Knowledge– Project management capabilities including
schedule and cost control systems, and computer hardware/software for collaboration
– Prime contracting capabilities– Maintenance management systems– Systems engineering capabilities
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SYSTEMS ENGINEERING/ SYSTEMS INTEGRATION
• 1. Concept Development (the Front-End Process)
• 2. System-Level Design• 3. Detail Design• 4. Refinement & Value Engineering• 5. Post Project Evaluation
– “Product Design and Development”; Ulrich & Eppinger; McGraw-Hill; 1995
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FRONT END PROCESS
• Identify Client Needs• Establish Target Specifications• Generate Concepts• Select a Concept• Economic Analysis• Project Planning