Support digital transformation with the AEC BUSINESS MODEL PLAYBOOK

"The AEC business model playbook is a collection of best practices that supports executives and business operations to reflect, guide, verify and prioritize capabilities that are required to make a business transformation happen"

Giso van der Heide, MSc.

Acting for more than 25 years in the design- and make business I have experienced a lot of different industries, clients, cultures and practices. What I often have observed is the challenge to translate a corporate strategy into an implementation and the transformation that comes along. Too often, the corporate strategy is unclear, or are just "big rocks" for the people in the daily business operations. Therefore, I have compiled the AEC business model playbook. This playbook supports executives and business operations to reflect, guide, verify and prioritize capabilities that are required to make a transformation happen.This playbook is aimed for the AEC (Architecture, Engineering and Construction) industry and is built upon practices originating from the famous consulting firms and organizations; World Economic Forum, Boston Consulting Group, Strategyzer, KPMG, McKinsey, PwC, etc. The guiding principles for this AEC business model playbook are as follows:

• Understand digital transformation in the AEC industry, the Arc of Transformation
• Reduction of the business complexity by the use of business model practices
• Utilization of consulting practices, white papers and research materials
• Focus on customer practice and feedback

What is the AEC business model playbook?

The AEC business model playbook is a generic guide which explains “how-to navigate” and "to road-map" a digital transformation. It is built around the business model mechanism. The figure below shows an overview of the major steps. It begins with a business model health check. The health outcomes of six [6] business model cornerstones are presented with their individual "best practice" menu cards, advising the following business elements: sustainability measures, strategic initiatives, business capabilities, business outcomes and "jobs to be done" (stakeholder needs), all required to build a meaningful capability road-map (capabilities are distributed across the three [3] planning horizons as defined by McKinsey). This “road mapping” exercise must lead to a structured digital transformation implementation plan, with prioritization, dependencies, milestones and owners. 

Figure 1 Overview of the business model playbook steps, from the actual business health, identifying improvements and opportunities, leading to a capability road-map (source Giso van der Heide)

The business model

“A business model describes how your company creates, delivers and captures value” 

Steve Blank

The business model can be described by six [6] business fundaments, so called cornerstones. To deliver reliably superior performance than the competition, a company must be better at some or all of the six cornerstones of their business model (Source Analogy Partners).

Figure 2 The six business model cornerstones for AEC industry (source Giso van der Heide)

• The Value Proposition: driven by two [2] Cornerstones: the Architecture, Engineering & Construction Services and Revenue-Profit
• The ability to Generate Demand: driven by two [2] Cornerstones: the Brand & Reputation, and your Professional-Other Influencer relationships
• The ability to make and Deliver what you Promise: driven by two [2] Cornerstones: Construction & Contracting and Customer Experience and Lifecycle

The business model health check

Do you have a good understanding of your business model ? Does it fit the strategic aspirations you have concerning operational excellence, market growth, organization resiliency, competitive advantage and sustainability targets? Which strategic initiatives and business capabilities do you prioritize in order to improve ? How do you build a solid business transformation road map? If you have insights of your business model it can help you to:

1. Uncover weak parts in your business model and act accordingly with the appropriate strategic initiatives and business capabilities.
2. Compare results of different business models, e.g., other business units, or compare yourself with “best in class” performer.
3. Use it for annual performance reporting.

To avoid complex and time consuming engagements, this business model health check is easy and can be executed in 5-10 minutes by business owners and C-level staff. Each cornerstone of the business model will come with solely one, but major question (derived from Strategyzer, "building invincible companies")

1. Do you create significant value for customers because you perform and configure activities in disruptively innovative ways?
2. Is your cost structure conventional or disruptive and do you have strong margins from low costs and high prices?
3. Do you own key resources that are difficult or impossible to copy that which give you a significant competitive advantage and how easy or difficult is it for your customers to leave or switch to another company?
4. Do you have large-scale and, ideally, direct access to your end-customer?
5. How rapidly and how easily can you grow your business model without substantial additional resources and activities?
6. How large and attractive is the untapped market potential you are going after and do you use strong revenue streams and pricing mechanisms to monetize the value you create for customers?

Each question has to be scored with a 1= consistently much worse, till 5 = extremely much better, comparing your organization with the competition.

Figure 3 One pager as result of a business model health check, contractor residential business example (source Giso van der Heide)

Building the business model playbook

For each of the business model cornerstones a "business element" will be added, we start with the sustainability dimension, followed by strategic initiatives, business capabilities, business outcomes and stakeholders needs (jobs to be done).

Step 1 Adding the sustainability dimension

How would under-performance of the business model influence the corporate targeted United Nations Sustainability Development Goals (SDG′s)? In the table below we connect twelve [12] most relevant SDG′s (derived by KPMG ) for the AEC industry to the corresponding six [6] business model cornerstones. For AEC firms, connecting business models and sustainability goals is the best way to embed social- and environmental performance. It is also a terrific way to build public transparency, legal accountability and balance investments.

Table 1 Adding typical AEC SDG elements to the six [6[ business model corner stones (source Giso van der Heide)

Step 2 Adding the strategic initiatives dimension

A strategic initiative is an investment of resources dedicated to accomplish an organizational objective. Unlike strategic objectives, which tend to be phrased as broad goals, strategic initiatives are projects that include a scope, budget, and start/end date. Every strategic initiative should be treated just like any other project, with a dedicated project manager in charge of outlining the plan, delegating tasks and tracking progress. The following thirty [30] AEC strategic initiatives, in the table below, are derived from the World Economic Forum report, Shaping the Future of Construction, January 2016.

Table 2 Adding the strategic initiatives to the six [6] business model corner stones (source Giso van der Heide)

Step 3 Adding the business capabilities dimension

Half of executives rate capability building as one of their companies’ top-three priorities. McKinsey

A business capability is the articulation of the capacity, materials and expertise an organization needs to perform its core functions. Business capabilities provide an abstraction of business reality in a way that helps to simplify conversations between different stakeholders.

Figure 4 Construction business capabilities researched by PWC

Creating a business capability model for the enterprise is key to promote collaboration in a company. In the table below a total of sixty-six [66] AEC business capabilities are spread across the six [6] business model cornerstones. 

Table 3 Adding the AEC business capabilities to the six [6] business model corner stones (source Giso van der Heide)

Step 4 Adding the business outcome dimension

Business outcomes are, in essence, the goals set by a company to measure the success or achievement of an internal or external process. These goals can also be labelled “desired outcomes” and are a useful way of helping staff to focus on achieving customer success.

Table 4 Adding the business outcomes and metrics to the six [6] business model corner stones. (source Giso van der Heide)

Step 5 Adding the stakeholder needs "Jobs to Be Done” (JTBD) dimension

This dimension targets a change management part that is extremely important for an organization to be able to “land” the transformation program with new strategic initiatives and business capabilities at the correct stakeholder levels. The stakeholder needs are expressed by a “job to be done “statement. It comes from a deep understanding of the work the stakeholder is trying to deliver. It is the desire to get a job done that causes them to accept and adopt a new way of working Strategyn, 2020. In the table below, I have gathered thirty [30[ typical “Jobs to be Done” for the AEC industry.

Table 5 Adding the” jobs to be done” to the six [6] business model corner stones. (source Giso van der Heide)

The business model playbook execution

Each business model cornerstone "menu-card" will contain a piece of the business dimensions has been described in the above chapter. As a reminder, I have added; sustainability outcomes, strategic initiatives, business capabilities, business outcomes and jobs to be done. 

Figure 5 The "menu cards" related to each business model cornerstone, ideally to present to management (source Giso van der Heide)

Business capability road mapping

Creating a business capability model for the enterprise promotes more of a common understanding of the business. It can be complex, but it doesn’t have to be. To understand the actual maturity of a business capability , the following capability maturity scores will be used:

• Level 1: Ad-hoc: scattered capability / or not existing
• Level 2: Emerging: at team level
• Level 3: Expansion: scaling effort in place and consistent adoption
• Level 4: Empowered: scaled consistently and effectively
• Level 5: Embedded: enterprise continuous learning and improving

Collaborative road-mapping using MURAL

Below is a snapshot of the Mural digital canvas that contains all the relevant dimensions and elements as been described earlier. By using virtual sticky notes it easy to discuss, replace, rename and recolor the different items. It is also perfect to analyze, bottom-up or top-down implications, the blue arrows indicate the influence of elements and which capabilities need to be prioritized in able to achieve the SDG′s and a better performing business model.

Figure 6 Piece of the Mural collaborative canvas, displaying one of the business model cornerstones and dimensions related to that. It is easy to on-board stakeholders, make changes, score different elements , prioritize capabilities, agree on business outcomes, all in a real-time manner (source Giso van der Heide)

Capability-based planning is a method that uses techniques such as capability mapping in order to understand which capabilities need to be build, changed and prioritized so that your organization can meet its strategic objectives. Below is a capability canvas, reflecting the three [3] horizons and the project life cycle stages. The prioritized business capabilities reflecting their maturity (color) and data label (actual vs desired state). The output of this canvas can be ideally used to generate a business transformation implementation plan.

Figure 7 The business capability canvas, displaying two dimensions : the asset life-cycle and the three horizons. The displayed colors are capability maturity.

Conclusion

The AEC business model playbook can assist in bridging the gap between strategy and implementation. It provides a full box of proven business elements that can drive and scope a set of capabilities to support your transformation. The core of this playbook is built upon the business model and its cornerstones. These cornerstones tell you if your business is running well or is under-performing and they are also the starting point to understand where you are and want to go to serve future businesses. For most clients it provided greater insights that they never had before.

"It provides a structured approach based upon leading consulting practices. We will use this playbook for our annual strategy- and business planning"

AEC client, The Netherlands