Learning across Business Sectors:

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Learning across Business Sectors

• Knowledge Sharing between Aerospace and
  Construction

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Welcome

• Andrew Carpenter, Forticrete

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Background

• Two-year collaborative research project between
  the Innovative Construction Research Centre
  (ICRC) at the University of Reading and seven
  industrial partners.
• Actively involved practitioners from both
  sectors.
• Part of a wider initiative to promote learning
  across business sectors.
• ICRC is funded by EPSRC and currently has in
  excess of sixty industry partners involved in
  twelve projects.

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Manufacturing Research Centres

• ICRC is one of fourteen Innovative Manufacturing
  Research Centres (IMRCs) set up by EPSRC to
  support the competitiveness of UK manufacturing.

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Industry Partners

• BAE SYSTEMS
• Forticrete
• INBIS
• Mowlem Aqumen Property Services
• Mowlem Building
• N.G. Bailey Co
• Scott Brownrigg

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Research objectives

• To facilitate learning and knowledge sharing
  between aerospace and construction.
• To develop and evaluate a participative approach
  to knowledge sharing that recognises that
  business practices are inevitably rooted in a
  wider organisational context.
• To investigate the extent to which established
  practices within the aerospace sector can be
  successfully implemented in the context of prime
  contracting in construction.

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Research Overview

• Stuart Green, The University of Reading

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Knowledge sharing

• Knowledge is increasingly recognised as the key
  source of competitive advantage.
• Current recipes for learning from other
  industries tend to be over-simplistic.
• Tacit knowledge v explicit knowledge.
• Tacit knowledge embedded in context and cannot
  easily be codified.

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Knowledge creation

• Firms are constantly in the process of creating
  knowledge in a dynamic context.
• Continued competitiveness depends upon a firms
  ability to learn in dynamic environments.
• Research process sought to make explicit the
  assumptions that practitioners have about their
  own sector.
• Knowledge is generated from understanding the
  relationship between best practice and the
  broader dynamics of change.

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Research cycle

• Four different topics
• Supply chain management
• Requirements management
• Human resource management
• Innovation
• All analysed within the broader dynamic context.
• Interviews, case studies, literature reviews
  participative workshops.

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Some facts and figures.

• UK Aerospace
• 16.14bn turnover
• 117,000 employees
• 1,000 SMEs
• SMEs 9.6 of workforce
• 1.74bn RD spend
• One firm accounts for 60 of UK supplier output

• UK Construction
• 83.59bn turnover
• 1,599,000 employees
• 120,000 SMEs
• SMEs 82.6 of workforce
• 270m RD spend
• Top 30 firms account for 17 of output

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Dimensions of difference...

• UK Aerospace
• Highly consolidated
• Few customers
• High barriers to entry
• Long time frames
• Fixed locations
• High inter-dependency
• High-trust economy

• UK Construction
• Highly fragmented
• Many customers
• Low barriers to entry
• Short time frames
• Transient locations
• Low inter-dependency
• Low-trust economy

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Relationships with government

• Aerospace
• Traditional close relationship.
• Frequent intervention
• Continuity of work vital to survival.
• Notoriously inefficient in use of working
  capital.

• Construction
• Stop-go cycles still shape thinking.
• Laissez-faire policies
• Flexibility a major strength.
• Highly efficient in use of working capital.

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Dynamics of change aerospace

• Massive global consolidation since Cold War.
• Slump in civil aviation demand post 9/11.
• Increased RD costs.
• Privileged relationship with national government
  weakened during 1990s.
• Intensely competitive export market.
• Shift to through-life support.

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Dynamics of change construction

• Limited degree of globalisation and mergers.
• Since mid-1970s massive shedding of labour in
  favour of outsourcing.
• Emergence of the hollowed-out firm.
• Evolution of large construction companies into
  service companies.
• Proliferation of new procurement routes.
• Polarisation emergence of super-league.

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Wadi metaphor.

• When rain falls on the desert it will inevitably
  follow the course of the existing terrain.
• Improvement recipes cannot be understood in
  isolation of contextual understanding.

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Conclusions

• Best practice recipes are mediated by context
• Supply chain management
• Requirements management
• Human resource management
• Innovation
• Knowledge sharing approach aids dynamic
  capabilities.

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Lessons learned

• Terry Whitehead, BAE SYSTEMS

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Key points

• Report sets out key drivers in both sectors.
• Outcome is a greater understanding by all.
• Knowledge sharing was a two-way process.
• Aerospace practice continues to influence the
  way that BAE SYSTEMS procures construction.

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Lessons for construction (1)

• BAE SYSTEMS Point of view
• Innovation
• Construction industry is traditional and
  conservative.
• Only in last few years have they started to think
  outside the box.

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Lessons for construction (2)

• BAE SYSTEMS point of view
• Supply Chain Management
• Much more widely understood and implemented in
  aerospace.
• Significant lessons here to be learned by
  construction.
• Especially within context of prime contracting,
  PFI and framework agreements.

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Lessons for construction (3)

• BAE SYSTEMS point of view
• Human Resource Management
• HRM practices in aerospace sector are ahead of
  those in construction.
• Aerospace processes allow recruitment, training
  and retention of skilled personnel within a
  recognition and reward environment.
• Too many construction contractors devolve
  responsibility for investing in human resources.

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Lessons for aerospace (1)

• BAE SYSTEMS point of view
• Risk Management
• Construction risk is more likely to affect the
  individual therefore greater tendency towards
  active risk management in construction sector.
• In the aerospace sector, risk is too often
  perceived as somebody elses problem.

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Lessons for aerospace (2)

• BAE SYSTEMS point of view
• Relationships
• Aerospace Industry - long term or privileged, so
  can lead to lack of ownership and real knowledge
  of the end users requirements.
• Construction Industry - one-off and short term
  projects rely on more personal relationships,
  trust and creating confidence that delivery is
  assured.

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Lessons for aerospace (3)

• BAE SYSTEMS point of view
• Managing the bottom line
• Construction Industry is better able to manage
  the costs mainly due to ownership and personal
  responsibility.
• Overheads and Profits are much tighter in
  Construction but are owned by individuals which
  leads to a high personal performance culture.

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So what is BAE SYSTEMS doing?

• Context
• Support Service trend is towards bigger,
  longer-term, more integrated contracts - eg PFIs,
  prime contracting
• Key driver is risk reduction
• Tools include Life Cycle Management Key
  Capabilities
• Links needed between construction,FM and
  aerospace industries to provide know-how to
  integrated projects
• Facilities Management set up as one of CSS 11
  key capabilities

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Near-termChallenges
Defence Training Rationalisation

INFO LOGISTICS INFRASTRUCTURE
Combined Aerial Target System
MFTS
Through Life Capability
Hawk LIF
Harrier GR9
Tornado
JSF
Nimrod MRA4
Typhoon
Level of integration
Wedgetail
Future Defence Supply Chain Initiative
Munitions Mgt
Echidna / ALR 200
Integrated Support Service Packages
Discrete Support and Services
-
-
Number of Contractors

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So what is BAE SYSTEMS doing?

• Context
• Support Service trend is towards bigger,
  longer-term, more integrated contracts - eg PFIs,
  prime contracting
• Key driver is risk reduction
• Tools include Life Cycle Management Key
  Capabilities
• Links needed between construction,FM and
  aerospace industries to provide know-how to
  integrated projects
• Facilities Management set up as one of CSS 11
  key capabilities

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Lessons learned

• Martin Brown, Mowlem Aqumen Property
  ServicesMowlem plc

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Learning across Business Sectors

• Encouraging diversity of thought
• Moving beyond existing comfort zones
• Seeking new ways of working to meet future
  demands
• Understanding the context in which we operate

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Learning across Business Sectors

• Encouraging diversity of thought
• Participation in research forums
• Participation in interviews
• Challenge concepts of best practice

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Learning across Business Sectors

• Moving beyond existing comfort zones
• Moving away from traditional, insular approaches
• Recognising we are but one part of our customers
  wider business solutions
• Collaborative working programmes

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Learning across Business Sectors

• Seeking new ways of working to meet future
  demands....
• Review of approaches to SCM, HR, RM and
  Innovation
• Internal dissemination seminars
• External participation and influence

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Learning across Business Sectors

• Understanding the context in which we operate
• Application on collaborative working contracts,
  eg Prime
• Influencing our business improvement agendas
• Greater understanding of best and better
  practices

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Questions and Answers