The Shift from Service Provider to Integrated Alliance Partner

As end users become more sophisticated in their operations they understand through experience the real advantages of optimizing product delivery processes.  It is natural that they should want to extend those advantages to key services, both provided and received.  Supply Chain Management (SCM) is often thought of as a manufacturing discipline, which it indeed is.  Today, however, SCM principles are being adapted to the services side of business as well, with rewards and dividends to both sides of the provider / end user relationship.

For many this is a fundamental change requiring acquisition of new skills, knowledge, and mind sets.  These folks must learn to walk first, but getting up to “business speed” cannot take too long.  Others have the requisite skills and knowledge but need to extend them to new areas of their business.  In both cases, overcoming ingrained cultures running counter to the initiative is paramount and something that should be thoughtfully done.

Across industries and market sectors companies are looking for service providers who want to partner with them at new levels.  Whether the end product is machinery, financial services, a new building, or operational in nature; optimizing the delivery process is now a holistic agenda that encompasses all required resources.

What Is Driving Business Integration?

For starters, better educated and more demanding customers.  As organizations improve internal management systems and mechanisms they develop new intelligence about themselves, their competition, customers and yes, service providers.  Business intelligence is a greater differentiator now than ever before.  Process improvement, Six Sigma, metrics programs and other initiatives of their ilk are changing the way we understand and organize our work.  As that intelligence matures it begins to ask new questions, test new ideas, and probe for new advantages.  Extending that intelligence beyond the boundaries of your own organization by challenging business partners to match it in their domains and align their processes with yours is a natural next step.

Competitive intensity has increased in recent years, partially the result of economic stress.   Focused by the need to survive some companies have pared away non-core businesses, reduced or expanded offerings, or taken advantage of opportunities to expand and grow.  Behind all of these strategies is a single imperative – succeed when others do not.  The oft-quoted exhortation to “Never let a good crisis go to waste” has been taken to heart. These activities amount to a reshaping of business, each incidence an opportunity to streamline processes.  Many companies have gone after these opportunities with zeal and more often than not they challenge their business partners to match them stride for stride.

Customers seek to minimize the number of business relationships they must manage.  Their goal is to lower the amount of management friction that is applied to the business of doing business.  As a result, strategic business alliances often form in which multiple businesses collaborate in competition against other alliances.  It’s not just your company competing for business anymore, it is your alliance competing against other alliances.  That means each alliance partner has a vested interest in each partner’s business performance; and it motivates alliance partners to plan, act, measure, and communicate in similar fashion.  You cannot do that when your processes, standards, and tools are different.

Fulfillment of customer requirements has always been the primary business purpose - it has not always been the primary business activity. Although SCM began as a manufacturing discipline, business in general is moving from a production-based model to a fulfillment-based model, improving business speed and alignment.  The foundational principle at work here is that of connectivity, creating networks of entities that share business intelligence and act together in synchronized fashion.  As this model moves further down the chain efficiencies and advantages are increased to the advantage of all in the network.  Inherent in this model is the recognition that individual firms depend upon resources controlled by others in the network.

Integration Tools

Deployment of secure and integrated information technologies across the customer – provider alliance enterprise enables process synchronization and speeds the flow of information.  In classic terms, such seamless operating protocols make pulling resources vs. pushing them possible, thereby avoiding stranded investments for inventory, space, and management systems at each level of the alliance.

Common measurements and language are critical elements.  Each partner in the alliance may elect to retain measurements they feel are uniquely important to them but which are not relevant to other partners; all partners, however, should adopt common measurements and language for tracking and reporting enterprise activity.  If, for example, the customer’s five most important Key Performance Indicators (KPI’s) are expressed as cost per end unit or cost per revenue unit, then the alliance partners providing support services to the customer should provide measures of their business that feed into the customer’s metrics in similar fashion and language.

The human part of the equation requires specific attention.  The degree of transparency required can be a challenge.  Sharing business intelligence and allowing visibility and integration of key processes may be a new dynamic for some.  Employing managers who have a collaboration orientation, are comfortable working with a range of technology systems, and who understand process design should be a priority for any firm engaged in an alliance business model.  Linking compensation to alliance performance strengthens the leverage towards implementation of cross-enterprise best practices.

Information is the Currency of Integration

Integrating and managing the supply chain seeks to assure that the right part shows up at the right place, at the right time.  The goal of services integration is to speed information to the point of need exactly when needed, thereby enabling the deployment of services in the most efficient manner.  The opportunity to integrate services to the level discussed here is enabled primarily by technology and information systems.  Information becomes knowledge, and knowledge becomes wisdom.  Wisdom, when acted upon correctly and speedily, becomes advantage.

Condition-based service management systems proliferate today.  I get an email from the car dealership with an appointment date and time when it is time for an oil change in my vehicle; not based on distance driven or elapsed time but on the actual condition of the oil and operating conditions of the engine, and on the day of the week and time of day I prefer based on the history of previous visits.  Sensors communicate automatically when set parameters are reached, triggering a process that results in my pulling into a service bay.  In building management an exact parallel occurs when an outsourced HVAC maintenance provider is dispatched to service a unit by automated sensors linked to intelligent building systems.  This model can be applied at multiple levels, even to stocking paper for copiers.  The fact that cloud computing largely eliminates the cost of deploying these technologies is speeding their adoption.  Service vendors lower inventories, redeploy capacity, and reduce costs.  Customers have greater visibility, can forecast more accurately, and have more control over cash flow.

The philosophies behind service chain integration are not new: Deep integration of business processes by alliance members who are invested in each other’s success, who are intensely customer-centric, who trust each other and accept accountability, who are driven by a desire to achieve process excellence, and who share business intelligence willingly.  When merged into a cohesive operating system each becomes a force multiplier for the others, improving service quality, cost and efficiency.  

Choosing the Right Service Model

Selecting the right service model for your CRE and FM organization is a fundamental determinant of your ability to succeed.  Executing the plan well is important of course, but does little good if you have selected the wrong plan.   Corporate structure, size, sophistication and culture will all influence your choice of service model, which must be well aligned to optimize potential.

This makes understanding your organization well in these multiple dimensions a high priority as you engage on a service model review process.  This understanding will be the keyhole to insights into opportunities and risks with the various service models, as they relate to your particular situation. 

While there are a multitude of service model options, there are three general classifications into which they tend to fall.  Understanding the characteristics of each will help you understand their alignment with your organization, resources and skill sets required to manage, and their respective advantages and disadvantages.

Best of Breed Services Approach

This service model places the CRE / FM organization in direct control of a number of specialized service providers.  These may range from real estate transaction management, design and construction management, all the way to operational functions such as maintenance and general services.  This model allows you to select the best possible provider for each function, effectively putting CRE / FM in a General Manager’s role.  If your organization is global then you have the freedom to select the best providers in individual markets.

By selecting the best service providers for each function and region you enable service excellence.   In addition, corporate CRE / FM groups retain appropriate control of tactical execution while avoiding the risk of single point dependency. 

However, it is not risk free or without burden.  Taking this approach will require attention to governance processes and consistency.  The CRE / FM staff must assure that uniform standards are in place and met by all providers, that accountability systems are in place and equitably exercised, and that sufficient resources are in place to manage a large number of contracts and relationships.

Not to be undervalued, it is critically important in this model that disparate entities be harmonized as much as possible.  This means special attention to KPI’s, technology, contract synchronization, quality of resources, and solving the technology puzzle in a manner that allows CRE / FM to receive and communicate a rationalized perspective of operations with high confidence. 

Bundled Services Approach

The bundled service model describes a one to one relationship between the CRE / FM client and a service entity that directly provides all services.  It provides a consistent approach to all services and strong cross-functional coordination since all have the same reporting and reward mechanisms.  Additionally, it provides a single point of contact for the CRE / FM group, thus lowering the internal management resource requirements. 

The advantages to this model are consistency, economies of scale, and transparency.  It is incumbent on the CRE / FM client to establish a contractual and relationship framework that maximizes these benefits while allowing flexibility to continually press the “art of the doable” upon the provider.

Primary risks in this model are the single point of failure nature of a one to one relationship, and potential uneven service performance across the entire portfolio.  The latter increases in leverage the more dispersed your portfolio is.  An additional risk is that the line between client and provider can become blurred, even internally.  In worst case scenarios this can make the CRE / FM group seem irrelevant or without influence.  For this reason alone CRE / FM groups that adopt this model must have strong internal executive leadership.  Selecting a single provider may indeed be the right choice, but it is always important that both parties clearly understand who is serving whom.

Integrated Services Approach

Similar to the bundled services approach, the integrated services approach provides a strategic alliance between client and one contractual partner.  Unlike the bundled approach, the Integrator is able to source individual functional services from the best providers available in a given market. 

The integrated services approach is in many ways a combination of the first two models with most of the benefits of the best in breed approach.  Additionally, it transfers the responsibility for management and coordination of multiple service provider contracts to the integrator, thus allowing for a smaller internal CRE / FM function.  While there is still the dependency risk of the one to one relationship model it is diminished by the integrator’s ability to individually source functional service providers.

This model also has the advantage of placing technology in the integrator’s sphere of responsibility.  They then must assure that a wide array of service providers deliver information via the same or compatible technology applications so that data management, analysis and reporting are consistent and transparent across functions.

Risks inherent in the integrated services model include the integrator’s ability to manage a number of service providers in an integrated and transparent manner, and a poorly constructed governance system that allows individual players too much autonomy.  Care should also be given during the development phase to assure that the total management structure and cost across the service spectrum is optimized.  CRE / FM groups should insist that they be given full visibility into the contractual and management framework between the integrator and its multiple service providers, to assure that an unhealthy and costly management bureaucracy is not being implemented.  You must provide and fund appropriate management but should avoid redundancy where not needed.

One final note here applies regardless of your service model choice:  The coin of the realm is data.  Accurate and timely data about all facets of your operation is the only way you will know when things are working and what’s wrong when they aren’t.  Developing your own data capabilities (acquisition, analysis, and articulation) is a critical first step.  From that position of knowledge and confidence you will be able to demand strong data discipline from your service partners.  Without it you will be hostage to the unknown and unproven.

Assessing Facility Management Performance

Providing workplaces that meet organizational needs and services that support business operations is what FM’s do.  Sometimes, however, it seems like that is the easy part.  Knowing exactly what to do and how to go about it can sometimes be a challenge.  Even more perplexing at times is understanding how well you are doing and what your customers think of your performance.  To help us we have all kinds of performance analysis and management systems, balanced scorecards and the like. 

Sometimes I think we over complicate it.  What we really want to know can be revealed by the answers to a few simple questions.  By properly structuring these questions and aligning them with core principles and tools we open the door to knowledge that improves our processes and increases our value.  These simple questions and their affiliated processes are the heart and soul of performance management and improvement.

Who do you serve and what do they do?  Understanding your customers and stakeholders is the foundation that supports everything you do.  Here is a key fact to always keep in mind:  You cannot understand your stakeholders if you don’t know what they are concerned about, and you can’t know that unless you ask.  So ask.  Be intentional about your relationships with key stakeholders.  Their business is your business.  Learn it.  Start to think and talk in terms of their strategies and goals.  Demonstrate to them that you both know and understand their business.

What services do they need?  Now that you understand their business, ask what services you can provide that will help them be successful.  This is your chance to do the expected well and to surprise with the unexpected.  While everyone needs the basics you will find customers who need something else, maybe even something they haven’t realized yet.  Knowing your customer’s business at a fine level gives you the ability to see their needs from your perspective.  Providing options to improve their value demonstrates FM’s strategic importance and leverage.

What is the best way to provide those services?  Evaluating your workflow process is a critical step in making sure that your processes are aligned to maximize benefit across the enterprise.  Too often we design and evaluate FM processes and workflow from a FM perspective only.  Because of the breadth of our reach our workflow processes touch virtually every nook and cranny of our organizations.  It behooves us then, to assure that our workflow is efficient, thorough, and well-aligned.  Also, FM sometimes needs to be more assertive in driving workflow alignment throughout an organization.  Yes, we serve every nook and cranny; but we also are served by many.  We need information and process outputs from others to do our jobs well.  When we aren’t getting it we have a responsibility to speak up.

How can you know you are doing a great job?  Sustainable metrics are the protein in your FM diet.  Metrics provide data, knowledge and eventually, wisdom.  Metrics tell you what you are doing, how often, how fast, how well, and how efficiently and effectively.  Understanding what is important to your organization, how to measure it accurately, how to analyze the data and glean operating intelligence from the data is a core FM skill set.  Some of this information will come from your customers, as it should, but only a small fraction.  Those who rely on a limited number (usually less than 5%) of survey returns to portray their operational health do themselves and the enterprise a disservice.  You should be tracking and reporting basic numbers and trends for all segments of your FM operation as a minimum.  You should also be using metrics to investigate operational alignment with key organizational goals, to troubleshoot when necessary, and to help make the business case for projects and initiatives. 

What is the best way to organize?  The correct organizational structure is the foundation upon which your strategy and execution capabilities rest.  Depending on your company’s size, services/product, complexity, geographical arrangement and the market sector you are in, you may elect to provide all services in-house, out task discreet elements, or outsource the bulk of the FM effort.  If outsourcing you might elect different providers for different FM elements, or select one provider per region, or even one global provider.  The options here are almost endless and most likely more than one will work for you.  But some will work better than others.  Understanding the service and competitive advantages and disadvantages of the various organizational models and how they relate to your specific requirements and culture are important steps to knowing your best option.  This is truly a foundational issue and getting it right is critical.  Do not make changes to your structure without a strong due diligence effort to identify risks and mitigation strategies. 

One FM’s View of the Immediate Future

As part of an annual scan process we go through in preparation for the beginning of the budget season our organization takes a hard look at the financial world around us. Right now it’s not a pretty picture. Pick an indicator - residential or commercial real estate, manufacturing, job creation – they’re all in trouble. Okay, we know that. But what does it mean for FM's?

Capital to fund projects is going to be hard to come by. The majority of large projects will stay on the back burner as emphasis remains on improving the bottom line through productivity gains and cost savings. Projects that do make it through the approval gauntlet will most certainly be under increased pressure to meet or beat budget and schedule targets. Given current economic indicators corporate capital is expected to remain constrained through at least the next two years.

Commercial real estate will remain in distress through 2011. Default rates continue to rise and are expected to reach 5% this year with the bottom not coming until 2011 at the earliest. That means even tighter credit at a time when many commercial loans are due to reset. Landlords caught in the squeeze are in trouble. Watch your landlord relationships and their financial health. Their risk is your risk. It might be your opportunity as well.

Emphasis on cutting costs and boosting productivity will escalate. Many companies have made the easy cuts and still have to improve to survive, but additional staff cuts run the risk of so deeply depleting the talent pool as to be too risky. For others, the need to improve is a key to competitiveness even if they have so far remained unscathed. Companies will dial up Continuous Improvement initiatives, but the initiatives must demonstrate hard gains through specific metrics. This will include second tier metrics to make certain that credit is not claimed for gains in one sector, cost as an example, at the expense of another, i.e. quality or revenue.

FM service providers are still under pressure. Virtually every firm you depend upon for service or support is under financial duress. Some have improved their position over the last year and most will make it through, but some will not. Keep a close eye on those that are most critical to your operations or present large financial risk should they fail. One way of doing this is to include corporate financial health information in your routine monthly or quarterly contract reviews. They will expect you to be asking so don’t be shy about it. You should be monitoring key ratios, borrowing capacity, credit rating and stock value as a minimum.

Opportunities exist to gain contract concessions. It might be a lease as noted above or renegotiating terms with your largest outsourced service providers. In most cases FM’s will have several of these opportunities. Your goal here is to drive down the cost of the contract in exchange for considerations in their favor such as extending the term of the contract, while maintaining enough resource to get the job done without endangering quality.

Adoption of alternative office strategies will become more common. Even organizations that traditionally have not ventured into this territory will do so. Companies will analyze occupancy and presence data to understand the scale and scope of stranded real estate investment. For companies who need to grow doing so without real estate expansion will become a priority. Densities will increase with shifts in office entitlement policies and standards.

Smart FM’s will watch the scoreboard. You may not consider yourself an economist but now more than ever you need to understand the basics of how business works in this very interdependent world. You should be watching basic market indicators relevant to your business and thinking strategically about risk and opportunity. FM’s should be knocking on the CFO’s door with observations and trends, and proposing actions to take advantage of opportunities and/or mitigate risk. You don’t have to have details. Demonstrating that you are keeping your finger on the pulse and understand what the data potentially means to your business will raise your own stock and protect the company’s as well. Go knock on the door, don’t wait to answer the phone.

Downturn? Some Say Opportunity

We are all in the business of making lemonade these days. I am hearing more anecdotal evidence that the beginning of the end of our current economic mess is in sight, but I am not yet a believer. Several of my friends in the design and construction industry point to an uptick in proposals but none of them are yet signing much new business. They interpret the increased RFP activity level as a sign that good things are about to happen. Maybe. Or maybe it’s a sign of people wishing and hoping good things will happen. Who knows? Time will tell, and I hope it tells a happy story.

In the meantime, however, there is still much each of us can be doing, using the urgency created by our current state to make changes to our future state. As CRE’s and FM’s we are responsible for assets that comprise a large portion of the economy. We know for example that real estate is typically the second or third largest cost item, behind talent and sometimes technology, for most companies. It is not uncommon that RE represent 50% of a company’s balance sheet and the operation of those assets can account for 20% of a typical income statement. Big numbers you say? How about this one: Fortune 2000 companies are responsible for over 1 trillion square feet of space. In other words, we design, construct, manage and operate trillions of dollars worth of assets.

To state it another way, we make a very large contribution to the welfare of our respective organizations, and have a responsibility to steward the resources entrusted to us with great wisdom.

So how do we do that, especially in times like these? There are a host of ways, I suspect you will find one or more of these suggestions appropriate for your circumstance.

· Increase portfolio efficiency: In the eighties I spent several years building large corporate campuses and facilities for my employer. Then it all began to crash. We shifted from expansion to contraction and worked hard to redeploy real estate. We analyzed the entire portfolio and consolidated, focusing on strong business units. We got rid of space that was dragging down the balance sheet and were ruthless in doing it. Net result: Fewer sites and greater density, and significant cost reductions.

· Centralize control: When times are tough you need to make better decisions, make them faster, and strive to integrate them across the enterprise. It is certainly possible to do all of that in a decentralized organization, but you will fight fewer battles, make progress and reap benefits much faster by centralizing authority over strategies and implementation tactics.

· Don’t accommodate change, drive it: As noted in an earlier posting here, tough times can also represent opportunity. People are more likely to listen to ideas and more open to large scale change. As those responsible for a large asset base we have a responsibility to do much more than just manage the day-to-day details of operations. We are responsible for envisioning what’s better, what’s next, what’s needed that no one else is thinking or talking about. We are responsible for bringing it to the table, socializing the concepts and promoting positive change that contributes to the well being of our organization. Put your change agent hat on, roll up your sleeves and get to it!

It’s Time to Monitor Your FM/CRE Supply Chain

Most FM’s/CRE’s are dependent upon a wide range of service and material providers. If you have checked on the financial health of your key providers recently you may have gotten a few surprises. The S&P 500 shareholder value index is down 56% (as of early March) but many providers have suffered deeper losses, some to the point they are on failure watch lists. Here are a few real examples.

Office supply company -98%

Custodial equipment and supply company -96%

Provider of outsourced FM services -78%

Electric utility company -60%

Provider of outsourced food services -44%

Each of the providers listed above is a national top tier company in their market segment and each has suffered substantial loss of shareholder value. Those losses may result in any number of impacts to customers, including staffing changes, decreases in quality and attempts to maximize billings.

In addition, take a very close look at your Real Estate relationships. Many REIT’s and building owners are in distress due to reduced property values, high vacancy rates and lease defaults. If you are a Landlord through ownership, management, or sub-leases then a monthly watch on tenant’s health is a prudent step. One simple way to do this is by dashboarding shareholder value as a percentage as was done with the companies listed above. Another method is tracking share price, debt/equity ratios, etc. Whichever metric you decide upon make certain the context is both valid (choose the right measure) and equitable (sensible across segment boundaries).

CRE and FM Staffing Models Changing

One effect of the economic downturn is the acceleration of a shift already underway in how companies meet their talent resource needs. Traditional staffing models relied predominantly on corporate employees. Temporary workers were often regarded as little more than fill ins, and consultants were thought of as high-priced problem solvers to be used sparingly. Not so anymore.

This shift began earlier in part because younger workers have different ideas about who they want to work for, where they want to work, and how long they want to work. Many organizations were already making changes in staffing models to accommodate the demands of important new talent. Now, however, that shift has received a dramatic boost, thanks to the economic realities of the day.

Younger workers are typically less concerned about corporate benefits and more concerned about the contribution they are allowed to make across a wide spectrum and their perceived freedom to control their own destiny. They see “free agency” as a way of both enhancing their contribution by working with many organizations, and improving their long term compensation in the process. Now, more and more companies are agreeing with them, motivated in part by cost savings but also because free agency allows them to deploy a better aligned resource set against any given problem or project. Both employees and employer see it as an advantage, not a penalty. And now this perspective is not only the purview of the young. More mature workers are embracing this model as well, some to widen the opportunities they have and some to facilitate a transition to the next phase of life.

So who are these “free agents?” They have many labels. Temporary employee, leased employee, contingent worker, specialist, independent contractor, strategic partner, and to some extent consultants are all what we refer to today as “free agents.” Some project that in the foreseeable future 80% of staffing needs will be filled by free agents, compared to the more traditional 80% “owned” staff model.

Organizations that choose to go this route will have to resolve inherent conflicts between this new staffing model and the stability needs of daily business.

· How will you maintain standards of care?

· How will processes remain in control?

· How will corporate culture adapt to include, support, nurture…and then release these players?

· How will this change affect your customers, and their satisfaction with you?

One very important question to ask yourself is…what about you? Are you one of these new free agents? If you think you might be, what does it take to be successful? How will you need to change?

Ah, there’s that word again. Change. Get used to it.

Surviving and Thriving In A Downturn

Right now things aren’t looking so good. The Recession is now forecast to run through 2009 with rosiest predictions foretelling improvement in 2010. No matter when improvement actually comes, one thing is clear; it’s not going to be soon enough.

What are FM’s to do? Many of you may wonder if your own position is safe. Others must give bad news to coworkers and friends. It’s tough, and not uncommon to feel a sense of loss of control. Helplessness, however, is not healthy or helpful. It is important that you keep your attitude up and focus on positive actions that will contribute to positive change. That, really, is the only way it turns around. The government can throw as many life lines as it wants to, but in the end each one of us has to pull ourselves up.

Here are a few thoughts on what it will take to create a lasting turnaround. It is up to each business, each CEO, each manager and each worker to do their part. It will be hard work but as I said a couple of weeks ago, a good crisis is a terrible thing to waste.

Customer Service is important again. Back in style as a way of developing buyer loyalty, strong Customer Service initiatives will differentiate good firms from bad ones. The market knows, and the market votes.

The only way you know your Customer Service profile is to ask. Good firms do, and they measure and track customer perceptions and make changes accordingly. The point here is that you can’t change if you don’t know, you can’t know if you don’t measure, and you can’t measure if you don’t ask. Got it?

Favor solutions over services. Whether you are an in-house organization or face external customers directly, you should think of yourself as being in the solution business. You deliver solutions through your products or services, but the customer can probably get those anywhere. In times like this, solutions will differentiate you from the “low cost provider” of services alone.

Forget yesterday. It’s time to throw the old assumptions out the door. Simply put, what worked then won’t work now. It’s tempting to say “if we just do what we’ve always done but do it a little smarter” then all your problems will take care of themselves. It’s a lie, don’t believe it.

Take advantage of the opportunity to create a sense of urgency. Mobilize your people and engage them in the renewal process. Let them be a part of creating the smarter, better, leaner, more efficient organization that will emerge. Don’t feed them doom and gloom. Challenge them, energize them, empower them, and support them.

Check your alignment. Over time core values and mission can become diluted by good ideas and initiatives that are the enemy of the best. Search for and prune away these resource robbers that muddle the vision and direction of the enterprise.

Make sure your plan is big and small. Big change requires big thinking, strategy formation, socialization, and detailed execution. It’s not going to happen quickly. But, don’t fall into the trap of setting one large change initiative in place and then starting the march up the hill. The troops will get tired too fast. Once you have the big plan, break it down into smaller plans. Think in 100 day bites. This provides a sense of accomplishment, a chance to celebrate, and it develops momentum.

Take care of your most valuable resource. Retaining and recruiting good staff should be a priority item. It is these people, after all, who create the value the customer buys. You may need to be creative (probably a good thing) in how you do it, but look for opportunities to acquire good talent that other firms are forced to let go, and make sure you keep your own all-stars.

The Pace of Innovation is Accelerating

With increased collaboration comes increasing transparency and faster innovation. Workers in and out of the company are requiring more visibility into the detailed workings of the organization. Global companies once focused on a “best-in-market” alliance partner business model are shifting to a “best provider” model. That means fewer alliances and increased opportunity for those who are participating. One result is that providers are acting much less tactically and much more strategically. Instead of being task resources only they are now also thinking and acting strategically on behalf of their clients. As a result, they have the opportunity to leverage their entire business chain to the client’s advantage, providing technologies and innovation that the client would not have thought of or be able to execute on its own.

And now we see that the search for innovation is not limited to formal business partners. Sites like www.Innocentive.com bring seekers and solvers together. You have a problem, someone out there has an idea. Companies are asking for and getting innovations on new manufacturing techniques, scientific support, energy efficiency, design, and operational models and technologies from people and sources with which they have no previous connection or pathway. In other words, our resources are no longer limited to those we know or have business relationships with. The world is your workforce!

The pace of innovation is driven by the pace of knowledge. It is one thing to talk about computing power and efficiency doubling every two years while the price of same is halved. There is knowledge in these continuing changes, but it is the incremental knowledge of increasing efficiencies. There are areas of research, however, where knowledge gains are large, coming at us very quickly, and which have the potential to transform our lives. The biotechnology revolution now occurring is driven by the intersection of bio-science and the expansion of information technology; and the promulgation of nanosystems has scientists designing new machines at the cellular level. If you really want something to catch your attention, think about this – Ray Kurzweil stated in 2006 that scientists are within two decades of having reverse engineered the human brain. What does this convergence of affordable high capacity computing, bio-intelligence, miniaturization, and brain intelligence foretell? The futurists among us see a world that includes high bandwidth Net access all the time, electronics that are embedded in our clothes, nanotechnology brain implants, and virtual reality (VR) technology that augments real reality to speed the transfer of knowledge and intelligence.

Is that “out there?” Of course it is. Will it all come true as currently envisioned? Unlikely. Will our world, the way we learn, and how we work remain static and unchanged? Absolutely not.

These emerging technologies will have real life implications to our every day world, including work processes and environments. We will be able to actually experience new buildings before they are built, test system interdependencies to identify errors and opportunities by actually operating systems in VR, discovering and avoiding mistakes that could be catastrophic. We will be able to replace brain function lost to accident or disease and do a thousand other things that will improve the human condition – and FM’s will have a role to play in all of it.

PM Lessons from the Front – International Projects In Underdeveloped / Emerging Regions

A friend recently completed development of a new office in one of the former Soviet republics. The country is now independent and younger generations are extremely entrepreneurial, and the workers are talented. This particular company was using a firm there to provide programming services and liked the product so well they decided to buy the company. That’s when the fun began. They learned lessons that will be valuable to anyone leading projects in emerging regions. You will find their experiences to be very educational.

“Class A Building” has more than one interpretation: The building the company was located in was billed as “Class A” but seemed to be everything but. It was a Soviet era building that the owner had thrown multiple colors of paint on, and the ‘hood’ wasn’t that great. Employees insisted on leaving the facility before dark, and even during the day had to navigate through a perimeter of intimidating types. Needless to say, building systems were far from dependable. They were finally successful in finding a suitable new building using the following strategies.

• They focused first on finding a Landlord they were willing to work with, then looked only at those properties
• They insisted on buildings that housed other multi-national firms on the assumption that those would have better standards and that the firms could band together to leverage the Landlord when needed
• They didn’t back down in the face of last minute gamesmanship

It’s a dangerous business environment out there: As you would expect, multiple business challenges arose. A complex legal system contributed to confusion and misunderstanding, and several parties engaged on the project tried to use the tenant’s supposed naiveté against them. Business ethics that we take for granted were in short supply. They expected to be tested on deal points, and they were. They did not anticipate the level of opportunism they would find. In one example, the Landlord put forward multiple contracts at the lease signing, some of which were obviously tax dodges. When the tenant refused to sign with any but the approved entity an attempt was made to significantly change deal points. Only when they stood their ground (read, got up and walked out) did the deal come together on acceptable terms.

Cultural differences show up in unexpected ways: This was an office for about a hundred staff members. Before the new project was built they had been working in incubator space that was barely habitable, in a poor building in a dangerous neighborhood. You would think that a design for a modern and well equipped office in a new building would be met with enthusiasm. Not so. In fact, there was a staff revolt. What was the source of all this angst? In the old space, as crummy as it was, each one of them had their back to a wall. No one was left vulnerable by having people sitting behind them or able to walk behind them. Naturally, the project was completely re-designed to satisfy this “unusual” requirement.

Look for creative risk management solutions: In the end, this group decided to transition the entire staff to Independent Contractor status. This strategy saved taxes for both the company and the workers, allowed the workers to maintain their entrepreneurial spirit, and provided a buffer for the company name and reputation.

These are only a few of the tales from the dark side of this PM’s experience on the project. However, even these are enough to make the point. When working off shore the rules are different. Make sure you understand the written ones and the unwritten ones, accommodate culture early rather than late, and stand your ground when needed.

CRE/FM Standardization Is Coming of Age

The Open Standards Consortium for Real Estate (OSCRE) recently announced publication of the Work Request & Work Order Fulfillment Standard Version 1.0, designed to automate service requests, work order management and report generation between stakeholders with shared business processes, including occupants, service providers, suppliers and owners. The standard is applicable for Corporate, Commercial, Industrial and Multi-Family sectors of real estate. Read the entire OSCRE press release here

If you haven’t noticed the increasing momentum of standardization in the CRE/FM arena then you haven’t been paying attention. The explosion of applications, increasing demand for data-centric operations analyses and decision support, and increasing speed coupled with larger risk are all exerting pressure on existing systems and structures. For well over a decade now we have been cobbling together a series of semi-elegant solutions. Most of the time they are pretty good solutions, but they must be reengineered each time the architecture of relationships changes.

I once outsourced a large maintenance operation at an electronic manufacturing plant. We had nearly two million square feet of production space, test labs, robotic manufacturing, and fab space. In other words, there was a lot of risk. The outsourced provider brought with them a nifty work order and maintenance management application, proprietary of course, and immediately put all of our data into it. And the instant they did we were trapped. As long as we retained them as our provider all was good. But if we ever had to sever that relationship we knew our data would be lost. That was before interoperability standardization made its way into our little corner of the world. Thank goodness it has.

Fifteen years ago we were talking about HVAC interoperability, finally being able to monitor and manage different systems from different manufacturers, linking them in a fashion that allowed us to take a holistic approach to managing the entire system from a global perspective. Today, that same change is occurring in work processes and applications that we all use. Owners, landlords, tenants, contractors, and sub-contractors will all benefit from common and aligned processes and tools. Supply chain management will experience the same metamorphosis as HVAC interoperability did, eventually maturing into a trusted tool.

The key, of course, is the quality of the data in the system. As the new standard becomes institutionalized across the industry operations will become more transparent, efficient, and presumably more effective. It will, however, expose those who do not know their data or have reliable data. If you don’t have your data house in order then it’s time to get busy.

OSCRE is doing good work. It has taken a while to gather momentum but the progress this industry group is making is notable. Participants include a virtual Who’s Who of the real estate industry, often competitors in business but collaborating to assure consistent, fair, and beneficial standards are in place. Check it out at www.oscre.org.

Looking Back, Looking Ahead

Every once in a while society and life seem to go through fundamental transitions. I’ve got a strange feeling that we are in the midst of one now, and that it may not be all that pleasant for us. Naturally, our current economic woes are cause for concern, but there are a lot of other current and emerging issues as well. If you look back over the last several years and then think about current issues and where they could lead, it can be rather sobering.

Over the last few years the U.S. has experienced the following;

• Prolonged wars in Iraq and Afghanistan increased political and fiscal stress
• Sustainable building moved from the fringe to the mainstream
• The price of oil jumped from $45/barrel to $138/barrel (as of this writing)
• The housing boom went bust
• Mobile communication became ubiquitous

I am not a fortune teller and, truth be told, I never go to the race track. Las Vegas only sees me when there is an air show in town, not a prize fight, and I’ve never won a lottery jackpot (have to play to win, right?). Never the less, I will take a shot at predicting the future (warning, some of these are intentionally “out there” in order to get your over the horizon perspective geared up).

As we look ahead to the next decade we can guess that some of the following may occur;

• Emerging nations will continue to consume resources at an increasing rate, driving up the cost of goods even as U.S. consumption of strategic resources declines
• Increased global demand, concerns over supply life cycle, and geopolitical issues maintain price pressure on oil
• Global warming debate sees real international agreements to limit carbon dioxide emissions
• A carbon credit arbitrage marketplace will emerge
• Fundamental changes in workplace strategy will include incentives for those who use mass transit (somewhat common now), penalties for those who don’t (less common now but gaining momentum), and mandated telecommuting two days a week for some workers
• Workplace strategy changes in turn contribute to a period of commercial Real Estate instability
• Younger generations of workers will choose to live and play closer to work, causing a reversal of the “Burbs Boom” of the last century and helping to revitalize cities
• Older workers exit the workforce en mass, creating knowledge gaps in companies and stressing social systems
• Meaningful immigration reform will be adopted in some fashion
• A major terrorist incident in the U.S. causes economic disruption and tighter security protocols
• The U.S. airline industry, hammered by energy prices and reduced appeal of air travel, contracts to two major airlines
• Private enterprise goes into space, taking tourists along for the ride

Looking still deeper into the crystal ball and gazing decades into the future, we might suspect that;

• South America and Africa become economically and politically aligned with those who benefit them the most – the new super powers China and India
• The U.S. loses its technological pre-eminence as the interest on a decades-long slide in the quality of education comes due
• All of those unmanned exploration devices sitting on the surface of Mars will be visited by humans
• Increasing influence of growing Muslim populations in western Europe increases social stress and emotionally charges policy debates
• Someone is going to find a cure for cancer.

OK, you say, what does that have to do with me and my company? Why does an FM care about all of this economic and geopolitical stuff? Here’s why;

• Your energy consumption may go down but the cost most certainly is going to go up
• You will be challenged again and again to improve your environmental stewardship, including new reward and penalty systems for companies and individuals
• The cost of construction will continue to rise as commodity prices are driven up by expansion in emerging nations
• You will be challenged to provide better connectivity and collaboration tools that truly enable the any thing-any time-any place work model
• Real Estate strategies will shift as fewer people are entitled to private work space
• You will need to identify and “secure” future leaders much sooner than before
• Cross-border/off-shore staff recruitment will be increasingly important
• Teenagers will still be teenagers

Okay, maybe that last was a bit obvious, but you get my point. Despite all of the changes that will happen, life and business will go on …. and you will be challenged to keep pace with it, be a part of it, and even lead your organization through one of the most exciting times in human history

Trends In Research Lab Design

This week I am attending the Research Facilities conference produced by Tradeline, Inc. Aside from getting to enjoy historic Boston, I am also learning a lot about the current state of research lab design. It is impressive to say the least. While I work at a research institution, it is pure academic research focused on policy issues. Our “labs” are offices and conference rooms. Here, however, I am learning about research facilities in the life, materials, and bio science disciplines. It is a window to a whole new universe on one hand, yet reinforces common issues and solutions on the other. These folks deal with hard science requiring physical elements to their projects that we in the “office” world just don’t see, but at a practical level many of the issues are the same. Here are a few trends in the world of lab design that I have heard discussed.

“Dance Floor” labs are emerging as a team/project strategy. Labs used to be filled with fixed benches and hard piped utilities. Now, everything on the floor is mobile and can be reconfigured as needed, and utilities are located overhead in “service carriers” that contain water, power, and gasses.

In some cases, offices are being co-located inside labs, without walls to separate them. This places the researcher immediately adjacent their work, enables greater communication/collaboration, and increases productivity.

Eliminating visual barriers is becoming more important. New labs have a lot more glass in them, providing increased natural light, allowing visibility throughout large lab spaces. One point of conflict, as you might imagine, is the tension between this increased visibility and code requirements for two and four hour separation of some types of lab space. Glass in these environments is extremely expensive, yet more and more projects pay the up front construction cost penalty in order to capture the benefits in productivity, collaboration, and researcher morale. One important note – the competition for researcher talent is fierce and the recruiting / retention value of this type of facility and environmental investment is recognized and supported.

LEED certification has become next to mandatory for new labs. Scientists recognize the importance of the issue and will not accept anything less than an organization’s honest commitment to sustainability. While expecting every project to attain Platinum certification would be unrealistic, it is undeniable that there is a sense of “rightness” about doing everything possible to support the environment when building these facilities. This position has at least three legs: Scientific integrity requires recognition of the issue and an honest attempt to contribute to solutions; organizations that are in the business of creating products that take from, improve, or help us live in a faltering environment face a marketing challenge if they do not contribute, and; the talent these organizations depend upon require it.

Being here is educational and fun. I am meeting new people with new perspectives on some of the same issues I face every day. I am learning new things about work I have never thought of before, and beginning to draw connections to my daily experiences. All in all, not a bad way to spend a couple of days. It is a ‘High-ROI” experience, and I encourage you to look outside your normal channels for information.