Historically, Toyota is seen as the pin-up company for being the first to show how strong strategic alliances with supply chain partners can transform a company and an industry.
Toyota is praised for standing up and challenging the ‘Detroit model’ of business which long dominated car manufacturing and promoted a confrontational, risk-shifting and price-cutting environment in its supply chains. Does the Detroit model sound familiar? It may be long-dead in car manufacturing but it is still dominant in construction. Indeed, a number of prominent commentators such as David Chandler attribute the recent scandals in the Opal and Lacrosse apartment towers to this outdated, divisive and self-serving way we do business.
The Detroit model has its origins in a now obsolete early twentieth century school-of-thought called Scientific Management. This was the basis of the production-line and was founded in a basic mistrust of people and a belief in an individualistic model of success, driven by the power of competition, the division of labour and the constant driving-up of productivity through measurement, monitoring and control of people in the minutest detail. In contrast, contemporary schools of thought are based on the belief that success is more determined by relationships rather than individuals working alone and by an organisation’s capacity to collaborate, to work collectively and to develop a sense of collective responsibility for performance in its supply and demand chains.
Shifting from the Detroit model of business and embracing the idea that success depends more on the quality of our relationships than the type of individualistic, self-serving and risk-shifting behaviour that typifies the construction industry will require a fundamental change in business practices and behaviour. Collaboration requires a new way of thinking based on mutual trust, open and respectful communication, empathy, openness to others’ values and perspectives, shared decision-making and risk taking and a willingness to negotiate fairly and avoid common practices like bid-shopping. The timing for construction firms to change is right because emerging digital technologies and advances in manufacturing in construction are undermining traditional top-down business models and approaches to management, by enabling the creation of new supply chain relationships and collaborations which were only dreamt of a decade ago. How construction companies harness and embrace this opportunity is going to be one of the keys to future success.
Compared to traditional ways of doing business, digital technologies will provide the foundation for new forms of ‘networked businesses’, where traditional professional boundaries will be less structured and hierarchical than they were in the past. The profound implication of these changes is that contractors will no longer be able to rely on the old relationships and sources of knowledge that have served them well in the past. Recent research into the world’s most innovative companies shows that one of the critical defining factors that distinguish them from others is their ability to harness multiple sources of information and to develop collaborative management practices which cut-across traditional knowledge domains and harness loosely coupled networks based on deep and trusting personal relationships which have been nurtured over time.
That’s where we need to focus our energies… building relationships not shifting risks to the point of least resistance – which is generally where the least resources and expertise to manage those risks will be.
Ultimately, while the causes of the Opal and Lacrosse apartment tower problems are complex and multi-dimensional, the root cause is the outdated model of management we nurture, teach and employ in our industry.