THE DIGITAL TRANSFORMATION EXPERIENCE : Episode three

AJ Waters:

Well, welcome everyone, to episode three of our Digital Transformation series. If you haven’t yet, check out episodes one and two, they’re available on-demand at ineight.com here in the next week or so. But today, we’re going to be having a conversation on digital transformation and we’re super excited to have with us Frank Peters from Los Angeles World Airports, and Salla Eckhardt from Microsoft. Glad to have you both here with us today. Before we dive into our topic though, real quick, let’s have both of you introduce yourselves and your background a little bit. Salla, ladies first.

Salla Eckhardt:

Thank you, AJ. Good morning, everyone. It is truly a pleasure to be a guest for InEight and talk about digital transformation together with you, AJ and Frank. I’m Salla Eckhart. I work for Microsoft internal real estate and security organization called Global Workplace Services, and I’m the Director of Transformation Services in our Center of Innovation. My work focuses on developing the digital building lifecycle framework and I’m accountable for our BIM strategy and digital construction strategy and digital twin strategy. As my background is that I’m trained as an architect back in Finland, but then I build a career that already incorporates the digital building lifecycle in it. So thank you so much for having me as a guest here.

AJ Waters:                           Thank you. Frank, how about you?

Frank Peters:                     Good morning, everybody. I’m Frank Peters. I run group at the Los Angeles World Airports, which most of you might recognize as LAX. My background is a little bit mixed. I grew up in construction, I went to school to get away from construction. I spent most… I would say the better half of my career in manufacturing in high tech and after a number of ups and downs in the high tech, I got sucked back into the construction field about 12 years ago.

And since then, I’ve been focusing on BIM and VDC and project management in the construction field. And at LAX, my group is responsible for the owner’s BIM strategy, which includes everything from standards to contract language and now in today’s terminology, a digital twin; when we started, that term wasn’t commonly used. But our responsibility is to develop the center of built environment information so that when somebody has a question on, “What is it and where is it?” they come to our group to find out the information. I could go on a number of directions on other topics too that my team is working on, but I’ll suffice it to say, good morning.

AJ Waters:                           Thanks, Frank. Appreciate it. So, the really cool part of today’s session is our panel is going to be talking about not just digital transformations in theory, but their firsthand experiences of how they are digitally transforming their organizations. And offering up some of their expertise, their knowledge, but also just some real-world scenarios that they’ve lived through in doing such. And it’s interesting, there’s a lot of studies that show that construction is a bit behind when it comes to digital transformation. And what do we really mean by digital transformation or digital disruptions? Maybe Salla, you could give us an example of, for the audience, what is a digital disruption, and maybe why or how can the industry catch up?

Salla Eckhardt:                   Oh. Thank you, AJ. So I think that the great example of a digital disruption is already from the 1980s when AutoCAD started replacing pen and paper as a drafting tool and enabling designers and detailers and engineers to be faster at reducing drawings and documenting their work digitally. Next even bigger digital transformation or digital disruption was the emergence of BIM technologies, and it was about 20, 25 years ago that we were imagining BIM to be what we today speak about as digital twins, creating a shared digital platform enabling everyone to access the same latest and greatest data to deliver the digital replica of physical infrastructure.

So for me, and from my perspective, digital transformation and digital disruption means evolution. So it means that we are not making just incremental improvements at small scale to be slightly better than we were yesterday, but it means that we’ve actually started at a status quo and morphed into something completely new way of working and that way enabling exponential improvement until we arrive at the stagnant phase again and we need to retransform again. And thinking about our industry, it is great that we are respecting the history and tradition, but we should be more focusing on the future than the past.

And to my knowledge, no other industry is as proud of how they’ve been doing their business for hundreds of years and choosing to continue on the same path, regardless of known issues and problems. I think we’ve already had long enough clarity on where those disruption opportunities are and us who’ve been in the industry long enough, we should be clearing the way for those that are now entering this industry and being digitally native already. And it’s our responsibility to make their future better and just stay out of the way as they continue their careers and providing support with our experience.

AJ Waters:                           Yeah. That’s a great point. The, “Oh. We’ve always done it this way,” message. I can’t tell you how many times we hear that. So Frank, from your perspective being out at a large owner of a major infrastructure facility, transportation facility, however you want to categorize LAX these days, what has been the catalyst for transforming not just your business, but some of the industry around your business because of how you all have led the way?

Frank Peters:                     Well, LAX is in the midst of a rather large capital improvement program for the last, I would say seven, eight years, and going on for probably another five or six years. The airport is under continuous construction, there is north of $15 billion worth of projects being implemented. So, part of our dilemma as an owner is how to manage that and how to leverage that to our advantage. And as a large government agency implementation of strategy takes lots of time, but fortunately with the capital program, we got some motivation. And one thing that we want do is leverage what the industry is already doing.

So there are aspects of the industry that are rapidly improving in process, and use of digital technology, and just out of sheer accommodation with what the industry are doing, we have to accommodate or we have to adjust. So that in itself is a motivation, and the other part is because we’re sort of bound by many things in the capital program’s lifecycle, risk certainly is one of those bounds, legal requirements for contract language. And the delivery process is bound by lots of legal things. We have some restrictions that we also have to accommodate, and that’s the ying and the yang of it.

So part of it is following the industry and trying to keep up with it and utilize what’s the industry is already doing. And the other part is accommodating the ability to manage risk and the legal aspects of delivery processes. And that’s sometimes a tricky path to navigate, and part of what we’re doing is based on the fact that we have that opportunity, so let’s do it. The speed may be something that we could argue about, but that’s the motivation that’s behind us as far as the accommodating the disruption, so to speak.

AJ Waters:                           Right. And it’s interesting; you mention the opportunity and the fact that you have the support. We did our global capital projects outlook surveying a number of contractors and owners over 300, and we found the same thing. There’s no lack of support to digitally transform, but a lot of times you need the right business case to chase. So, Frank, what are some of the key business cases or business challenges that you are facing or that LAWA has been chasing that you’re using that support to target?

Frank Peters:                     Well? Okay. So part of the disruption that’s occurring in the industry is that the design process is delivered in a very different way than it used to be. And my apologies if I insult any architects in the audience, and Salla you are included in this one, too. Our friends on the design side tend to move a little bit slower in the embracing of technology, basically, on the design side that accommodates the ability to leverage.

And the specific that I’m talking about is we have opportunities now to define some of the data requirements at the beginning of the design and those data requirements, everything from quantities to asset parameters, that we as an owner are very interested to have delivered to us both physically and digitally at the end of the project, have that opportunity to define at the beginning of the project or at the beginning of the design.

And those specifics, it’s a bit of a paradox when we’re trying to get something specific at the early part of a design and it’s very difficult to do. And whether you’re an architect or another designer, you want to keep your options open as long as you can, and the definition of things opposes that; you want to make those decisions early as possible, so that kind of battle goes on all the time. And we are actively leveraging that capability so that those things that are delivered at the end of a project, the assets and the information about the assets, have some alignment with the design documents so that we don’t have to do some back flips at the end. We want to start with the end in mind, and I know that’s an old overused cliche, but it’s very true in this case. And that’s the leverage that we’d like to be able to have across every project and everything.

AJ Waters:                           I mean, you’re right. Start with the end in mind is probably one of the most overused cliches in construction, but it wouldn’t be overused if it weren’t the right answer. I mean, that’s why we say it.

Frank Peters:                     Yeah. I mean, it’s unfortunate that we motivate with old cliches and it’s like if there was a new whiz-bang, how to poke somebody in the nose and get their attention, in a nice way obviously, we would do that. But it’s a matter of persistence also, there’s an element of that.

AJ Waters:                           So then turning the question to you, Salla, what are some of the key business challenges that Microsoft has been facing or that you yourself have been promoting throughout the industry as an expert in this field?

Salla Eckhardt:                   Yeah. It’s very much what Frank was saying that how do we take that end in mind approach and how we can support our vendors and partners take the approach of continuous services design? Rather than providing a single-time design service and then always ending at creating data that then doesn’t necessarily accumulate through the design and engineering process all the way to digital construction, and then be ready for us to take when it’s time for digital handover. So from our perspective, it really depends on our network of people that how digitally transformed are the partners and the companies that are working with us or working for us so that we can then digitally transform to support them support us?

So it’s very much that the game of collaboration and breaking down the traditional silos, eliminating the unnecessary gatekeepers and creating something that everyone feels that there is a high trust amongst the project teams and high quality and something that everyone can build on. Even when the building itself is built for the first time but then it starts to change and things start to get very hairy very quickly. Now if we create something that is easier to manage and is more digitally-led and people have the access to the latest and the greatest data, then we can rely on our decision-making much better and have different outcomes.

AJ Waters:                           That’s a good point; focusing in on who has digitally transformed, who can we partner with that have these skill sets? Because in a sense, that’s what the construction industry is, just a huge partnership on in each project and the better skills your partner has, the better you all turn out. Frank, I know with some of the challenges that you identified, LAWA went out and looked for their own solution as well, not just specifically from partners. What did that process look like? What did you have to put together on your evaluation sheet? How did you reach out to people? Just what was your mindset in searching for the right solution to take the step forward?

Frank Peters:                     Well, I’d like to frame it as being perfectly thought out and projected and we got our experts to write it down and we sent it out to the industry to present to us what we wanted, but that’s not the way it worked, initially. Because it was purely out of an accident, I guess you could say. Full disclosure; I used to be a contractor at LAX and that’s how it started. I was part of a team that built the first big capital project since the ’84 Olympics, so there was a long pause LAX from 1984 to 2010.

And on the 2010 timeframe, LAX went out and said, “Okay. We better dress up this airport a bit. We need some new facilities.” And long story short, I was part of the team that delivered that new terminal. And near the end of the project, the contractor looked at the documents and said, “Mr. Owner, you’re asking for piles of paper. Matter of fact, your contract language even says I’m supposed to deliver six Mylar copies of every drawing set.” And I’m like, “Nobody does that anymore.”

And what I did, I went and looked at effectively the industry and said, “Hey, what would be a tool set that we could use to deliver the digital equivalent of the close of a project? Including documents, models, and data.” And what we did was from the contractor standpoint, we put it together, we delivered, but there wasn’t anybody on the owner’s side that could receive it. And that’s probably a common scenario for large agencies, there’s no infrastructure at the agency to accept what we as digital transformers want to deliver.

So I left Friday from the completion of the construction project and took on the owner’s hat on Monday and received what I pushed over on Friday. And that lesson of a contractor defining what an owner should use as far as systems became a little bit of an eye opener. And it turns out that that’s a very common practice, and the problem with that is owners end up with an alphabet soup of systems at their disposal that they’re not very good using. And matter of fact, most of them don’t use. So owners need to define the delivery of information into a system that is owned by the owner.

And that became a pillar or strategy in saying, “Okay. We’re not going to just receive what you, Mr. Contractor, would like to give us. What we want you to do is to give us what’s your contractually obligated to give us within the environment that we control.” In today’s terminology, that’s the common data environment. At the time, there was no acronym for that. And there was very few systems that accommodate that and we’ve sort of lived with what we chose eight years ago and has grown over time and has expanded capability. But it’s important to know that as an owner, you want to define the how the information gets delivered to you. That’s key.

AJ Waters:                           Yeah. That’s a huge tip right there. And wrapped up in all of that, Mylar. A word some people on today’s webinar might have to look up.

Frank Peters:                     Yeah. What is Mylar? That was a fast technology at the time, made a lot easy for copying.

AJ Waters:                           Right. So you mentioned a common data environment, it’s another one of the buzzwords around the industry. But Salla, when we talk about a common data environment, one of the things that we constantly look at is how do you balance all of the data elements? The scope, the cost, the schedule, they typically all come from different areas and then you’ve got to try to put them into this single source of truth. Why do you think that’s been a challenge for owners and contractors balancing those together on the capital projects, and what maybe could they do to overcome this and/or benefit from putting that all together?

Salla Eckhardt:                   Yeah. It probably continues to be a challenge due to the siloing of the roles and the disconnect that the AEC has from the O. So when thinking about that disconnect, the scope and cost and schedule mean very different things to a designer rather than a contractor. And then, when you have an owner in the mix, they have a completely different perspective as a financial organization. So to overcome these challenges, adapting to the cloud-based common data environment might be a good starting point, and that way, all the different project stakeholders are integrated into the same digital environment where data and information is flowing instead of the files and folders. So it’s much easier to have meaningful discussions with everyone when you’re accessing this same latest and the greatest information, and that’s why democratizing data with common data environments in the future is so important.

Frank Peters:                     Yeah.

AJ Waters:                           I think the real big point inside there, Salla, and you hit on this and we’ve talked about this before is that segregation or separation between the AEC and the O; we always talk about the AEC industry, and then there’s the O. And what can be done to get those folks talking together? And Frank, maybe going off topic just a little bit, but you went from the AEC to the O. From Friday to Monday, that was kind of how that story happened. What do you see as some of the challenges of the disconnect there and how do you see things being mended, if you will?

Frank Peters:                     Well, it’s a multilayered complex equation, it’s not as simple as that. And if you were to say the O to an owner, they would be a little bit confused. They’d go like, “Yeah. We’re the owner, but I think of the O as operations.” So the owner is divided into multiple silos, Salla’s saying there’s silos. Yeah. There’s silos everywhere. Even within what you’re calling the O; we have the capital side of the O and we have the operations side of the O.

And the capital side of the O has a transient lifestyle. They come and go and they typically, in larger agencies like LAWA at LAX, hire a big engineering project management firms to manage the capital side, and they tend to have a focus on the capital delivery process. Very much like the AEC. They have the idea of the AEC, “We have to get the contract in place. We have to get it delivered and we have to meet the contract and then we leave.” And that puts the owner in a position of, “Well, do we need to become experts at that? We as an owner need to become experts at that capital delivery process?”

And the answer is, “Well, sort of, kind of.” You need to define a delivery mechanism that can be on both sides; the capital side and the operations side. Because why do we spend money? Well, we spend money to make either operations more efficient or we adding capacity. And that’s an important distinction and we need to keep it in mind is the why are we doing this? And there is a requirement and my team sort of backed into this is that our contract language needs to speak to the operations requirements.

And believe it or not, this is begin with the end in mind, and the end in mind is not just closing out a project on the capital side. It is making the project available for operations efficiencies. One simple example, operations has a maintenance system they use at LAX Maximo, that’s sort of the most common large asset management system. Well, they have a very defined data requirements for things. Well, that data requirement for things is part of the contract language on the capital side now so that that language on the capital side is the same language as on the operations side, and that is bridging those two.

Having a common system that both the capital side on the owner and the operations side on the owner have access to and utilize, is the key. That’s one of the things we’ve done. Sorry for the long answer, but I can’t explain that in 15 seconds. That’s a challenge that audience, if you have a way of doing that in 15 seconds, let me know. Because I could really use that.

AJ Waters:                           I mean, that’s what everybody’s challenge is; not just to have more data, but to have the more data mean something.

Frank Peters:                     Yeah. Use it or make it useful.

AJ Waters:                           Yeah. Because when we did our capital projects outlook, everybody claim they’re collecting the amount of data they want and they’re sharing it, but even more so, they admitted they could do more with it. Salla, maybe in your opinion, what are some of the more things that people could be doing by connecting this data?

Salla Eckhardt:                   Yeah. Honestly, I think that everyone could do more with less, but at the same time, in order for us to really embrace the digital transformation in the industry, we need even more data. But the data needs to be somehow better documented, better structured, be in digital format so that it doesn’t continue to be as fragmented and as unstructured, traditionally speaking. And why we need more data and why we need it in structured format is that that data helps us understand what the future of our built environment looks like based on evidence from the past.

So that’s the balance that we are struggling with as an industry that even though if we are embracing big data for the sake of having a lot of data, if nobody’s able to manage it and you can’t really have machine learning algorithms or artificial intelligence to support your people do it, then that data becomes a burden. It becomes dark data that everyone knows that that lump exists, but nobody knows how to attack it, how to go and extract what is then relevant or meaningful for the different decision makers, and how that data could be actually used for creating the better outcomes in the future. We can’t change what has happened in the past, but we can certainly just evaluate why things happened, but it needs to be something that is more pulling from the future than leaning into the past.

Frank Peters:                     Yeah. If I could add just a snippet as an example of that; there is no shortage of data coming our way. I mean, we get flooded with… And the question is, well, what’s useful? Well, we can use our toothpicks to figure that out, but there’s just too much coming our way. And one of the things that we stumbled onto, and I have to give credit to Microsoft on this one, is that we started using Power BI to mine some of that data and make it available in the form of information that project managers could understand.

For instance, we wanted to get data from contracts on assets and it’s always difficult to get the contractors to deliver the nitty-gritty details. Well, we created charts that showed them how close they were in completing those requirements. And it was pretty simple, but there was a huge pile of data that we had. But that was way behind the scenes and we’d just summarize it in a simple report that we could say to, “All right. Project managers, you’re only 60% completed and you’ve got two months before a substantial completion. Come on, give it to us. Please.”

AJ Waters:                           So we find ways to make this data useful; Salla, how do we get people to change the way we’ve already done it?

Salla Eckhardt:                   We have to find some ways to include the people in the change process and find the answer to, “What’s in it for me?” And that way, when it becomes something that people want and see the value in, they will get on board, and we need to bring everyone on board. It does sound like boiling the ocean, but change oftentimes fails because people feel so disconnected or undervalued as potential contributors. So even if the change needs to start from the top-level management and have them feed the motivation and support the change, it needs to happen everywhere and needs to made something that is very personable for the people that are going through that change management process.

AJ Waters:                           For sure. Frank, from your experience, what were some of the challenges that you ran into making the change to this new non-Mylar delivery method?

Frank Peters:                     Yeah. I mean, if anybody has ever read Peter Drucker, he’s sort of a management guru par excellence, he always said, “No matter what you do, culture will eat your lunch. If you don’t affect culture, you’re not going to be able to change anything.” Culture is that people part of an organization that dictates the why of their behavior, way more complicated than what we’re trying to do as far as digital stuff, but it is the biggest barrier that I run into. And you mentioned it earlier, why do folks in our industry say that that’s the way I’ve been doing it for 50 years, and that’s the way I’m going to do it for 50 more years? Well, there’s a culture associated with that behavior.

And what we’ve tried to do… And yeah, it is boiling the ocean, changing culture. You can’t do that overnight. It’s finding a few folks that can gain some ownership to it. It’s like, “If it’s my team’s data, nobody cares because it’s my team’s data.” But if it’s the project team’s data and the project manager’s data and they have the ability to do something that they couldn’t do before, and they could have a little bit of ownership in that, we run at that full force and go like, “Hey, anything I can help you to make you more successful and you take full credit and have ownership of it.” So that I don’t have to watch behavior at all times. I can basically know that it’s going to happen, whether I’m there or not. My team can’t be there everywhere. So, culture is by far the biggest hurdle that we have to address. Salla’s idea of getting successes at a personal level is the key.

AJ Waters:                           We talked about what it takes to digitally transform, we’ve talked about organizing the data, we’ve looked at what it takes to implement the change. Being all the way through that journey, Frank, what are some of the biggest benefits that you’ve seen on LAWA’s journey with digital transformation?

Frank Peters:                     I mean, there’s a myriad of benefits and one of the benefits, this is probably on the capital side of the owner organization, is having the ability to get visibility of the delivery process as it relates to time. And one of the examples that we use on one of the larger projects within the very large capital program was the closeout process. And the closeout process is always one of those nobody really wants that, good project managers escape the project before the starts closeout because anybody that’s stuck in closeout knows that it’s not a career-enhancing activity.

So it tends to get a low professional development cred, and as an owner, it’s critical to us because it’s… Another cliche, it’s not how you start the game, it’s how you end the game. You look at the scoreboard, it doesn’t matter how good you’re shooting at the beginning of the game, if you’re not winning at the end, what does it matter? So that becomes a critically important part to us, and we implemented a digital closeout process so that we didn’t have to transfer on paper and physical checklists.

And it sounds kind of archaic that that’s the way we used to do it, and yes, that’s the way probably most of the industry does it. And we digitized that and we associated some of those other things like a punch list with that, and were able to close out this project in record time. I mean, it’s one of those hard to believe things when you can say, “Well yeah, every project manager, he delivers under budget or before schedule.” Which is one of the biggest lies in the world.

In this example, we were able to close out a project in a timeframe that was within the contract timeframe, and we’d never done that before. I mean, it was 120-day closeout cycle that was in the contract, but I swear I’ve never seen an actual contract to actually do that. And we did that; we went from 40,000 punch lists down to 14 within that timeframe. Now, am I going to claim success that I didn’t get to zero? Well, those 14 in my mind, in the big picture, is pretty close to zero, so I’m claiming success.

AJ Waters:                           There you go. So, Salla, all of this talk about innovation, the future, digitally transforming, it costs money; there’s an upfront investment to this. How does an organization that’s interested in maybe taking that first step or that next step justify the cost and what will be the differentiator for them if they choose to do so?

Salla Eckhardt:                   Yeah. That’s a good one. Innovation, it always requires funding, but also education and training and prototyping and testing and the trial and the error. So from that perspective, it’s an investment. However, big investment doesn’t have to mean that it is an expensive investment. So when thinking about what’s the ROI of innovation, innovation per se doesn’t have an expectation of ROI; the results from the innovation fall into that category, and it’s a very long journey measured in time. So when thinking about what is that most expensive investment in innovation, it is the not in investing in innovation. That’s when you’re basically predetermining that you plan to go out of business when your competitors mature with their innovation journey.

AJ Waters:                           That’s a really good point. It’s more expensive to not do it than it is to do it. All right. So last question, I’m going to ask this to both of you so be ready. I know a little bit about your background, both from your intro today and from other conversations, and both of you at one point in time, took a turn in your career because you saw a void in the industry that needed to be filled. So any advice for listeners on this that maybe see a void for innovation or digital transformation at their company and have an idea to fill it, what they could do next? Salla, you first.

Salla Eckhardt:                   I think that best approach going forward is diversity and inclusion, invest in the people who have the diverse backgrounds and diverse education, diverse career paths and career lengths, too, and start blending those ideas and foster people talking to each other. Because that starts to spark open innovation and spontaneous collaboration amongst people, and that’s where you start to see a lot of business growth, but also improvement in your products or services.

AJ Waters:                           Yep. Exactly right. The old, “Ask questions to check your ideas.” Frank, what about you?

Frank Peters:                     Well, I think my intro, as I said, I grew up in the construction industry as a family business and I went to school to get away from it. And I think our industry has a bad rep. What parents tell their kids to go into construction because it’s great? No. They say go into information technology and other things. And it’s unfortunate because our industry has a bad rep and I discovered that the long way. It has a bad rep as well as it pays pretty well, so most people don’t know that. So it pays well and has a bad rep, and it turns out that the opportunities are immense.

When you look at the industry worldwide, construction industry dwarfs, every other industry. The money spent on building stuff just dwarfs everything. So one’s ability to leverage an improvement, that is the definition of the opportunity is huge. So when I went from the high-tech world to the construction world, it seemed like people were looking, “What are you, crazy?” I’m going like, “Yeah. That’s probably true. I am crazy. But listen to me, there’s an opportunity here.” And the opportunity is this industry has places where improvement can be made with a individual’s effort.

And that to me is important; as we choose what to work on, one needs to know that the improvement that I’m going to have some impact on has a leverage. And this has a huge leverage. So I’m not disappointed, I’ve been doing this for 12 years on the construction side, and in hindsight, I just I stumbled onto it. I fell backwards in the sense of a career, but it was a huge opportunity and I have been rewarded for that. And I’ve enjoyed literally… I would be lying when I said every step, because if you’ve worked in construction, you don’t enjoy every day that you show up. But most days, I would say by far, the vast majority of the days. Sorry for the long answer.

AJ Waters:                           No. You’re exactly right, the opportunities are going to be there and it’s about reaching out and taking those.

Frank Peters:                     Yep.

AJ Waters:                           Well, thank you both for joining us today. It’s been a great conversation. I’ve really enjoyed it, hopefully all of our listeners have as well. Before you leave, don’t forget to download our global project outlooks report on ineight.com or you can find it attached to this session. Also, next up, we will finish our series out with episode four coming next week, December 8th, featuring WSP and North East Link. We will see you all there. Thanks again.

Salla Eckhardt:                   Thank you.