How Information Gives You Competitive AdvantageWhat problem are We Trying to Solve - Strategic Level?Strategic approach to IT in FAECOMWho are You?(Company Role, Your Rank)What are You Trying to Do?Analytical Framework -Technology StrategiesWhy Bother? Who Retains the Value Created by Innovation?What “Big Wins” do:! But Most Firms are Not Trying to Restructure the Industry.My Personal Vision:E-Business StrategiesInformation Technology Strategy for Smart BuildersHow Information Gives You Competitive AdvantageJohn MacomberMITBuildingVision.netGeorge B. H. Macomber CompanyNovember 24, 2003 Smart Builders - MIT E-Business John Macomber 2What problem are We Trying to Solve - Strategic Level? About the Construction Industry:Characteristics• Huge - $4 tr worldwide• Local•Project Based• Unique end product• Hundreds of firms all working with dozens of firms• Low barriers to entry• High barriers to exitTraditional Implications• Few economies of scale• Fragmentation– (ENR 400 in aggregate < 25% of US market)•Low margins•High risk• Same in related sectors -A/E, RENovember 24, 2003 Smart Builders - MIT E-Business John Macomber 3Strategic approach to IT in FAECOMWho are you?What are you trying to do?November 24, 2003 Smart Builders - MIT E-Business John Macomber 4Who are You?(Company Role, Your Rank) Building Products Manufacturer Subcontractor Consultant Engineer or Distributor Designer Constructor Sponsor/ Developer Owner/ Operator or Investor/ Owner Tenant Investor C - Suite (CEO, COO, CFO, CIO) Executive (Office leadership) Project Manager (field leadership)November 24, 2003 Smart Builders - MIT E-Business John Macomber 5What are You Trying to Do?Who are you?• Helping a large “at risk” company compete• Helping an existing service provider compete• Starting a new company• Playing with computersHow ambitious is the strategy?• Restructure the Industry• Build Sustainable Advantage• Increase Revenue• Reduce Cost• Play with computersNovember 24, 2003 Smart Builders - MIT E-Business John Macomber 6Analytical Framework -Technology StrategiesScope of IT Initiative:ExternalAdvantageInternalProcessesIntent of IT Initiative:DELLL.L. BeanWALMARTBECHTELChange IndustryStructureCompetein SameArenasNovember 24, 2003 Smart Builders - MIT E-Business John Macomber 7Why Bother? Who Retains the Value Created by Innovation?Closed Book Open BookNon Traditional:• Design - Build• Build - Operate - Transfer• Design - Build - Finance• Engineer - Procure - Construct -Operate - MaintainTraditional:Design - Bid - Build - ClaimBasis of Payment:Form ofContract:e.g. ChipFabe.g.SchoolObjectives:Control; look out for single firmsObjectives:Optimize; coordinatesystemOpportunityfor higher marginsCapture theValueUser trend???November 24, 2003 Smart Builders - MIT E-Business John Macomber 8What “Big Wins” do:Overcome fragmentationManage vertical integrationCreate barriers to entryUse economies of scaleChange negotiating powerRetain peopleIncrease marginsNovember 24, 2003 Smart Builders - MIT E-Business John Macomber 9! But Most Firms are Not Trying to Restructure the Industry.So: How Information Technology Gives You Competitive Advantage (Michael Porter, Harvard Business School)1. Grow the top line (IT investment helps you get more work)2. Grow the bottom line (IT reduces cost structure)That’s it.Remember, customers won’t pay for differentiation that they don’t value!November 24, 2003 Smart Builders - MIT E-Business John Macomber 10My Personal Vision:• 3D solid models • tied to databases• acting to optimize the system across material and labor• with multi-firm visibility into constraints• with compensation based on a multiparty agreement and coordinated by a profit-based algorithmReduce time 50% and reduce cost 25%November 24, 2003 Smart Builders - MIT E-Business John Macomber 11E-Business Strategies• MIT 1.464 (and 1.961)• Spring 2003• Topics in implementing e-business strategies, including:– Supply chain– 3D modeling– Auctions and