A PROJECT-BASED VIEW OF LINK BETWEEN STRATEGY, STRUCTURE AND LEAN CONSTRUCTION Antonio N. de Miranda Filhol, Luiz F. M. Heineck2 and Jorge Moreira da Costa3 ABSTRACT Currently, there is a good understanding that companies do not obtain satisfactory results when lean practices are implemented alone. The benefits can only be realized by making a substantial number of organizational changes, which in turn need to be coherent with the business strategy. However, contextual factors drive companies to adopt different business strategies, organizational structures and bundles of production practices.
Consequently, the sequence and content of business development projects aimed to implement and test lean constru firm’s internal charac argues that lean impl to view of an effort to create because lean implem accordlng to each needs. This paper lated event, but part nment. Moreover, rough different internal projects, it is also argued that projects constitute the link between business strategy, organizational structure and lean processes. A model is proposed to explain the role that projects play in interlinking strategy, structure and processes.
In doing so, the authors hope to bring awareness to the bigger changes ehind lean implementation and to the challenges ofbuilding “finely-tuned” organizations for specific missions. KEY WORDS Project-based view, organization structure, lean implementation. INTRODUCTION contextual factors drive companies to find multiple, equally effective ways to compete within a particular industry. However, in Swlpe to vlew next page in free-market economies, the top competitors in each market sector are the organizations showing the best environmental and internal fit (e. . , Christiansen et al. 2003). Such companies are aware of the tangible and intangible attributes that impact he workings of a production system and the emergence of its competences. Consequently, they are cautious in aligning strategic choices in production strategy with one another and with those in other functional strategies. Coherence between subsystems is recognized as necessary to make the bigger system capable of supporting the business strategy. 2 Civil Engineer, M. Sc. , Ph. D. , CEO, Construtora Santo Amaro Ltda. Fortaleza-CE, Brazil, [email protected] com. br Civil Engineer, Ph. D. , Senior Professor, Production Engineering Department, Federal University of Ceará, Brazil. [email protected] com. br Civil Engineer, Ph. D. , Associate Professor, Department of Civil Engineering, University of porto, Differently, there is a lack of understanding by top managers of construction firms that, in any context, the development of a successful production system is the result of not one but many internal adjustments in the content of production strategy.
This seems to be the root cause of the difficulties to implement lean practices in construction firms. The focus of such initiatives has been primarily on the tools of best-in-class production models and not much on the supporting underlying principles and strategic choices. The recognition of this problem has led the authors to explore the m riad of factors that affect the performance of produ and best practice PAGF practice development. The discussion presented in this paper is supported by a literature review on best practice implementation and by the authors’ personal experiences with the topic.
Besides bringing awareness to the challenge of shapng organizations for specific missions, the objective is to present lean implementation as the result of internal adjustments carried out in the form of business development projects. A model is proposed to explain he role that projects play in interlinking strategy, structure and lean processes. THE NEED FOR CHANGE AT ALL LEVE-LS A production model is the result of a combination between strategic choices, nonintentional processes and various internal and external constraints. Therefore, companies have only partial control over the emergence of productlon models (e. g. Boyer and Freyssenet 2000). But even the aspects supposedly under control can be quite confusing and misused_ To begin with, there is no generally accepted definition of production strategy (e. g. , Acur et al. 2003). In industrial management literature, researchers gree that it involves the identification of competitive criteria that should be prioritized, based on a balance between business strategy and internal competences (e. g. , Voss 1995, Acur et al. 2003). They also agree that it encompasses a number of key strategic choices such as vertical or horlzontal integration, capacity, workforce, technology, facilities and organization.
It is understood that there needs to be a relationship between these two aspects because the assurance of environmental and internal fit is a pre requisite to good performance. In other words, the competitive criteria serve as a reference to strategic choices in roduction strategy, that need to be aligned w PAGF 91 a reference to strategic choices in production strategy, that need to be aligned with one another and with other functional strategies in order to make the whole organization capable of supporting the business strategy (e. g. , Wheelright 1984).
DISTINGUISHING BETV,/EEN STRUCTURAL AND INFRASTRUCTURAL STRATEGIC CHOICES In an attempt to clarify the decisions that directly affect production system design, Wheelright (1984) proposed that the key decision areas in production strategy be Split into two sets of strategic choices. One set relates o structural decisions, such as resource capacity, facilities, machines, and technologies to be used. In manufacturing, these decisions create the physical part of the production system desgn and are usually seen as onerous, long-term and difficult to reverse (e. g. , Barros Neto 2002).
The other set relates to infrastructural decisions, like relationship with suppliers, managerial philosophy, production planning and control, workforce management, quality control and so on. These are less obvious decisions and are behind the creation of intangible capabilities and competences that cannot be copied y the competition (e. g. , Hitt et al. 2003). The two categories are the most commonly accepted in industrial management literature. In the context of construction, in general, attention is mostly given to the set of structural decisions relating to facilities, resource capacity, and technologies.
The other set has been usually taken for granted or has been mainly limited to misaligned initiatives at the level of operations. Therefore, the traditional development of project production systems has been very much limited to the physical aspects of the construction phase. The concern with these structural aspects o 91 oncern with these structural aspects ofthe production system has a direct relation to construction peculiarities. Not only there is the influence of site production, but also of the product’s one of a kir,d design, location and specifiCities.
DIFACULTIES IN ALIGNING STRUCTURAL CHOICES WITH INFRASTRUCTURAL STRATEGIC Infrastructural decisions seem to be the least understood aspects of production models. When analysing the content of production strategy, Harris (1997) reported the existence of interactions between strategic, tactical and operational factors. The author argued that consistent decisions at all three levels would give eturns over and above the benefits obtained from particular levels of any one factor.
However, academics have difficulty in capturing all the strategic choices and even the underlying rationale used by decision-makers when structuring organizations to support business strategies. Practitioners offer little help, since few put effort into analysing why they do what they do. A good example is the relationship between strategic choices in production strategy and production practices implemented at the level of operations. Voss (1995) mentions the link between strategic choice and “best practice” implementation projects, uch as Just-in-Time (JIT) and Total Quality Management (TQM), as being quite unclear.
Not only there is little information on the infrastructural strategic choices needed to support the practices, the reasons to why they are chosen and how they align are usually not explicit. The poor understanding causes doubt on the efflcacy of fundaments and subsequent decislons. The only certainty, however, is that the strategic choices in pr s 1 and subsequent decisions. The only certainty, however, is that the strategic choices in production strategy and the production practices effectively implemented or developed internally by top ompetitors are in some way aligned with one another and with the companies’ business strategies.
IMPLICATIONS FOR BEST PRACTICE DEVE-LOPMENT A further discussion on the challenges of “best practice” implementation offers a more comprehensive view of the problem. For instance, if a “best practice” implementation project is conducted alone, the company may not obtain satisfactory results. First, as discussed by Voss (1995), a “best practice” Will not by itself guarantee improved performance because it cannot solve all problems. Second, “best practices” usually come in small isolated pieces. Thlrd, their most obvious characteristics can be easily imitable.
Therefore, they are unlikely to give sustainable competitive advantage. But even worse, some may only bring the best results under certain circumstances or are applicable only in specific contexts. And like other aspects of functional strategies, they may not be relevant for all companies. In fact, some production practices may be of interest and even appropriate only to firms following a similar strategic orientation and sharing the same geographic area. Thus, firms emphasize the implementation of different bundles of production practices, btaining diferent operational performance (e. g. , Christiansen et al. 003). This shows that regardless of what many consultants like to say, a “best practice” is not a technique that can be easily taught and transplanted from one industrial or market environment to another. On the contrary, smilarly to other aspects of production models, true best practices to another. On the contrary, similarly to other aspects of production models, true best practices are the final results of the combination between contextual factors and organizational arrangements. It must be understood that “best practice” is What the best performing companies do within their market sectors.
Thus, the implementation of a successful production practice in a new context requires an organization to recreate and match the main strategic choices that have made it so effective in the original environment. But even this may not be enough, as there are many other external and internal factors that are not fully understood nor replicable. It is difficult to understand the implications of individual or combined strategies on project performance in a dynamic environment like the construction sector. This explains why some best practices fail o provide the alleged positive results_ For example, Alarcón et al. 2005) perceived organizational aspects to be one of the main barriers to the more complete implementation of the Last Planner System and other lean construction practices. Mohan and lyer (2005) have also presented results showing a small amount of lean principles and practices effectively used in construction companies and an even smaller amount of major benefits realized. The discusslon points to the need of critically perceiving the various internal and external contextual factors that may hinder an organization from satisfactorily applying ertain practices or developing competences.
It also sem•es as a reminder to the construction sector for a better understanding of underlying strategies and their impact on the emergence of production models. As discussed by Barney and Zajac (1994), the competitive consequences of resources, PAGF 7 production models. As discussed by Barney and Zajac (1994), the competitive consequences of resources, capabillties and competences cannot be understood independent of the strategic and competitive context within which a firm is operatlng. nder the existing contingency factors, like any other successful rganization, effective project-based organizations should not only seek a proper fit with the surrounding environment, but also between its subsystems. Although challenging, the strategic choices in production strategy, be they structural or infrastructural, must be aligned with one another and with the decisions in other functional strategies like marketing, financial and human resources. There must be horizontal coherence inside and among functional strategies In arder to support the vertical coherence with business and corporative strategies.
THE IMPORTANCE OF UNDERSTANDING PROCESS TO MAKE THE CHANGE THE CONTENT AND The existing top competitors in each market sector are most likely to be organizations showing the best environmental and internal fit. In accordance with Ballard et al. (2001), the production systems in these firms have been successfully designed to achieve the purposes of both thei costumers and those who deliver the system, the producers. Such organizations were capable of strategically making changes to reduce the external and internal constraints that kept them from attaining better results (e. g. , 4 Blackstone 2001).
They have learned that, despite the biggest barriers being in the market place, many problems can be elatively well surpassed through the revision of different functional strategies and decisions in production strategy. But the Way top competitors find different, effective designs to achieve th production strategy. But the way top competitors find different, effective designs to achieve the same customer needs within a particular industry is poorly understood. A route to better comprehending the productlon strategy is by looking at it from two perspectives: content and process (e. g. , Acur et al. 2003).
The content of production strate»,’ comprises the specific key decisions which set the production system’s competitive criteria nd structural and infrastructural aspects. As for the process of production strategy, it is defined as the method to make the specific content decisions that originate the production system. The focus on the content is concerned with What the organization is going to compete while the focus on the process is on how the production strategy is developed. Both perspectives are perceived to be interrelated because some aspects of the content can only be clarified by understanding the process of production strategy.
The process of production strategy has been the subject of many academic debates and has even lead to the roposition of heuristics, principies and methodologies. Porter (1980) proposed a top-down approach where the implementation of functional strategies, including the production strategy, should begin with the analysis of the five competitive forces in the market. Oppositely, Wernerfelt (1984) proposed a bottomup approach where the formulation of strategies should depend on the organization’s resources, capabilities and core competences.
Nowadays it is commonly agreed that the two approaches are complementary. There is strong evidence that both strategy and competences influence each other (Hansen et al, 1997). It is mportant to notice that because the need for a change can only be Justified by 1997). It is important to notice that because the need for a change can only be justified by external pressures, the top- down approach, with competitive criteria driving business development projects, is in fact stronger. Acur et al. 2003) found results corroborating that it is apparently easier for business and marketing goals to influence production than the other Way around. The authors also observed that if a formalized production strategy is present it is more likely that the firm has employed a top down than a bottom-up approach in the esign of the strategy. These aspects explain why the changes in production system des gn to support the competitive criteria are primarily concerned with the effectiveness of the chosen solutions and secondly with their efficiency.
Following the firm’s directives, the production system is initially designed to meet the costumefs expectations and only thereafter to look for ways to eliminate waste in processes. This leaves no doubt that production is a secondary consideration in strategy formulation and a derivative of business strategy. Even so, it cannot be ignored that the alignment between competitive criteria and usiness development projects may actually work both ways, with competitive priorities driving key decision areas and development projects, but projects and competences limlting priorities (Acur et al. 003). This two-way communication is best explained by Hitt et al. (2003), who affirm that although the strategy influences the structure, it is the effective alignment between the organization’s tangible (i. e. , facilities and machines) and intangible (i. e. , people’s skills and procedures) assets that facilitates the implementation of strategies. To summarize, there is a constant effort