The following is an excerpt from my book, ‘Cracking the VfM Code:  How to Identify & Deliver Genuine Value for Money in Collaborative Contracting’.

The commentaries of the experts I interviewed for this chapter are as pertinent to  all  B2B industries as they are to the infrastructure sector and the collaborative contracting movement. Any pursuit leader and/or bid strategist endeavoring to inject genuine, project-specific innovation into their submissions’ value propositions will benefit from their wisdom.

Public Infrastructure Agency Commentary

“Innovations are hugely important. But they need to put deeper analysis into coming up with more thoughtful innovations. Don’t just ‘come up with something’ you think is creative. This is where we see how much thinking they’ve put into it.”

Several years ago, I conducted a series of very open-topic and broad-ranging interviews with project owner representatives for a conference presentation I was preparing at that time. During these discussions, many of these representatives took the opportunity to point to innovation – or the ability to innovate – as an essential ingredient in collaborative contracting success.

Here’s how one interviewee put it, albeit he was speaking in the context of the bidding process:

“Innovations are most important nowadays. You need to come up with really innovative ideas that make a real impact on a project at grass roots level. And you need to show how much time and thinking you’ve put into it. We want to see deeper analysis; more thoughtful innovation. This is a big sticking point for us as evaluators.

“But you need to really understand the project and its bigger picture before you can see what the best, or at least any superior, way of delivering the project is. It’s of little value to just come up with something ‘creative’ on the fly.

“So do your research first so that you’ve got something solid to offer. Then it’s of the utmost importance that you demonstrate your ability to think innovatively – and to think innovatively for the benefit of our  specific project.”

But what are innovations? What is “innovation”?

Before launching into specific recipes for “innovating”, it’s important – in an era in which the definition of “innovation” has become amorphous and rubbery, often to the point of meaninglessness – to seek clarity around the concept.

To quote innovation expert, Scott Berkun, from his 2010-released book, ‘The Myths of Innovation’:

“Simply saying something is great doesn’t make it so, yet as the success of marketing and advertising demonstrates, this doesn’t stop people from trying. The i-word is thrown around so frequently it no longer means anything.”

And from our own industry’s ‘Practitioners’ Guide to Alliance Contracting’ (Department of Treasury & Finance Victoria):

“Is it really ‘outstanding’ or just ‘BAU’ by another name? The BAU expectation is actually changing year on year through continuous improvement in practices and performance metrics; ‘outstanding’ means a quantum change that informed opinion would judge to be clearly a significant departure from current industry best practice and best practice trends.”

‘Three Levels of Innovation’

Robert Newman is an organisational psychologist with Brisbane-based advisory firm Change Focus. He’s worked for 20 years in the field of organisational psychology and, within those two decades, he’s spent 10 years serving the infrastructure industry. Within that, he’s provided services to the collaborative contracting movement specifically, for eight years.

As part of a broader service set, he facilitates conversations on the topic of “innovation”. Newman has some very distinct, professional theories and views about what constitutes innovation – and what doesn’t.

“When people talk about ‘innovation’, they’re really referring to one of three ‘levels’, ‘types’ or definitions of innovating.”

He explains his “three-type” theory:

“Type 1  is the most simple form of innovation,” says Newman. “This is the well thought-out logical solution, typically associated with specific professions or disciplines. They are ideas that are an extension of the expert’s own, pre-existing mastery.

“These aren’t, however, ‘innovations’ in the strictest sense of the word.

“Type 2  is the bringing together of multiple disciplines which then engage with each other to operate from multiple perspectives on the problem to hand. Through a process of integration they build on their own knowledge bases, as well as bouncing off each others’ knowledge bases to produce a new and innovative solution.

“The difference between Levels 1 and 2 is that the solution is not predictable based on any one discipline, background or instance of expertise.

“Type 3 is  true  innovation. This type of innovation takes place when the multi-disciplinary nature of the group produces a new paradigm that is not simply a logical extension of multiple disciplines. Rather, it is actually the creation of a new discipline.”

Each of these three types of innovation produces a different form of outcome, Newman says.

Drilling down in his explanation of each, he says “type 1” produces “continuous improvement”:

“You can imagine how that works: a logical professional using their body of knowledge to build on what they already know, rather than creating a real paradigm shift. In other words, someone applies their body of knowledge to a problem and generates a different solution than was previously available to that problem. The reason they generated a new solution was the intensity with which they focused their body of knowledge and mastery on the particular problem.”

Type 2, he says, results in an “integrated solution.

“Multiple perspectives have been brought together to produce a solution that is now elegant, in that it straddles multiple facets of the problem.

In terms of the difference in these outputs, “type 1 produces solutions that fit in a less complex context, while type 2 produces solutions that work better in more complex contexts, where no single discipline has a comprehensive understanding of the problem domain.”

It’s the ‘type 3’ process that produces the genuine “breakthrough solution”, says Newman:

“It produces these because the solution generated is not predictable based on the contributions of the individual disciplines that produce it. In other words, it’s new ground, and there’s no one process that creates this new ground . . . except that it’s the result of a new context, a challenging and bringing together of professionals and their expertise.

“There’s something magical that happens at this level. It now moves into the zone of being no longer just logical. It’s no longer the sum of the parts; it’s now, in fact, something else – and it’s entirely new. For me, it’s the most pure form of innovation . . . where you look at the solution and have no idea how that solution came about by the process that lead up to it.

“So, coming back to the three different types of innovation, the most fundamental question to be asked by a team looking to innovate or problem-solve is:  “Can I just use an expert to solve this, or do I need to bring together a group of professionals, a multidisciplinary team? Or do I need to dispense with logic and go into the creative space and break new ground?”

“If you find yourself answering that it’s the latter that you want to do, then you’re after pure innovation, not just continuous improvement or effective teamwork.

“If that is the case, the thing to be totally mindful of is that pure innovation is jolly hard, very rare, and typically doesn’t arise when you are looking for it.”

Why not?

“It’s that ‘unpredictable’ element. It’s not something you can push. It’s like saying run faster, but you can’t. What pure innovation is asking you to do is to find a new level of running.”

Innovation is in Eye of the Beholder

“Again, those first two types or levels of innovation aren’t in that sphere. That’s not to say that the result of those particular processes aren’t valuable . . . even immensely valuable, in some cases. It’s just to say that they’re more the product of logical thinking and hard work: one percent innovation, 99 percent perspiration.

“From the expert’s perspective, in more instances of ‘innovation’ than not, they would not call it that themselves. You could ask them, and they’d say, ‘No! I worked jolly hard at and kept at until I reached that outcome.’ They’ve applied their own expertise over and over again to move up to new levels – but it’s still not ‘pure innovation’ in the sense that is actually incremental improvement, to whatever degree.

“So, of these three levels of innovation, the most common and the easiest to engineer, is the expert progressing his or her expertise. All that’s required is to find a diligent, motivated and tenacious expert and give him or her the problem and the resources to solve it.

“The second level or type of innovation is a little harder to acquire, because it requires some of the foundation work involved in developing teams e.g. clear roles and contributions, a clear understanding of the problem, good communications between disciplines, and an intention and a willingness to collaborate.

“This is typically what we are aiming for in relationship contracting.

“But moving up to that ‘pure’ type of innovation requires more, because it’s not formulaic.

“This – what I call ‘type 3’ – is the ultimate in team-generated innovation,” he explains. “It requires team functionality first and foremost. It also requires a climate that allows trying things out and making ‘mistakes’, a willingness to defer judgment, and a high degree of openness to explore possibilities – which is not typical of many professional experts.

“It’s the nature of experts to believe their discipline’s perspective of the world is the only one that exists. People who become experts are often very happy to be seen as knowing it all about a certain thing. It’s a part of their ego needs; a part of their personal identity.”

Newman says, however, that innovation “types 2 and 3” always underpin, to some degree, the optimisation of value for money.

“But – whatever they choose to call it – an alliance is always hoping to achieve type 3 innovation to really maximise client value and, if possible, increase their margin. This is the hope, the promise and the holy grail of relationship contracting. Sometimes it’s achieved and sometimes it’s not.”

Newman reiterates that there’s no formula for this type of innovation. There are, however, some principles and conditions that make it more likely to transpire.

Principles & Techniques for Creating ‘Pure’ Innovation

“You’ve got to start with a highly functional group, because ‘type 3’ innovation rests on the requirements of ‘type 2’ innovation, in that it requires the injection of multiple perspectives towards a multi-faceted perspective on the problem and its solution.

“There are ways that you can get nonfunctional teams to innovate, but their performance won’t be consistent. The ideal is to create an environment where they want to work together and innovate . . . where experts, for example, in one discipline, start enjoying interacting and gaining the perspectives of experts in other disciplines; where professionals who are secure in their profession realise that there are other ways to look at the world, and are curious about the differences between those perspectives.

“You only need one or two of those in a group to create a climate of curiousity, which can actually drag along those who are less secure or more closed-minded. If you create ground rules that foster curiosity, open-mindedness and a goal focus, then we tend to see this type of team-based innovative thinking emerge.

“So, the basics include creating an environment in which thinking together across multiple disciplines is desirable and enjoyable. This requires the development of the team itself. You have to build the familiarity and comfort level between team members, identifying each individual’s expertise and the common ground between them, building communications skills, getting clear on goals for the problem at hand, and being clear on the method of discussing these.

“When you’re in the ‘brainstorming’ phase of the ‘type 2’ process there are many methods you can employ – for example, the Kepner-Tregoe multi-disciplinary problem-solving method, or any other recognised group process for exploring problems and their solutions in the engineering field.

“And, at any point, you need to be clear on what stage you’re at in the overall discussion – you need to know whether you’re in the phase where you’re generating possible solutions, or the phase where you’re evaluating options against the criteria.

“One of the things that works against different disciplines functioning well together is the lack of a clear methodology; the lack of a structured/staged process for thinking.”

This foundation of high-functionality ‘type 2’ team performance then requires the addition of several more fundamentals, Newman says, in order to cultivate ‘type 3’ innovation.

“The group leader, himself or herself, has to be a role model for curiosity, openmindedness and goal focus. To move up to this higher level, the leader needs to epitomise these character qualities. They also need to create an environment that gives people license to be comprehensive in their exploration of the problem and the possibly prolific range of solutions. 

“Next, there has to be a generous amount of time dedicated to the cause; it’s very rare for innovative thinking to emerge without some sort of dedicated focus. People need to be taken offline. They can’t be part of an operational process and have half their mind on that while they’re trying to be involved in this sort of initiative.

“They also need to be allowed to make mistakes. The attitude that needs to reign is:  ‘Everything is possible. Mistakes are expected on the way to the final solution.’

A Rider

A rider from Newman:

“In this commentary, I don’t mean to give the impression that any of these ‘types’ of innovation is inferior or superior to any of the others. It’s simply that, more often, people haven’t really thought through the nature of innovation they’re referring to, and in most instances, it’s ‘type 1’ innovation they’re referring to. Although, of course, in the context of collaborative contracting, they’re aiming for – and quite often producing – ‘type 2’.

“Type 3 is just the icing on the cake. It’s unsual, uncommon, unpredictable. And while it’s not always necessary for a highly successful alliance, there is no question that that type of innovation leads to superior value for money outcomes.

“And that’s the type of innovation that defines and underpins true gamebreaking results on project alliances.”

A Strategist’s Perspective on A Psychologist’s Theory

Robert Newman’s commentary, inadvertently, leads naturally into my own philosophies and teachings – as a (bid) strategist – on “thinking”. These are not dissimilar to Newman’s theories on innovating, in that there are various levels, or types, of thinking . . . and there’s a fundamental progression between them.

More often than not, when I’m working for the first time with a new bid team, the initial expectation that team has is that we’re going to get straight down to the business of strategic or creative thinking.

But it doesn’t work that way: There are different types of thinking. One of them is “logical” thinking (which sounds like a natural, “default” output but, typically, it isn’t) and its output is the foundation of all other productive thought processes. If a “strategy” or the output of a creative thinking process should ever proved on target without it, it would be more often than not, a fluke.

Why is this?

That in itself is logical: 

If the brief is to think “strategically”, this implies that a solution to a problem is sought, or that a strategy is sought towards the achievement of a specific objective. Thus, that problem or that objective needs first to be broken down, investigated and understood at the level of its component parts. This needs to be followed by further research and thinking through of issues like previously-tried solutions or strategies, sub-problems and sub-strategies, obstacles and fall-back positions, resources and limitations, benefits and trade-offs – and numerous other elements of consideration that may arise only in the midst of the thinking process.

The foundation thinking in all those processes is first and foremost logical. As an added requirement, it should be comprehensive. In other words, the facts need to be methodically collected, and the objectives identified and worked through comprehensively, before anyone turns their mind to strategy formulation – or to becoming “creative”.

In other words, it’s only on the basis of a comprehensive base of research and other facts, and clarified objectives, that useful, directed strategic thinking can take place, since strategic thinking (in my book, at least) involves taking all these elements and then determining the most intelligent, success-likely course of action to take towards a specific qualified and quantified desired outcome.

‘Creative Thinking’

Creative thinking is a step further on from strategic thinking in that a “best strategy” may often require, or at least benefit from, elements of creativity.

A discussion about “creative thinking” or “creativity” takes us squarely back to the domain of Newman’s “three types of innovative thinking” philosophy.

Similarly to innovation (which is, arguably the same thing in this context), there is creativity that results from a “continuous improvement” style of thought process (think Edison and his 10,000 attempts to invent a long-lasting electric light bulb); there is the collectively-based creative thinking that takes place in groups comprising complementary professional skill sets where tenacity prevails until the best “creative” solution is arrived at; and then there is the truly inspired, less explicably arrived at, “it just materialised in our minds” type of output.

In this latter instance, it might be said that the various intellects and creative minds have come together and produced a “1 + 1 + 1 = 10” type of result. But this level of inspiration can’t be reached without a diligent, methodological approach to first conducting the fundamental layers of research and thinking. Again, you’re innovating for a reason and without that reason squarely in front of you or your team to keep you focused on the logic of your solution, you’re at grave risk of going off into the “creative for the sake of it” space, without a solid foundation.

That said, while there should be structure to the levels or types of thinking to be undertaken, it is neither my belief nor my experience that these can be templated (at least, if peak results are to be achieved), as is the endeavour of so many operatives.

As I explain to any new bid teams I work with, template-style “processes”: 

• “Box” or “mechanise” thinking (they keep you “inside the square”).

• Standardise a team’s thinking and its approach.

• Occasionally help you go broad, but definitely inhibit depth.

I hold, again, my own modus operandi and daily working experience shows clearly that structured thinking can be achieved without the aid (or interference) of rigid processes. I hold also to my assertion that the optimum value of any form of “thinking” cannot be extracted by reducing it to a template.

To think strategically and creatively in a group (without placing it at risk of “group-think”), I believe the optimal “methodology” to employ is free-flow thinking within a (moveable, expandable) structure – a structure that can only be set on the basis of a comprehensive collection of facts and logical ordering. Formulating the best strategy from those logically-ordered facts then requires room for “thinking” to move and develop sideways, up, down and any which way . . . allowing for an endless number of paths to an undetermined number of possibilities on the way to arriving, ultimately, at the very best option.

I have seen many agendas for bid strategy workshops that feature, for example, a session on “competitive intelligence” between 2pm and 3pm, or a session on “innovation” between 3pm and 4.30pm. It’s a complete nonsense. The brain, let alone a group of brains, can’t work to order as rigidly as that. You have to invest time, and accept the unpredictable timeframe associated with digging and thinking deeply into each area of strategy – or into each area of the problem you’re endeavouring to innovate a solution for.

Conversely and yet, at the same time, similarly I’ve also witnessed some slightly off the wall, but equally time-locked “innovation stimulation” sessions.

I once had the dubious privilege of sitting in on an alliancing coaching/bid team preparation workshop where a group of otherwise sane engineers ran around with rubber balls and timers in an attempt to come up with a list of “silver bullets”. Following that, they were given a little bucket of playdough to help loosen up their cerebral region so that they could mastermind group lists of innovations for a specific Request For Proposal (RFP) to which they were about to respond.

Notwithstanding the obvious value of brain limbering-up exercises, that sort of entertainment (i.e. in my view that’s the nature of that type of activity) is not the way you arrive at well-researched, well thought-through, credible innovations – or strategies of any kind.

Improvements & Innovation; ‘No-Brainers’ & Eureka Moments

Let’s see how theory looks in practice.

At the time he was interviewed for ‘Cracking the VfM Code’, Leighton Contractors’ Northern Region Operations Manager for Transport Infrastructure, Iain Ward, was fresh off two of Brisbane’s most recent collaborative contracting success stories, the Inner Northern Busway Alliance (Queen Street to Upper Roma Street) and the Eastern Busway Alliance (Buranda to Main Avenue) – both well-known for their “innovative” approaches to various issues. He provided his views on the broad topic of innovation. Ward was Alliance Manager on the Inner Northern Busway (completed in May 2008), and Alliance Manager on the Eastern Busway (completed in August 2011).

“Innovating is critical on projects like these,” says Ward. “You can do anything with money, but in these projects obviously the funding is not endless. If you just keep spending money you’ll get a solution, but we want to reach the best, most flexible, whole-of-life cost-effective solution. These are the issues that are important to the overall, long-term success of these busway projects.

“The key to achieving this type of result is to be prepared to continually challenge your project team. If you do that, and do it right, you’ll develop amazing improvement and/or innovation time and time again,” he says. “You can start out with things that appear to be almost impossible to achieve, but when highly motivated teams start developing ideas based on clear objectives, and you get teams of experts bouncing ideas off each other, it’s amazing how quickly they pump these great concepts out.

“With these projects, we know that when we start, there’s a high-level concept that maps out what we need to achieve. So you have the team, you identify how you’re going to build it, you identify the constraints, then the team develops solutions to eliminate or miminise those constraints, and then you develop an actual solution.

“Depending upon how complex the project is, you might go through that loop a number of times. In fact, you most likely will. On the first pass, you come up with your proposed solution, then as a group you challenge that. That’s like a peer review; you’re challenging the solution and confirming that it’s a good one and that you haven’t oversimplified anything.

“So, each time you come up with an answer, you’re challenging it – most especially for the purposes of ensuring you haven’t missed anything. Also, you might go through that whole challenging and refining process a number of times on any one solution, and then still ultimately leave that one behind and do it all again with another proposed solution.”

Ward says it can happen, on some projects, that “the first idea is the best idea”.

“There are times when the solution is more obvious – even if that’s just because some highly skilled person sees it the first time. Obviously, using highly skilled people increases the likelihood of developing very refined answers easily.

“You need a broad cross-section of disciplines and experience on these teams to come up with these ideas. And you don’t just want senior leaders from each of the alliance participant organisations. Don’t underestimate what the youngest person in the crew can provide, because it’s these newer minds that have the potential for the highest degree of free thought. If you keep going back to the old tried and tested personnel, where you are simply challenging the norm, you inadvertently keep going back to the way they’ve solved things previously.”

Ward agrees with Robert Newman’s philosophy, in that “you can get a group of people together, split them up and send them away with the problem, and they’ll come back with the answer and it will be an incremental improvement. Or the same group of people might come back with a solution or a breakthrough that is really something special.”

Further agreeing with Newman, he says that often the difference between the “incremental improvement” and the “real innovation” is the amount of time and effort people are empowered to invest in its development.

“If you’re restrictive, it’s unlikely you’re going to get a breakthrough answer.”

Sometimes though, he says, the most beneficial propositions aren’t “innovations” at all.

“They’re no brainers. Changing all the light fittings in a tunnel might save enormous whole-of-life costs over the 100-year life of a tunnel, for example. Technology can change quickly, and so, especially in a long project like a tunnel, sometimes you’ll find pearlers that can save the project a huge amount of money.”

However, he says, there certainly are a good many times when a non-formula produced, genuine “breakthrough” idea emerges.

“Once people start feeling and seeing that ‘no problem is too big to solve’, then from that point on, they will see both that the best way is the team approach and that the first answer isn’t usually the best solution, and they’ll go through every aspect of it to push into new areas of improvement.

“What can happen, during these processes, is that someone will put an idea out there that is just so far out of left field – but it is the perfect answer. And it has comes from a deep understanding of what the issue is. Having talked through proposed solutions, suddenly, for whatever reason, an individual or a group of people will come up with that ‘Eureka moment’.

“That’s not a formula. You can’t set up a group of individuals and say, ‘Right. On Friday the 22^nd, we will meet here at 9am and develop a Eureka solution.’ You need to set the scene, help people understand where you’re trying to get to, bounce around conventional thought processes, and then – sure enough – one day when you might not be specifically expecting it, you’ll get a Eureka moment. But you need to get there via diligence in those first processes of understanding, communicating, investigating, challenging and refining.”

The other side of this coin, Ward says, is that there can be a relentless drive in a group to keep perfecting existing answers. He cautions that this tendency needs to be kept in check, where the “grand breakthrough” version of innovation isn’t necessary or, at least, isn’t ultimately the most strategic use of time and resources.

“There are plenty of instances where it just doesn’t make sense to let the ‘potentially perfect’ get in the way of the ‘good’,” Ward says. “It’s the old 80/20 rule i.e. the extra investment won’t bring you a dramatic degree of improvement to the end project.”

Ward says there are robust, formal controls that help identify that trigger point and guide a team to the best balance of time and resource investment versus benefit.

“We have processes to support us when we’re working to quantify the benefits of these improvements and innovations. They help us work out whether something is a go or a no-go.

“For example, a team might have developed an extremely innovative concept to table that will provide benefits to the project. However, implementing it might cost, say, $2 million. In such a case, the robustness of our processes will help to ensure we’ll identify the fact that the net benefit to the project as a whole does not offset the extra cost.

“Using a combination of these processes and his or her own savvy judgement, the Alliance Manager needs to quickly recognise the point at which you now have in front of you the optimum solution . . . as opposed to a perfect solution.

“Often, you get to a point where you have an answer – and you need to be brave and skilled enough to know when it’s a good or a great answer, and taking it further is not going to provide a Eureka moment, only a slightly incremental improvement that may take more time or money than that increment of improvement is worth and may, in fact, jeopardise other priorities like budget and timeframes.

“If you can successfully achieve that balance in those particular instances, then you can focus your innovation efforts on other areas where the current solution is not going to get you where you need to be, and where you really can’t move on in the project until you do produce that Eureka moment.”

Ward says another checkpoint mechanism it’s important to have in place for the sake of efficiency, is the ability to record all suggestions.

“You’ve got to be quick to track your ideas and innovations. If someone has an idea that they think has some merit, and if it’s been reviewed and hasn’t got legs, close it out quickly.

“What you’ll find is that the same ideas often come up repeatedly on these sorts of projects. This especially happens where people are particularly passionate about certain ideas. Someone has an idea that they think represents an exceptional piece of innovation and it keeps on coming up. You need to have a process in place so that if these same ideas that have been previously put aside do arise again, it’s a very quick and definitive conversation and then you move on.”