Transcript: Using Data as An Asset: The Future for Building Owners and Operators

Why do you think we're disincentivized from using our data? I don't think it's anything more than just the status quo dominates and that it's just easier to be conservative and keep trying what you used to do and hope that it's going to yield a better result. I don't think it's any more complicated than that. And then along comes an individual or a set of individuals that are somehow oblivious to the risks of trying new things and they disrupt markets and change the game entirely. Like your point on research and development is a really good example.

Why not go allocate $100 million to this? Profit margins are so thin in construction. Waiting around won't change that. It's possible that it will be a technology company that, like what Uber did in the taxi industry, becomes the world's largest construction company. It's unlikely that today's companies will be shaken up adequately and take tech and data seriously.

I don't mean to be so doomsday about it, but the call to action to me is just like, it's time we all get there. Hello and welcome to the Constructor Podcast, the future of the built environment. I'm your host, Brittany Campbell-Turner, and this podcast is dedicated to helping property owners have certainty in their decisions about their construction projects. We talk about fostering trusting relationships, help you to understand how to lower risk, be under budget and on schedule, and most importantly, exceed your end user's desires. Welcome to this episode of the Constructor Podcast.

Last episode, we wrapped up our recap of the 20th annual LCI Congress with a Lean Lab presentation where James Pease and I present on the topic of how to increase adoption of the IPD model by using blockchain. James Pease is a regional manager of facility and property services with Sutter Health, and he's also developed an education platform at leanipd.com where he's been sharing through webinars and blog posts different elements about how one can be successful in running lean projects. In this presentation, James and I talked about how it's unquestionably the future to incorporate blockchain and smart contracts with construction contracting.

We focus on integrated project delivery contracting, although blockchain can impact and streamline any contracting model. If you haven't listened to that episode yet, check it out at constructor.com slash IPD blockchain. In today's episode, my guest is Jordan Cram, CEO of Instoa, where Instoa is listed in Inc 5000 for six years. Instoa is a New York based systems integrator that offers a data driven evidence based approach to capital project development. Jordan and I discuss why IoT does not deliver on its promise to provide overwhelming productivity.

We talk about the future of IoT and actually an IoT device they've created. We discuss data as an asset, the notion of applying science to culture and how Instoa has rolled this out in their own company via not using organization charts, which is very interesting. Last but not least, we talk about their recent company acquisition and what they're now able to offer. I'm sure you'll enjoy this interview. Listen in.

So this morning we're speaking with Jordan Cram, CEO of Instoa, which is a New York based systems integrator that offers data driven evidence based approach to capital project development. So Jordan, welcome to the Constructor podcast. Well thank you. It's great to be here with you. So tell me a little bit about you.

Tell me about, you know, how did you get to this point of using data driven evidence based approaches to delivering projects? I mean, that's sort of a journey. What's your background? Yeah, thanks. That's always fun to reflect on where we've come from.

It helps us know where we're going. I started in construction. I was working for various GCs or CMs in the US. I was then pretty early in my career over in the Middle East working in Kuwait and just fell into a management by fact approach and mindset. It never stuck with any of my employers.

I kept resigning and at one point I just felt really bad about resigning and figured I'd go out on my own. And I would say really since that time, I've been on this pursuit of helping data drive value, helping decisions be data driven, really helping to augment the decision making process with insights that data can provide. And Stowe is my second company. So I've had two runs at it, but we're certainly on a good run now. That's how we got here.

It's funny how sometimes from a perception standpoint, things can appear like failures. And I'm sure at some point you were like, why is this industry not figuring this out? And I'm sure, I don't know, from my perspective, I know my family, if I were to just keep quitting jobs because I was unhappy, they would look at me pretty strange. So it sounds like you guys are obviously now on a great path. It sounds like your purpose.

Yeah, well, I was looking back to our 2007 business plan like a week ago. Someone asked me like, did you create a business plan? It's just shocking how close it is to where we are 11 years later. Now we've got traction. We're sitting more at the strategic table in our client relationships.

So we're able to have much greater impact than we certainly did in those early years. It has been really very much a laser focus on trying to drive value improvement, productivity in the industry. It sort of feels like we're just getting started. There's so much work to do. Oh, yeah.

Oh, yeah, definitely. So let's hop into some of the topics that we plan to talk about today. From my understanding, and Stoa has been able to build an elaborate IoT device, Internet of Things, that captures a lot of information about buildings. And you can share a little bit about that. You know, I listened to a talk of yours and it appears still that we are not using Internet of Things to its broadest capability.

I think we understand it at a high level. We all have iPhones, but we're still not understanding how tech, I would say the majority of the industry, it's growing now. But we don't understand tech and how we should be applying it to maximize the data that it's collecting. Tell us about that device and tell us about your opinion of how we're collecting data as well. We tinker around with various devices.

I mean, the great thing about IoT is it's so affordable and you can construct these devices really fast that can have a range of sensors from motion, light, sound, and temperature, so on and so forth. And so you can construct these devices and they start collecting all this ambient data. The question you bring up is, why is it not delivered on its promise of overwhelming productivity? And that's a question that for a while now we have been spending a lot of time thinking about. With the ability to attach just some sort of sensor on tools, something as simple as light levels and humidity, that can provide so much in a work area.

It can also provide, well, I'm thinking work on the construction site, but I'm also thinking a workplace once you arrive in the end users in this space. So I mean, there's a spectrum, a broad spectrum that we can really be pulling information from, but you're right. It sounds like we're just at the beginning of it. You mentioned data as an asset, as a concept. Could you share what that is and let's talk a little bit more about that?

Well, I think there's some, I don't know if it's a thing in childhood or in DNA or something, but for some people, they see data as a crucial strategic asset. And I don't mean like lip service towards it, but they turn to the right, they turn to the left. If they see any opportunity to collect data, they're all over it. If they're in some kind of management or leader position, they really hold their people to a standard of structuring data, collecting data, even if they don't have any immediate use for it.

They are relentless about collecting it, structuring it, storing it. It's that mindset is that data is a very valuable asset. I mean, think of it like gold or water and just how diligent people are to find and protect and store and not waste. To me, data is in that category. I think in 10 years, I don't know, maybe it's 20, it will just be that way.

But today it is, and especially in construction, it's just not really there. And so you don't get the weight behind the power of IoT or AI or even just plain old reports and analytics because that philosophy around the importance or the strategic nature of data is just not there. So case in point, especially in our industry, EPC or any AEC for firms themselves, it doesn't appear as if they're seeing themselves as a knowledge or data asset company. Are you seeing that or is that fictitious in my head?

No, and they're in trouble. I mean, if I stumbled across this stat from Gartner just earlier today, by 2021, AI augmentation will generate three trillion in business value and it will recover or eliminate 6.2 billion hours of worker productivity. It's just unfathomable. So in 2021, that's two and a half years from now. So imagine the amount of data that construction kicks off from equipment and positioning and tags and location information.

I don't know what percentage of the construction cost should be spent on tech, but probably in the 2%, 3%, 4% range. And right now, I bet it's in the 0.2% to 0.4% range, sometimes lower. The construction leaders are obviously not putting their money where their mouth is if they are in fact supportive of data and data collection and data generation. Well, it's an interesting thing. Research and development, the budgets that many companies have in this industry are close to nothing.

Unless say for instance, I can use this as an example, where I work MACE, we do have for research and development simply because it will be refunded by the government, subsidized, because they're based in the UK and that's only UK based research. So any company there can do that. However, most places, if they got to come out of their pockets, it's not an incentivization to go ahead and sandbox ideas. But we have tech that can maximize that data. How do you think we're being disincentivized?

I see it on a day to day basis, but why do you think that's the case? Why do you think we're disincentivized from using our data? I don't think it's anything more than just the status quo dominates and that it's just easier to be conservative and keep trying what you used to do and hope that it's going to yield a better result. I don't think it's any more complicated than that. And then along comes an individual or a set of individuals that are somehow oblivious to the risks of trying new things and they disrupt markets and change the game entirely.

Like your point on research and development is a really good example. Why not go allocate $100 million to this? Profit margins are so thin in construction. Waiting around won't change that. It's possible that it will be a technology company that, like what Uber did in the taxi industry, becomes the world's largest construction company.

It's unlikely that today's companies will be shaken up adequately and take tech and data seriously. I don't mean to be so doomsday about it, but the call to action to me is just like, it's time we all get there. That's right. So we've been taking a lot of cues from the manufacturing industry over time. Obviously on this podcast, I would say it's very much grounded in learning about lean construction and lean methodologies.

We've had the executive director of the Lean Construction Institute on the podcast. We've had one of the founders as well. However, I feel as if we're still missing some things from the manufacturing industry. It seems like we've been missing the fact that we need to have open data and essentially gain some efficiencies with supply chain and make sure that we're taking advantage of the information that we're collecting in order to improve the industry on a whole. Was it someone from Stanford that mentioned that we need to be taking advantage of that?

Oh, yeah. That was fun. I saw that quote from a professor from Stanford Business School who said that we've reached the limit of internal optimization and that future gains are going to come from the supply chain. That's the one you're talking about, right? I'll include a link to this in the show notes.

Yep, that's exactly it. Yeah. So you and I could talk about that as though it's construction and that quote was from 1999 in manufacturing. It's just so ironic. Oh my goodness.

But I mean, that's how long the innovation has been around, right? The idea of collecting the information that we have and making it broadly accessible for the industry to move forward at large and to think that we're missing that opportunity is sort of mind blowing. Yeah, it's like some just good old Jack Welch. When I think of those comparisons of productivity, GE generated $10 billion of value internally through applying improvement in Six Sigma. That's massive.

Anyone that's read Jack Welch, he made no excuses for anything. And if I'm sure people came to him and said, hey, boss Jack, there's no way we're going to be able to streamline the supply chain. It's too fragmented. The contracting structures are inhibiting the improvements that we'd like to make, so we can't do it. And I'm sure he told them, I can't hear the word can't.

And so go do it. And they went and did it. I don't really buy that manufacturing had an easier time at pulling off those supply chain improvements. And I think that it just, back to that whole comment on leaders and Jack Welch being a great example of somebody that really empowered, I guess, to your point earlier, funded his team to enable them to achieve those kind of remarkable results. Yeah, but that moves us into thinking about how we're going to approach things differently.

And you mentioned the contract structure with Jack Welch, whether you were just going through the thought process or not. I mean, it's obvious that we do have some siloed approaches and a specific mindset that's sort of stuck in the way that we've been doing things. So I've been investigating blockchain for about a year now. And there's an interesting integration here that we have with data, given that we have a lot of information that can be pulled onto an immutable ledger so that we can access that data.

I've been looking at this from all different angles, but I'm really interested in your perspective because of the data driven approach that Insto is taking. Tell me what your thoughts are on shifting the mindset, shifting the approach as it relates to incorporating blockchain and really thinking about this behavior change that we need to start taking. Yeah, I guess all these things thread together. It's IoT and devices that can generate so much valuable data and then data as an asset, a strategic asset, and then the power of blockchain.

It's incredible what that technology promises and what it's able to do. Our industry is highly fragmented. This is something everybody knows. There can be hundreds of organizations that are tethered together through contract structures. Those contracts, they're not geared towards transparency and collaboration, prime and sub and sub and sub sub.

They're all protecting each other from losses and they've got real world concerns like cash flow and safety and things like that. So we're equally passionate about blockchain. It's one of the things I love about your blog. There's always lots of rich content on it. Thanks, Jordan.

Is that the we stood back and we said, OK, how can we how can we get involved and how can we help support this technology? And we landed on the lawyers just said, let's go and find some forward thinking law firms, construction law firms who are ready to do things differently. If they're not involved, then they could very easily resist the movement. So it made a lot of sense to partner with them and together design contracts and contract structures that can support what those immutable ledgers can do.

So you mentioned the subcontractors and the sub of the sub of the sub. It brings to mind when I've spoken with Construction Industry Institute, Stephen Mova about flattening the supply chain and the OS 2.0 operating system 2.0. Are you familiar with that methodology? Yeah, pretty familiar. I'm going to explain it here for you because Jordan was fortunately right in lockstep with me in this part of the interview.

OS 2.0 is a multi industry spanning collaborative research supported effort that aims to redesign industry procedures and standards with current technological advances in mind. The goal of OS 2.0 is to create a standardized technology enabled platform that accommodates future change and makes capital projects more financially viable and sustainable. Both Kurt and CI are working on OS 2.0. You can find out more about OS 2.0 in my interview with Stephen Mova found at constructor.com slash EP 42. Do you think that that would support this approach to implementing blockchain as well?

I think it's on its own. It's not comprehensive enough, but it is what Stephen Mova and CI are doing are absolutely like pushing in the right direction. We need everybody actually pushing in in that direction of transparency out with the old. Let's redesign the new way that this industry is going to work. How are we going to reorient our contracts from protecting to value generating?

I think it's a critical message and an important one. Tell me a little bit more about what Insta is doing, working with the lawyers, really creating that structure to change the contracts. Obviously you're on board with flattening the supply chain and being more collaborative and developing more transparency and trust in the industry. What would that look like? Could you give us an example of what the thought process is?

We work with mostly the owner operator side. We've got a growing EPC service line that's mostly centered in China, but a lot of our work is in the owner operator space. I'll just use that as an example. They're at the very top of that supply chain. If you look inside one of their organizations, you'll see actually three teams doing the same thing, but none talking to one another.

You usually have a group that is developing policies and procedures. You're going to do this and this procedure has these steps and so forth. You have a separate group that is in procurement and is drafting and creating contracts. You may then have a third group that is creating technology and workflow systems. Just in that environment, in Stowa Works, we created an integrated practice about two years ago where we brought in the management consulting aspect and have been working very hard at least to align the procedures, the policies with the tech and automation.

The contracts and the legal side are still sitting out on its own. Our belief is we have to get the owner operators aligned internally and then that alignment has to occur within each company, which is an inward thing that needs to happen. We then also need to rework those relationships between organizations. There's so much that actually has to happen. Does that make sense?

It absolutely does to me because I've been thinking about it from this perspective as well. That's really crucial though to break it down that way. It's bridging the gaps, if you will, and making sure they're all dealing with the same relevant info, internal to their companies and then coming back out to construction. Yeah. I mean, the silos inside of organizations can be fierce, tribal.

So we can't just look outward, talk about the supply chain. Really everyone should. They should get their own house in order, which means that they're running on modern principles of transparency and collaboration internally. The cost and the schedule and the safety and the financial teams are all openly collaborating and sharing. That has to happen.

There's going to be some tipping point. You have to reach some critical mass where enough companies have internally achieved that degree of transparency and collaboration that end up working on the same project and then they enable a new contractual structure up and down the supply chain. So everything aligning perfectly for a moment. Yes, at one moment in time, but consistently. Well, tell me a little bit about what Insto is doing to do that internally.

You mentioned the owner operator companies are needing to transition, right? Each company is on its own journey to understand how they're going to be working more optimally for the business that they do, whether it's pharmaceutical or whatever it is that they deliver retail. Curious as to what you guys are doing internally to be more transparent within your company. It'd be interesting to hear from a company who's recommending this, holding that management consulting role for others. Do we eat our own dog food?

That's right. That's right. I mean, you know, it's certainly better to ask people on the team compared to me, but we're just about to cross the 100 person threshold. We probably will in the next week or so. So it's pretty exciting time for us.

That's a major milestone. And if we look at Insto's internal structure, I've never published an org chart. There were attempts and I always shut them down. We run on a organizational model that would most resemble a holacracy. I don't know if you're familiar with that, but it's...

I am actually. But go ahead and explain for the audience as well. Yeah, it's based on self-organizing principles. In our case, we have squads. I think there are 17 squads at Instoa.

Each has a squad lead. How those teams organize internally is completely up to them. People can opt out and say, hey, I want to be on that squad. It's up to them to communicate that through. So there's a high degree of autonomy and self-organization.

Across squads, we actually do apply quite a bit of communication rigor. So it's a nice blend of efficiency and rigor with allowing for decision making and creativity and autonomy. We pivoted to that model 18 months ago. We were in a matrix structure and it was broken. We were in a tough spot from the perspective of performance and morale.

We were probably about 45 or 50 people at that time. I'm just so excited to see it continue to flex and grow at 100 people. Essentially a collection of startups is what it is. Yes. That's so fascinating actually.

I'm coming across this Holacracy model simply just because I'm investigating blockchain and more and more companies are working to adopt this model. It's really great to hear that, yeah, you are eating your own dog food and it's working. Companies can run into challenges with this model as well, but it's interesting to hear about the rigor and sort of the self-driven approach. What enabled us to do that was applying science to culture and we all became such believers in it that we decided to take that IP and do something special with it.

It was all driven off of research from a Columbia Business School professor and so we're making a big move in this space. I'm so passionate about it. I think it's so important for organizations to offer the opportunity for people to have impact to be fluid in their work. We found that by applying science to culture and values, you can enable it on a mass scale. That's really exciting.

I know you can't talk about what the moves are moving forward, but I am curious as to the acquisition that you guys made with Design Tech that was able to provide a little bit more as far as the services that you provide to clients. Could you share a little bit about that? Yeah, sure. The Design Tech team, what an amazing group of people and what a story that the founders, Mark and David, started this business in London focusing on computational BIM. They looked and felt like in STOA 2012, they brought to the table expertise in Revit, in applying machine learning and AI to those data sets and augmented where we were historically around finances, cost, schedule related to capital projects.

For us, what we say is we needed the three legs of the stool, cost, scope, schedule. We had cost and schedule and Design Tech brought scope. Got it. It sounds as if as far as generating a profile scenario can happen a whole lot more quickly simply because that scope leg, if you will, is something that you can almost iterate faster. Is my understanding correct?

There's lots of applications for it for sure, like in the master planning phase, all the way through to asset management. Then there's the core BIM use case in design and construction. We've got some really exciting things on the bookends of that around master planning where the high level strategic decision makers are able to see complex scenarios in seconds. They would be able to generate tens or even hundreds of them and then use smart algorithms to pick the right portfolio projects and visualize them along the way.

Not just like decision on spreadsheet, it's like visual, 3D, interactive, and then all the way through to the handover of the assets, properly supporting the FM. Tell me what your next steps are with Instoa. Whatever you can share. I'm really excited about what you guys are doing and I just want people to understand what they should be looking to you guys, either for thought leadership or for potential services in the future. Could you share a little bit about that?

Sure. Yeah. You mean like the plug on what we do and what we're going to do? Yeah. I'm asking for the small pitch.

We started our business in 2007 doing Oracle Unifier configurations and we've just done so many of those worldwide. We still continue to do it. We're the leader in that space. Now as Oracle's continued to acquire products, we've grown with them. We've got that core application configuration process automation skill.

As I mentioned a few years ago, we teamed up with a really bright gentleman, Mike Matthews, who was coming out of PWC and we stood up our management consulting practice that allowed us to really engage in organizational design and business process design efforts that should ideally precede the technology related work. We are, as I just alluded to earlier, making a very strong move into the culture space with a proven means to engineer culture around the strategic needs of the organization. All of that stuff wrapped together, we're really working very hard.

I personally have been working very hard on helping leaders articulate the digital transformation visions for their organization. We have to get that right. We've put some really bright brains on the problem of helping a group of leaders craft the digital transformation vision for their own organization. Where are we going to digitize and how? And then broadly communicate that message with organizational change management so that the benefits are realized.

At this stage, we really are able to take an organization from innovation workshop through visioning all the way through, handing the keys over to them at the end of the process. Yes. Cool. So thank you for sharing about that. I got to thank you.

Before I ask you how can people learn more about Instola and about you, I just want to thank you for taking the time out, wanting to share on the podcast about your perspective the industry, data on a whole and how we can think about the changes that we're making to maximize data use and shift our behaviors as well. This has really been fun. Yeah. I'm just stoked to be here. I know you and I have been trying to do this for a month or two.

I'm so glad it worked out. Yeah. So please tell us, what's the best way to learn more about Instola and get in touch with you? I think LinkedIn is just so good. It's so good.

Follow us on LinkedIn, connect to all of us. We're actually incredibly transparent. We just see this as everybody's job to move this industry forward. So just get connected with us there. Of course, you can visit our website at instola.com.

I guess if you're in China, find us on WeChat. And of course, we're there on Twitter. So try to be everywhere. I'll make sure I put those links in the show notes for everyone. Thanks again, Jordan.

This has been really fun. Appreciate it. Great to be here. Thanks. If you liked this episode, find out more in the show notes at constructor.com slash Jordan Cram.

If you learned something valuable in this episode, share it with your friends and colleagues. You can also let me know you enjoyed our discussion by connecting with me on Twitter at Brittany or find me on LinkedIn. You can also email me at Brittany at constructor.com. That's Brittany at constructor.com. Next week, we will be speaking with Simon Ennuiah, chairman, CEO and founder of Building Block REIT, a blockchain backed real estate investment trust.

Building Block formed in 2018 by a group of real estate and blockchain technology professionals. And it is the first REIT in the US to combine the tax advantages of investing in a REIT with blockchain technology. Building Block is reimagining REIT investing and opening up this sought after alternative investment category to everyday investors. I'm looking forward to sharing this interview with you next week. Don't forget, if you haven't subscribed to the podcast, do so at your favorite podcast player.

I look forward to continuing the journey with you next week.