COVID-19: Another Tectonic Shift in the Business Operation Models

Disruptions to business operations are seldom as abrupt as COVID-19 and other comparable tectonic shifts such as World War II, the Oil Embargo, and September 11. While modularization and the industrialization of the construction industry has been occurring for over two decades, the sudden arrival of COVID-19 will catapult the industry forward in ways we haven’t seen before.

As a follow-up to our article series on modularization earlier this year,1 this article will make the connection to the imminent need for modularization as the primary means of business recovery from a disaster such as the COVID-19 pandemic. Building on the three articles2 and introductory sidebar written for “The Operational Model for Modular Construction” in the May/June 2020 issue, this article will expand on how modularization and the industrialization of the construction industry can manage and mitigate the risks in response to COVID-19.

Mitigating the COVID-19 Risk

The construction industry has one of the highest exposures to daily risk, and mitigating those risks related to COVID-19 isn’t drastically different than the impact of hurricanes, local flooding, or a weather-related schedule change. The primary difference is its broader impact at the international level, like the tectonic shifts or comparable disruptions previously mentioned.

Mitigation of risk in any event at the job, local, regional, national, or international level has three layers of cadence, which needs to be planned for and managed:

  1. Business Risk – the probability of a difference between the expected and actual financial outcomes of a project.
  2. Technical Risk – the probability of a physical failure of the built environment to function according to customer requirements or structural requirements.
  3. Integration Risk – the probability of failure at the interface of resources required to complete the project, including manpower, material, money, and information.

While business and technical risks are more widely understood, integration risk is often the most mismanaged. At the onset of the COVID-19 disruption, the companies with an integration risk policy suffered the least, and those that did not have controlled integration risk management in place experienced higher losses. E-mails were sent from executives throughout the company about what to do and what not to do, and everything was an instinctive reaction to the event without considering the short- and long-term effects and consequences

The role that the CFO will play is very critical in terms of managing the cost, having access to cash, and meeting governmental response requirements.

Immediate Response & Risk Identification

Good management is a mix of instincts and data; however, in the face of an unexpected emergency, cooler heads prevail. For instance, Navy training teaches sailors to avoid the instinctive reaction of jumping in to save someone who falls or jumps overboard. The training builds a new muscle for “response in time of crisis,” by directing sailors to turn the ship toward the person overboard to protect them from the propeller as the first preventable risk. Next is to throw a life raft and attempt a rescue from aboard.

While jumping in may seem like a natural way to take action and help, leaders must think first and sometimes act in unconventional ways to save people. Immediate response requires:

  • Clear thinking
  • Separating signal from noise
  • Decision-making
  • Consistent and frequent communication
  • Measurement and risk evaluation

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About the Authors

Dr. Heather Moore

Dr. Heather Moore is the Vice President of Operations of MCA, Inc. in Grand Blanc, MI. Her focus is on measuring and improving productivity. A previous author for CFMA Building Profits, she holds an Industrial Engineering degree from the University of Michigan and a PhD in Construction Management from Michigan State University.

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Dr. Perry Daneshgari

Dr. Perry Daneshgari is President and CEO of MCA, Inc. in Grand Blanc, MI. MCA focuses on implementing process and product development, waste reduction, and productivity improvement of labor, project management, estimating, and accounting.

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