Building the present, creating the future
It is BAM’s mission to build sustainable environments that enhance people’s lives by enabling the right people to capitalise on state-of-the-art knowledge, resources and digital technologies, providing solutions across the total construction life cycle for the Group’s clients and clients and generating maximum value for its stakeholders.
When launching its 2016-2020 strategic programme ‘Building the present, creating the future’, the Group defined its vision for 2020: By 2020 BAM will be recognised as one of Europe’s leading sustainable and innovative construction businesses, with healthy profits and a strong balance sheet, active across the total construction life cycle in European home markets and in selected growing economies worldwide.
BAM’s vision and unique culture are underpinned by four values which are guiding for the people of BAM. These values are predictable performance, scalable learning, proactive ownership and open collaboration.
To realise the strategy ‘Building the present, creating the future’, BAM will position itself as leader in the digitalisation of the industry.
Three external forces are shaping prospects for the construction industry. Firstly, economic growth is still vulnerable and will have a low to modest impact on construction volumes. Secondly, sustainability and mega trends such as urbanisation and energy efficiency are creating areas of higher growth.
Thirdly, digitalisation is increasingly transforming the construction industry and the built environment. Against this background, the main focus of the strategy for 2016-2020 is to continue to improve profitability and capital efficiency. The strategy has three pillars: to focus the project portfolio, to shape the business portfolio and to create the future portfolio. These are supported by a strong foundation consisting of two layers: culture and capabilities.
Focus project portfolio – Doing Things Better
BAM is focusing its project portfolio (‘Doing Things Better’) and continuously makes a rigorous analysis of the existing project portfolio. In order to win projects, the main drivers of performance improvement are either scale (‘cost leadership’) or differentiation through specialisation (‘knowledge partnership’).
In market segments characterised by price-led competition, BAM can achieve cost leadership through project bundling and/or industrialisation. For projects where requirements are more demanding, BAM will use its knowledge leadership, innovation and quality assurance as key differentiating factors. This focus will also lead to better planning and management of the fixed cost base.
Examples of project focus areas include energy-neutral home refurbishment, stadiums and tunnel-based infrastructure. In its Property sector, BAM will focus on equity-light developments in main urban areas and further integration of activities with construction to unlock synergies. PPP will continue to target contracts in home markets where payments are based on availability.
In 2016 BAM strengthened its processes to enable data-driven choices in order to focus its efforts on selecting the projects where it has the best chances to win and generate value for all stakeholders. BAM’s choices are aimed at generating the targeted margins whereby it focuses less on revenue growth.
Initiatives that started or accelerated in 2016 to support ‘Doing Things Better’ include the strengthening of the tendering stage gate processes, peer reviews, operational audits and working capital management.
The data BAM collects in its improved tendering process allows the Group to select projects where it can leverage its scale and abilities to differentiate with knowledge. The stage gate process includes peer reviews conducted by experienced colleagues to drive the exchange of know how between operating companies within the Group.
In 2016 all operating companies have aligned their strategic agendas to focus their project portfolio on the principles of scale and differentiation. This has resulted in focus on more specific product-market combinations to generate value for clients and other stakeholders. In market areas where BAM cannot differentiate itself, decisions to exit were made. The aligned 2020 strategic agendas were the basis on which the operating companies set their 2017 operating plans and priorities.
Shaping business portfolio – Doing Better Things
BAM is shaping the business portfolio (‘Doing Better Things’) by supporting the operating companies in developing new propositions in the home markets as extensions of projects along the lifecycle, and leveraging specialisms in international markets. These initiatives will be driven by investments in people and systems and developing partnerships. At the same time, BAM will continue to de-emphasise or exit from operational activities which do not offer sufficient opportunities to use scale or differentiation as critical success factors. BAM will continue to reduce its portfolio of Property assets.
Examples of businesses that were exited in 2016 since they did not offer sufficient opportunities to use scale or differentiation include the divestments of Heilijgers, Balteau i.e., Nelis de Ruijter, Nootenboom Sports and Mostert de Winter. Moreover the Group is exploring opportunities to strengthen its position in supporting clients along the project lifecycle in facilities management and mechanical and electrical services. More details about BAM’s divestments can be found in chapter 4.1 Financial performance.
Create future portfolio – Doing New Things
BAM is creating the future portfolio (‘Doing New Things’) by delivering construction services using a digital construction platform. BAM intends to be at the forefront of digitalisation by using cutting edge design and visualisation tools and keeping close to clients' evolving requirements. BAM will facilitate this transition by investing in innovation to create an attractive environment for partnerships and rapid prototyping to shorten time to market.
By creating this future portfolio BAM aims to:
- Create an advantage relative to competitors on the basis of innovation, returning superior financial returns to its shareholders;
- Improve product and project quality for its clients;
- Improve attraction, development and retention of talent for its employees;
- Contribute to innovation at its suppliers and subcontractors;
- Build a sustainable environment for society in general.
To become the leader in digital construction, BAM structures its innovation with a clear focus on tangible results. Moreover BAM creates a lively ecosystem to co-create innovative solutions.
BAM separates innovation into two streams: business (or ‘incremental’) innovation and transformational innovation. In 2016 existing innovation initiatives within the Group were organised and structured along these streams.
For business innovation BAM has identified more than two hundred innovation initiatives within the Group and clustered these in four categories:
- Digital construction;
- Physical construction;
- Future trends;
- Process innovation.
Existing initiatives were grouped together and are now being managed through an innovation funnel process that is based on the Lean Startup methodology. As a result of this structured process, BAM’s innovation strategy has a clear direction and innovations can be accelerated whilst making use of the strength of the Group.
For its transformational innovation the Group set up a startup company in September 2016 that is currently developing a digital construction platform. BAM’s focus on digitalisation includes both the digital construction process (BIM, 3D printing, augmented and virtual reality) and the digitally built environment (smart devices, sensoring, smart communities).
In 2016 BAM engaged in multiple partnerships, including startup platforms, to grow its innovation ecosystem and to improve its visibility as an innovative construction company.
The innovation strategy is executed by a newly implemented innovation organisation that is coordinated and managed centrally with strong involvement of passionate innovators from all operating companies within the Group.
The joint initiatives that emerged in 2016 in the field of business innovation have accelerated the spirit of open collaboration within the Group. Business innovators in the area of BIM (building information modelling) joined forces to accelerate their countries’ initiatives. Using an innovation structure that is based on the Lean Startup approach, innovation teams have applied the principle of scalable learning on a big scale.
BAM’s differentiating capabilities and operating model are being sharpened, with a focus on employee training and development. The operating companies are improving their systems, knowledge and expertise for data-driven project selection, tendering and execution. At the same time, Group synergies are being leveraged in areas such as business controls, information management, digital construction, strategic sourcing and partnerships, enhancing local entrepreneurship to serve clients. The Group analysed all key processes and delivered a blueprint target-operating model around strategic enablers. A start has been made with aligning core processes in accordance with these enablers.
Selected operating companies strengthened their collaboration in the area of specialised products to optimise the offering for BAM’s clients. Examples of products with strong international cooperation are tunnels, hospitals and PPP projects.
To support BAM companies in making rigorous data-driven project selection all Group-wide project data are captured in a joint database that all operating companies are able to make use of.
BAM’s unique culture
The Group’s culture will be strengthened further by scalable learning from tenders and projects, more predictable performance, working together in open collaboration and taking ownership of challenges and opportunities. BAM’s people are fundamental to its success, so project and business career will be aligned and a stronger culture will be promoted to make the Group more attractive as an employer and partner of choice. BAM’s aim is to continuously improve health and safety and to promote a net positive approach on the environment so it can deliver more value for clients.
Within the focus of ‘Doing Things Better’ BAM has started a project in 2016 with all operating companies to encourage collaboration and learning between project managers across the Group. Through this internal network the use of experiences and best practices will be stimulated.
In 2016 BAM’s safety strategy was aligned with the Group's corporate strategy to support the 2020 safety ambition. The BAM 2020 safety ambition is ‘zero accidents’ and being recognised as a safety leader in the European construction industry.
In line with BAM’s corporate strategy 2016-2020 ‘Building the present, creating the future’, sustainability is used as the overarching term to include the broader focus on sustainable innovation, being solutions driven (to exceed client expectations) and benefits derived from its use of digital construction. CSR is an important aspect of BAM’s sustainability journey. CSR best describes the impact BAM will have as a business on the environment and its social responsibility towards both
internal and external stakeholders.
Acknowledging BAM's ‘CSR’ maturity, as recognised through its increased CDP rankings (see chapter 4.3 Environmental performance) and as a leader in environmental compliance, BAM recognises growing market and legislative drivers to be more solutions driven, innovative and collaborative. The renewed sustainability focus also encapsulates the social value it generates through the design, construction and operation of its developments. This has been developed using insights from multiple stakeholders from within the Group, taking a view on the type of organisation BAM aspires to be in the longer term (up to 2050).
During 2016, BAM’s Management Board agreed to the sustainability strategy, consisting of three key themes (Climate Positive, Resource Positive and Enhancing Lives), together with a set of KPI’s to form part of the strategic agenda 2016-2020.
The intention is to develop the strategy as an integral part of BAM’s culture and for work in the current strategic agenda to pave the way for longer term benefits beyond 2020.
Sustainable Development Goals
In order to improve its strategy and relevance with global issues, BAM appreciates the impact of aligning its sustainability strategy with the UN adopted Sustainable Development Goals (SDGs); seventeen goals which serve as a roadmap for good growth by 2030.
BAM has received input from external consultants on its alignment with the SDGs (based on its 2015 Integrated Report). Building on this work, BAM evaluated the key areas of alignment of the goals with the relevant stakeholder material themes process (see graph 3) to highlight opportunities to measure impact going forward.
BAM’s business potentially has an impact on all of the SDGs; however, some have more direct influence within current markets and given the nature of its business. BAM has subsequently considered these global issues in relation to its 2020 sustainability strategy and has identified key focus areas where progress will be monitored going forward. BAM therefore strives to positively contribute to six SDGs in particular, since these align best to its strategy.
BAM’s vision is translated in specific goals for Profit, Planet and People. BAM’s targets for 2020 are to have a Return On Capital Employed (ROCE) that exceeds 10 per cent, raise the adjusted pre-tax margin to between 2 and 4 per cent, reduce the property portfolio to under €500 million and reduce trade working capital below -10 per cent, to have a net positive impact on the planet and to have an Incident Frequency below 3.5.
BAM started a strategy implementation programme in 2016 to manage the implementation of the strategy. In this programme, the five building blocks (focus the project portfolio, shape the business portfolio, create the future portfolio, differentiating capabilities and BAM’s unique culture) of the strategy ‘Building the present, creating the future’ each have their own work streams that drive the strategy implementation.