(ID:145) dynamic incentive model...parties buy share in the project

Innovative collaboration models

AddressWibautstraat 129-6, 1091GL, Amsterdam, Netherlands
ContactCecile van Oppen, vanoppen@copper8.com
Line of industryConsulting and Design services; Other, Collaboration implementation
Area of expertiseSustainability, Collaboration, Process management
Size1-10 employees

Role of company/organisation

The core of Copper8’s stance concerning the built environment is that technically (almost) everything is possible; the key within the case at hand lies in maximizing the innovative potential in relation to Eindhoven’s goals. Unlocking the innovative capacity of the (often technical) parties must be done in a way that is mutually beneficial – only then is collaboration possible. In our opinion and experience, changing the (traditional) rules and ways of working are imperative for the systemic change that is anticipated. We see our added value within this project in accelerating the collaboration between the different parties and disciplines, and binding them towards the (common) goal(s). We will create a financially-driven incentive model that engages all contracted parties (large and small) towards the (common) goal(s).

Opportunities for collaboration

The nature of your question (re. long term scope) requires collaboration across disciplines: in recognizable terms the design, build, (finance, ) and maintenance of Eindhoven’s municipal buildings. Yet, your question reaches further to include both established corporations and smaller-scale idea owners. Bringing these diverse blood-types together requires collaboration models that balance all interests and needs in order for innovation to truly flourish and the common goal(s) to be attained. Copper8’s role is focused on making collaboration work, and activating the collective to achieve the common goal(s). This starts with the careful selection (tendering) of parties (ideally, consortia to stay away from “arranged marriages”) that contribute to achieving the common goal(s). Essential is that all parties have a clear (financial) incentive to contribute towards the common goal(s).

Description of idea

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Copper8 is focused on realizing sustainable breakthroughs and facilitating cross-boundary collaboration. In order to do so we try to peel the question down to its’ functional core – what, in the essence, is the question at hand? Intrinsic motivation is the guiding principle upon which partnerships can be formed. Ambitions are needed. In our approach we strive for the goals of the principal (Eindhoven) to also become the goals of the contracting parties. Considering the potential scale and complexity of the question at hand it is important to bring organizations and individuals together in a way that is mutually beneficial. In order to build-in the “softer” key values such as “trust”, “collaboration” and “transparency” and connect these to the “harder” performance indicators (the common goal) – we propose to implement a tailor-made “Dynamic Incentive Model” (DIM). In this model every party (regardless of scope or scale) in effect buys a share in the project which corresponds to its’ financial share of the total project. The value of the shares can increase or decrease depending on the success of the collaboration (the argument being that good collaboration leads to lower transaction and process costs). The value of the shares can be remitted when the common goal have been reached. The DIM creates an incentive for all parties to work towards the same common goal and place their own interests or goals secondary to the common goal. In the figure added in question 9, the DIM is incorporated in the process map. DIM is considering Process (P), Technical (T) and Financial (F) aspects. The model divides the profitability of the project according to the achievements on the KPI’s, the partners have agreed upon. In her activities, Copper8 can assist in achieving a number of the sustainability ambitions of the municipality Eindhoven: Eindhoven as sustainable city and Eindhoven energy neutral city: we can ensure a significant contribution towards achieving the sustainability goals of Eindhoven. As the call for proposals clearly embraces the systems approach, the call for process innovation should not be underestimated. Only when disciplines are able to truly work together towards achieving ambitious goals such as energy-neutrality, can innovation be achieved within the allocated budgets. The goals should be ambitious to motivate the different parties at stake. Supporting governance in transition: Copper8 believes in the notion of “demonstration, imitation, implementation” – it is our goal to embed the new ways of working (tendering and collaboration models) within the involved departments of the municipality. By doing so we hope to create a learning curve and enable and equip the municipality to make the transition to a facilitative government. Making innovation visible: innovation can only be visible when the project has an iconic status. This status can only be achieved when new innovations have been applied. As Joseph Schumpeter stated, innovation is often found on the interface of disciplines. It is this interface that we strive to achieve in our collaboration approach, in order to fully tap the potential of the parties involved.

Illustrating file20140123 Copper8 DIM.pdf
Type of ideaservice
Category of ideawork flow; financial
Enabling conditionsA principal who is truly open for the solutions that are offered as long as they measurably contribute to the achievement of the goals. Clear role division on part of the principal (asking functional questions) and contracting parties (offering ambitious and integral solutions) Open mindset on part of all departments that will in any way be involved with the design, realization or operationalization of the plans. The open mindset of all of the contracting parties – ideally this will be one of the selection criteria in the tender. It is to be avoided that any hierarchy based upon power instead of knowledge takes form. Full transparency (financial, interests at hand) is needed on part of all parties in order for the DIM to work.

Stage of development

Proven innovation: it has been used in practice on a small scale.

Substantiation stage of development

The tendering process that usually precedes the initiation of the Dynamic Incentive Model (DIM) was first used in 2009 in the tendering process for the demolition and realization of approximately 450 houses in Amsterdam-West. The tendering process has since been successfully repeated in several different environments (housing, utilities, leisure, healthcare). In 100% of the instances, the winning consortia offer higher quality than expected, and achieve so within budget. This way of tendering has led to multiple technical innovations The tendering process has since gained much attention on a national scale, leading to several publications. The DIM has proven to be very successful: the implementation of this model has secured long-term collaboration in a large-scale housing project and has been operational since 2009.

Provability contribution to sustainability

Proven contribution to sustainability; this has been shown in practice.

Step in the right direction

The 2009 project in Amsterdam-West is currently being realized. The first 100 apartments have been delivered and the second round is currently under construction. The ambition set within the housing project was to achieve climate-neutral housing within traditional budget (usually climate neutrality would add 15% to the budget). Due to effective collaboration which was sealed by the DIM, the parties are realizing the climate neutral houses within the budget. In addition to the climate neutrality, other performance indicators within this project included the reuse of the demolished homes into the new project. All the “new” materials used for the project are also responsibly sourced. The continued flourishing relationship between the parties proves the success of the DIM.

Flexible idea

Copper8 has proven to be able to introduce un-orthodox ideas to optimize the ecological footprint of all projects she has been working on. Even prior to the current popularity of “circular economy” projects, Copper8 was already focused on achieving integral sustainability performance in all her projects – as shown by the reuse of materials in the housing project initiated in 2009, and again in the tender (and ensuing realization of the project) run for a large scale utility firm in 2011. It is Copper8’s ambition to stimulate integral sustainability solutions (triple P) that look at long-term effects on the environment. Copper8 has a proven track-record both within the building industry and in other manufacturing related industries.

Good investment

Ever since introducing the DIM in 2009, our advisory costs have been less than 0.25% of the total budget when it concerns projects within the built environment. This 0.25% is an investment that has significant returns for all parties involved, as most projects generally cope with 10-15% costs of failure in addition to the budget. Moreover, Copper8 believes that the consulting business model must change. It is not input that should be valued, but output. Copper8 continually strives to seek innovative business models with her clients to achieve a mutually beneficial agreement on what value Copper8 has added to the project.


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