Developing Infrastructure for Evolvability: Integrating Modularity and Safeguards In Design Nuno Gil Manchester Business School (on sabbatical) Global Research Awardee (Royal Academy of Engineering) CRGP, Stanford University (visiting scholar) © Nuno Gil MBS 2006 © Nuno Gil, Manchester Business School NUS, 2009

19th century, River Thames was practically an open sewer After The Great Stink (cholera epidemic) of 1858, Parliament decided to create modern sewerage system Joseph Bazalgette, civil engineer, designed system that diverted waste to Thames Estuary, totalling almost 160 km underground sewers fed by 720 km of main sewers 20th century, major improvements made to system Victorian sewerage system, London

Bridge over River Tagus, Lisbon Built between 1962 and 1964 Suspension bridge, double deck, 2277m In 1999, $1.4m project to install secondary suspension cables, widen roadway; install dual track railroad

Infrastructure meets Business Infrastructure Gap is Massive –population growth, migration towards cities, deteriorated infrastructure, globalization of supply chains Governments worldwide recourse to private-sector capital due to constrained budgets and ideology –sale of state-owned infrastructure companies –private finance initiatives –infrastructure increasingly attractive to pension funds, private investors, family houses

Infrastructure Design for Evolvability Acknowledge tension between profit-seeker and public interest –Affordability/caps on user fees limit capital investment –Long delivery times + operational longevity => uncertainty –Bias towards capital cost instead of life-cycle costs Evolvable design: design infrastructure to last, i.e., capable to accommodate economically change over time while limiting capital investment upfront

…from so simple a beginning endless forms most beautiful and most wonderful have been, and are being, evolved.

Evolvability Darwin’s theories in evolution and variability Evolvability: an organism’s capacity to generate variation (Kirschner and Gerhart 98) –Weak linkage, minimal dependencies among processes –Exploratory mechanisms, processes that can tolerate change –Surviving lineages diversified by maintaining core of conserved sequences and functions (vital processes) and modifying others

Product/System Design Modularity Modularity: generate design architectures that can flex to change (Ulrich 95, Baldwin and Clark 00) architecture, decouples functional modules standard rules, govern interfaces tests, verify modules will work together but modularity does not come for free (Ethiraj and Levinthal 04 ) and can come with penalty in performance (Fixson and Park 08)

Options Thinking modularity builds options in design (Baldwin and Clark 97) option, the right but not the obligation to choose course of action (Merton 73) –design with built-in options is more tolerant of uncertainty –high potential value is conditional on success/ limited loss conditional on failure –option purpose: stage delivery; switch use; grow capacity –options ‘on’ projects AND options ‘in’ projects (Wang and de Neufville 2005)

Research Site: £4.2bn T5 Development Heathrow airport, project promoter BAA plc. Conceptualization Mid 90s Start construction Dec 01 Open phase 1 Mar 08 Open phase

Analysis Two major determinants of decision to build options –Perceived likelihood that option may be exercised high likelihood increases attractiveness of upfront investment long-range timeframes to exercise option put off –Degree to which design is/can be modularised how much does it cost to build option? how much does it cost to exercise option? how much would it cost otherwise ? standard designs increase chances ‘to get it right’

Functional Modules Available ex-ante Functional modules with standardised designs tend to be available when group of qualified suppliers is limited (modular clusters) (Baldwin and Clark 97)

Modularize architectures Physically decouple functional elements: –Physically decouple concourse space across 3 buildings: allows to stage delivery (stage option) –Physically decouple roof and façade from interior floor plate superstructure: allows to delay interior design (delay option)

Build safeguards in designs Safeguard: provisions needed to embed option in integral design (or enhance option built in modular design) –Passive safeguarding: mostly design provisions (secure space) –Active safeguarding: build in physical provisions (additional tunnel)

Mapping of Built-in Options Likelihood of Option Exercising Low High

Attractiveness of Safeguarding

Design Decision Tree (Gil 07)

What’s next? Process of design for evolvability Infrastructure design for ‘future-proofing’ Building option fees in public procurement contracts