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Analysis_

Focus on the sweet spot for project success

Assessing the true value of a major project

The John Grill Centre's Chief Executive Officer Marc Vogts discusses value creation through major project leadership.

The fate of a major project is usually assessed in terms of how it fared in achieving time, cost and scope parameters. The true value though is far more difficult to assess and should reflect how the owner reached its strategic aims, and whether the customers it services and the community it impacts experienced positive change from the project.

In my career working globally leading large-scale projects with BHP Billiton and Rio Tinto in Southern Africa, Australia, Canada, Chile, Indonesia, Madagascar, Papua New Guinea and USA it has been clear that the decisions made at the front end of the project can have a major impact on how the project will proceed and the final value it will realise.

In those early stages before delivery commences and the project is handed over to the project team a range of crucial decisions are made which will impact how much value can be extracted from the project.

It is during this concept “sweet spot” stage that a successful project leader should be engaged with their executive team to share their insights to help realise the best opportunities for people, commercial and technical innovation in the project.
By examining how value is eroded from major projects – whether they may be capital intensive infrastructure or IT business transformation related projects – the opportunities to create value can be optimised and project failure minimised.

Graph on value loss

Great gains in concept stage

Concept stage is where the greatest gains in creating value can be made. Unfortunately this is generally when ill-conceived options are rife, executives are accelerating options to meet share-holder demands or subdue competitor pressure. This is a time of rampart optimism where there is usually no or limited data to substantiate estimate or assumptions.

You need to right culture and discipline

This is the time to stop and take stock, to allow your team to engage in divergent thinking – some organisations do this well, their culture allows for you to engage with a broad group of people at executive level and throughout the organisation. In the resources sector they have the discipline to analysis every factor of the project with their business development teams - to dissect the options available and the potential external challenges to unhinge plans - but they may not always have the diversity of people on the team to test whether their internal structure or lessons of the past have been heeded. Bias hinders individuals’ judgement and can obstruct new options being realised.

Toll roads are continually over optimistic in terms of traffic and revenues streams and inflate their value. The Legacy tunnel in Queensland has followed this trend – was their optimism driven by lack of data or that was the business case exposed and funded too early to the project before conceptually it was tested? If the team considered more than one option in the early stages it may have taken a different path.

Consider the “without case”

Concept stage is not the time to choose one option to progress to pre-feasibility. It is important to have a few options which allow you to take on the best case scenario through to the “without case”. The “without case” is imperative to include in your options. Many executives discount the “without case” as being out of scope or it does not have enough gravitas to let the board and stakeholders know you mean business. The “without case” is not usually the glamorous option but has long term merit that could offer a solution which requires very little upfront costs and could deliver a much quicker return. If the NBN had considered a “without case” maybe the inevitable pace of new technologies would have transpired as the best result.

Have the right people around the table

Yes you want people around the table who can weigh in on the extensiveness of the capital outlay, the risk profile, market conditions but you also need those who understands how the business is operating how its customers are currently evolving and the blunders they have dealt with to date.

Conversely you do not want people around the table who are risk adverse – who will not push past a “fatal flaw”. It is in the “fatal flaws” that some of the most innovative solutions will arise.

For the project leader it is important to make sure you have a seat at that table whilst these concepts are being tested. This is the time to focus on building a business not executing a project – so if the project doesn’t stack up for whatever reason it is time to voice your concerns and back it with data or past lessons. It is during this “sweet spot” that the real gains can be made and the right project is chosen for long lasting success.