© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Project Value Delivery

Large, Complex Projects: a different ball-game

Jeremie Averous September 2012

Project Value Delivery

W e E m p o w e r O r g a n i z a t i o n s T o b e R e l i a b l y S u c c e s s f u l i n

E x e c u t i n g L a r g e , C o m p l e x P r o j e c t s Discover more on

w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Project Soft Power Unleashing Value

from Your Large, Complex

Projects

Project Health Check

Project Coaching

Organizational maturity

Team effectiveness Intercultural leadership

Advanced project training Project Startup support

Project Recovery

Advanced risk management

Project Control and Reporting

Support systems integration

Convergence planning

Remote sites integration

Leadership development

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 3

Specifics of Large, Complex Projects

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 4

Specifics of Large, Complex Projects

• What is the difference between day-trekking and climbing Mt Everest?

ORGANIZATION / TEAM

SYSTEMS / EQUIPMENT

PROCESS

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 5

Specifics of Large, Complex Projects

Running a Successful Large, Complex Projects Company is

fundamentally different

from running a Successful

Simple Projects Company

Contents

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Specifics of Large, Complex Projects

• What is a Large, Complex Project?

• Convergence process • Organization • Survival • Project Controls • Systems • Project Soft Power: Project

LEADERS • Conclusion

Section

1

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Specifics of Large, Complex Projects

What is a Large, Complex Project? About size and complexity

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 8

What is a Large, Complex Project?

• What is complexity?

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 9

What is a Large, Complex Project?

• Complex System = System with many independent components and strong interactions

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 10

What is a Large, Complex Project? In the Offshore Construction Industry

• Complex ~ EPIC project • Sizeable Complex Procurement & Fabrication & related

engineering (30, 40%+ of revenue) • Large

– ~ 300 MUSD+ in offshore industry – ~ 200 MUSD+ in onshore industrial construction

• Risk ownership varies – not important

– lump-sum projects = risk & opportunity with Contractor = higher potential margins

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 11

Large, Complex Projects Business Benefits

– Leverage revenue / asset base – Lump sum – higher potential margins – Multi-year predictable activity / revenue / cash – Market premium & market leverage – Increased organization capabilities allows to

tackle new developments

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 12

Large, Complex Projects

• MINDSET ISSUE

• How do you recognize easily a company which mindset is only one of Simple Projects?

Section

2

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Specifics of Large, Complex Projects

Convergence process The Key To Successful Large, Complex Projects

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 14

Convergence process

Simple Project Complex Project

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 15

Convergence process

Project Performance Driver (or, what kills a project)

Simple project Large project

Efficiency Convergence Potential upside/

downside ±10% +20% - 30, -50, -100%

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 16

Convergence process

• For Complex Projects, the focus of project management needs to be on convergence – Main driver: avoid standby of project & major

assets – Project management is geared on timely delivery

of all required deliverables – This might require investment = additional cost

upfront

• Very different project management focus & process than Simple Projects

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 17

Convergence process

• Real life examples – Africa, 2006: A late 0.5MUSD item causes a

60MUSD loss on a 800MUSD contract • Delay impacted First Oil: huge organizational disruption • Loses next contract with same Client

– Numerous examples of lump sum projects

finishing at cost x2 or x3

Section

3

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Specifics of Large, Complex Projects

Organization Large, Complex Projects Require Specific Organization Patterns

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 19

Organization

• An integrated team – Geographically

regrouped – Team effectiveness

• Direct report to top

management

• Functions support project – Resourcing – Processes and tools

No Part-time job! Integrated team

away from departments!

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 20

Organization

• An experienced Project Manager of Simple Projects is not necessarily suitable to lead a Complex Project – Different skills required

?

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 21

Organization

• Different skills required also for Procurement

Engineering

Section

4

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Specifics of Large, Complex Projects

Survival

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 23

Survival

• With a Large, Complex Project, the very survival of the company is at stake.

Mt Everest claimed 219 lives… so far

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 24

Risk Pattern of Complex Systems

• In Complex Systems, freak events happen regularly

Tornado intensity

Moon

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 25

Risk Pattern of Complex Systems

IN COMPLEX SYSTEMS

• Freak events happen much more often than you would expect

• Their intensity/ consequence is much greater than expected normal distribution range

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 26

65% Failure rate of mega-projects

Source: Industrial Megaprojects, Edward E. Merrow

• New Technology • Remote site

Main failure factor: operability

+8% +10%

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 27

In Large, Complex Projects, one single project that gets bad can kill your company

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 28

Project risk management is key to understand the current environment

– Identify all relevant risk & opportunities – Prioritize – Take action

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 29

Minimizing Risk in Complex Projects

• 2 specific ways of diminishing risk –Diminish Complexity –Diminish Natural Variation

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 30

Minimizing Risk in Complex Projects

• Diminish complexity – Minimize the number of contributors

• Integrated teams • Integrated work package / subcontractors

– Diminish the number of convergence ‘meeting points’

– Improve contributors’ alignment • Familiarization, alignment workshops • Incentive schemes

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 31

Minimizing Risk in Complex Projects

• Diminish the effect of Natural Variation – Start as early as possible the most variable

activities and protect convergence point with a buffer

– Minimize variation in the process

Section

5

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Project Controls Where are we? Where are we heading? From the past to the future

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 33

Project Controls is about avoiding the Crash

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 34

In projects, we are exploring new

territories

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 35

Projects

In projects, unexpected events happen

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 36

A project is disruptive A mega-project is always highly

DISTRUPTIVE The environment will

FIGHT change

We need to

anticipate and react

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 38

What is Project Controls?

Project Controls is about building information sensors, and making sense of the information that is generated so as to pilot safely the project to its ultimate destination.

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 39

The Three Fundamental Questions WHERE ARE WE?

(ARE WE ON COURSE?)

WHERE ARE WE GOING?

WHAT DO WE NEED TO DO TO BE BACK ON COURSE?

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 40

In Manufacturing,

the future is an extrapolation

of the past

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 41

In Projects, the future

needs to be re-forecast

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 42

Cost control is not accounting

• TWO VERY DIFFERENT DISCIPLINES

COST CONTROL ACCOUNTING / FINANCE

- Focus on the future - Understands the business - Follows commitments

- Fixed exchange rates

- Focus on project end

point

- Focus on the past - Same for any business - Follows invoicing and

payment - Variable exchange rates - Cash flow management - Focus on reporting period

end point (PoC accounting)

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 43

• Cost control is fundamentally about

NO SURPRISES

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 44

Organization

• PVD recommends that Complex Projects be executed in a different Business Unit than Simple Projects – Complex Projects have different drivers

compared to Simple Projects

– It is a consistent mistake to try to manage both types of projects in the same organizational structure, with the same processes

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 45

Project success is determined at the beginning.

The first year Project Controls setup is critical

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 46

Project Control key

• Management of Change (and interfaces) is key to effective Project Controls

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 47

• Lack of interface management can be a disaster

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 48

Project Control traps

Too much detail! Not enough time for analysis

Section

6

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Specifics of Large, Complex Projects

Systems Large, Complex Projects Require Another Realm Of System Capabilities

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 50

Large project = large number of parameters to control

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 51

The Three Fundamental Questions

WHERE ARE WE? (ARE WE ON COURSE?)

WHERE ARE WE GOING?

WHAT DO WE NEED TO DO TO BE BACK ON COURSE?

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 52

Project Controls is about Navigation

Summary

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 53

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 54

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 55

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 56

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 57

• T

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 58

You can’t control a large, complex project

with an Excel spreadsheet

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 59

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 60

Systems

• Manual systems are overwhelmed, high error rate • Need to:

– manage inter-office remote work, remote sites – guarantee data correctness and accurate

reporting – have sound forecast over project span

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 61

Systems

• What systems? – Cost control – Commitments

• SCM • Logistics • Travel, HR • Timesheets

– Scheduling & convergence planning – Document control & Correspondence control

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 62

Systems

• What Investment? – Systems: 2-5 MUSD – People

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 63

Systems: the WBS is key

1 WBS

ACCOUNTING

PROCUREMENT

COST CONTROL

SCHEDULE

TIME CONTROL

Section

7

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Project Soft Power Large complex Projects require Project LEADERS

The Fourth Revolution

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 66

More on the Fourth Revolution?

• Book

• Blog:

www.TheFourthRevolution.org

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 67

The organization transformation

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 68

Industrial Age = rational IQ

1920’s

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 69

Collaborative Age = EQ Emotional Work

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 70

Project Manager vs Project Leader

Doing things right

Vs

Doing the right thing

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 71

SOFT

PROJECT POWER SPIDER

KUNG FU MASTER

ENTREPRENEUR TEAM COACH

PEOPLE CATALYST

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 72

The SPIDER

• Develop a specific network for your project

• Cover relevant stakeholders / priorities

• Maintain and develop…

At an emotional level

What we want to achieve…

Discipline

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 75

Focus: Theory of constraints, 80/20 rule

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 76

Project Control traps

Too much detail! Not enough time for analysis

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 77

The KUNG FU MASTER

• DISCIPLINE: run the project management processes against all odds

• FOCUS: the 2+1 rule: – 1 medium term

objective – 1 long term objective – Always enhance the

team

WHAT ARE YOU READY TO STOP DOING?

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 78

Invest at the beginning

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 79

The ENTREPRENEUR

• Don’t hesitate to invest early – Systems and processes – Anticipate convergence

early and invest if necessary

The Team

Coach

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 81

What makes an effective team?

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 82

What makes an effective team?

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 83

The TEAM COACH

• Build an effective team – No divas – Emotional connection – Creative conflict – Tough discussions

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 84

The PEOPLE CATALYST

• Know the people • Use far more of people’s talents • Leverage on people’s talents

Project Soft Power Skills

can be learned

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 86

What does it take to become a GREAT project manager?

TRAIN HARD

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 87

GIVE A GIFT: Feedback technique

1. Be present 2. Ask permission 3. State purpose and positive intention 4. Share personal perception of performance or behavior 5. Provide suggestions for improvement 6. Ask open question to get remarks 7. LISTEN attentively 8. Jointly decide action

Conclusion

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Specifics of Large, Complex Projects

Large Complex Projects Transformation: Hard and Rewarding

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 89

Specifics of Large, Complex Projects

On average, people spend more than 1 year to prepare for an Everest climb

More than 3,000 people have made it

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 90

Tackling Large, Complex Projects

• To tackle Large, Complex Projects – Transform the organization and its mindset / focus

• Corporate and governance level • Project leadership level

– Invest in the right tools, processes and people

• It is possible to do it with the right process, organization and tools

• It takes effort and practice

• It pays off

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 91

Tackling Large, Complex Projects

• PVD recommendations – It is an investment over several years. Are you

ready for it? – Change the organization’s mindset first – Change the organization structure: specific B.U.

and career path for Complex Projects – Implement specific Processes for Complex

Projects in particular in scheduling & convergence

– Implement appropriate Systems that can also be used for other activities

© Project Value Delivery, 2012 w w w . P r o j e c t V a l u e D e l i v e r y . c o m 92

Specifics of Large, Complex Projects

• Welcome to the top!

Project Value Delivery

W e E m p o w e r O r g a n i z a t i o n s T o b e R e l i a b l y S u c c e s s f u l i n

E x e c u t i n g L a r g e , C o m p l e x P r o j e c t s Discover more on

w w w . P r o j e c t V a l u e D e l i v e r y . c o m

THANK YOU!

Project Value Delivery

W e E m p o w e r O r g a n i z a t i o n s T o b e R e l i a b l y S u c c e s s f u l i n

E x e c u t i n g L a r g e , C o m p l e x P r o j e c t s Discover more on

w w w . P r o j e c t V a l u e D e l i v e r y . c o m

Project Soft Power Unleashing Value

from Your Large, Complex

Projects

Project Health Check

Project Coaching

Organizational maturity

Team effectiveness Intercultural leadership

Advanced project training Project Startup support

Project Recovery

Advanced risk management

Project Control and Reporting

Support systems integration

Convergence planning

Remote sites integration

Leadership development