Associating the Value of Automation with Project Funding

Associating The Value of Automation With Project Funding

Associating The Value of Automation With Project Fundingj gj g

Dave WollVice President

ARC Advisory Groupy [email protected]

Best Practice Development ProcessBest Practice Development Process

Understand issue• Recast as actionable

Perform Research• Primary Research• Direct InterviewsDirect Interviews• Deploy Web-Survey

Analyze ResearchO i i t P f M d P ti• Organize into Performance Measures and Practices

• Identify Leader’s Performance Measures • Compile Associated Practicesp• Order Results & Classify into Leaders/Competitors/Followers• Construct a Maturity Matrix• Review in Orlando Forum Session

2© ARC Advisory Group

• Review in Orlando Forum SessionDevelop and Publish

The IssueThe Issue

Assignment:• “Best Practices to show $$ benefits associated with

i t t i t ti ”investments in automation”Approach:• Develop a Best Practice Report based on “ Associating the

Value of Automation with Project Funding”Initial findings:• The degree to which projects satisfy their originalThe degree to which projects satisfy their original

justification varies widely between Leaders, Competitors and Followers

• The understanding of the value of automation varies widely• The understanding of the value of automation varies widely between Leaders, Competitors and Followers

• The degree to which projects are funded varies widely between Leaders Competitors and Followers


between Leaders, Competitors and Followers• At the Leader level there is a correlation between all three

Performance Analysis Projects Satisfying Initial JustificationPerformance Analysis Projects Satisfying Initial Justification

Leaders21% - 40%

41% - 60%Leaders are More Satisfied with Their Projects Competitors

61% - 80%

81% - 100%

Followers

0% 25 50 75 100

Followers


0% 25%

50%

75%

100%

Performance Analysis Understanding of the Value of AutomationPerformance Analysis Understanding of the Value of Automation

Leaders Better

Leaders

Leaders Better Understand Project Value Competitors

Excellent

Good

Fair

Poor

Followers


0% 25% 50% 75% 100%

Performance Analysis Percentage of Projects FundedPerformance Analysis Percentage of Projects Funded

Leaders

0% - 20%

Leaders Get More Projects Funded

Competitors

0% - 20%

21% - 40%

41% - 60%

Followers

61% - 80%

81% - 100%

0% 25% 50% 75% 100

Followers


0% 25% 50% 75% 100%

Performance Analysis Effectiveness of Controlling Capital ProjectsPerformance Analysis Effectiveness of Controlling Capital Projects

Leaders

SomewhatLeaders are More Effective in Controlling Projects

Competitors

SomewhatDissatisfied

SomewhatSatisfiedProjects

F ll

Satisfied

CompletelySatisfied

Followers


0% 25% 50% 75% 100%

Performance Analysis Predictability of Original Cost & SchedulePerformance Analysis Predictability of Original Cost & Schedule

d

Leaders are Better Able to Predict Project

Leaders

Able to Predict Project Costs & Schedule

Competitors

Excellent

Good

F ll

Fair

Poor

Followers


0% 25% 50% 75% 100%

Performance Analysis Safety RecordPerformance Analysis Safety Record

Leaders

Projects Following

Competitors Good

E ll t

j gLeaders’ Best Practices have a Superior Safety Record

Followers

Excellent

Followers


0% 25% 50% 75% 100%

Best Practice: Include Value of Non-Quantifiable Benefits – HSE, In-Direct Benefits and LifecycleBest Practice: Include Value of Non-Quantifiable Benefits – HSE, In-Direct Benefits and Lifecycle

Most Companies include

Leaders

Most Companies include Non-Quantifiable Benefits Competitors

No

Partially

ll

Partially

Completely

Followers


0% 25% 50% 75% 100%

Best Practice: Include Lifecycle ValueBest Practice: Include Lifecycle Value

Leaders

Most Companies now include Lifecycle Value Competitors

Other

NoNo

Yes

Followers


0% 25% 50% 75% 100%

Best Practice: Process for Controlling Capital ProjectsBest Practice: Process for Controlling Capital

Projects

Decision-driven predominantpSurprising how many companies use "Regular Reviews“ (over one

Leaders

e e s (o e o ethird)

Competitors

Other

Activity-driven

Decision-driven

Followers

Regular reviews

0% 25%

50%

75%

100%


Best Practice: The Use of Front End Loading Relative Time spentBest Practice: The Use of Front End Loading Relative Time spent

Leaders Project Design BasisDefinition

Business Needs DefinitionLeaders focus more on Design basis

Competitors

Business Needs Definition

Project Execution Planning

F ll

Capital AlternativeAnalysis

FollowersProject Risk Analysis


0% 20% 40% 60% 80% 100%

Best Practice: The Use of Front End Loading Project Risk AnalysisBest Practice: The Use of Front End Loading Project Risk Analysis

Red shows amount of time Respondents spent

Leaders

time Respondents spent doing Risk AnalysisResearch suggests Leaders spend less time

Competitors 1Leaders spend less time on Risk Analysis

Followers

2

Followers


0% 25% 50% 75% 100%

Best Practice: Automation of Front End LoadingBest Practice: Automation of Front End Loading

Leaders

Leaders use internally

Leaders

dy

developed tools to manage front-end loading

Competitors

Not Automated

Excel

Internal Tool

Followers

Internal Tool

Commercial Tool

0% 25 50 75 100

Followers


0% 25%

50%

75%

100%

Best Practice: Dedicated Project ChampionBest Practice: Dedicated Project Champion

Most users keep same

Leaders

pproject manager for duration of project

CompetitorsOther

NoNo

Yes

Followers


0% 25% 50% 75% 100%

Best Practice: Independent Project Analysis MembershipBest Practice: Independent Project Analysis Membership

Leaders and competitors are more likely to be

Leaders

members of IPA

Competitors No

Yes

Followers


0% 25% 50% 75% 100%

Best Practice: Major Companies Assume Project Control, Estimate and Market Fit ResponsibilityBest Practice: Major Companies Assume Project Control, Estimate and Market Fit Responsibility

Most Leaders take

Leaders

primary project responsibility

Competitors Sometimes

Always

Followers


0% 25% 50% 75% 100%

Best Practice: Benefit Identification and Estimation for Small ProjectsBest Practice: Benefit Identification and Estimation for Small Projects

F L d ti

A dynamicprocess model

From a Leader perspective• Consultant, the Financial

Balance, and Rules of Th b d ll

Leaders Best Operator

Thumb are used equally• Best Operator and

Simulation are used b h lf h

Competitors

Consultantestimates

Data Reductionabout half as much Data Reduction

Financial &Followers Energy/Mass

BalanceRules of thumb


0% 25%

50%

75%

100% Safety Margin

Best Practice: Benefit Identification and Estimation for Medium ProjectsBest Practice: Benefit Identification and Estimation for Medium Projects


From a Leader perspective:• Most use the Consultant

approach

Leaders

process model

Best Operator

approach• Rules of Thumb and

Simulation are used about one third as much

Competitors

Consultantestimates

Data Reductionone third as much

FollowersFinancial &Energy/Mass

0% 25 50 75 100

Followers gy/BalanceRules of thumb


0% 25%

50%

75%

100% Safety Margin

Best Practice: Benefit Identification and Estimation for Large ProjectsBest Practice: Benefit Identification and Estimation for Large Projects

d i


From a Leader perspective• Simulation is used about

38% of the time

Leaders Best Operator

C lt t• Dynamic Simulation and Consultants are used 25% of the time

Competitors

Consultantestimates

Data Reduction

• Safety Margin Reduction is used 13% of the time

FollowersFinancial &Energy/Mass

0% 25 50 75 100

BalanceRules of thumb

f


0% 5%

50%

5%

00% Safety Margin

Best Practice: Calculation for Economic ReturnBest Practice: Calculation for Economic Return

O h

Research Shows that ROI i D i

Leaders Other

Economic ValueROI is Dominant

Competitors

Added (EVA)

Return on CapitalEmployed (ROCE)

Followers

Employed (ROCE)

Return onInvested Capital(ROIC)

0% 25 50 75 100

Followers (ROIC)Return onInvestment (ROI)


0% 25%

50%

75%

100%

Best Practice: Automated Economic ReturnBest Practice: Automated Economic Return

Leaders use more internal tools

Leaders

Not Automated

E cel

Competitors

Excel

Internal Tool

Commercial Tool

Followers

0% 25 50 75 10

Followers


0% 25%

50%

75%

100%

Best Practices ReferenceBest Practices Reference

The Elements of Project Systems E ll Ed d MExcellence – Edward Merrow, Founder and President of Independent Project Analysis Inc.DuPont’s Role in Capital Projects –James Porter, VP Engineering and OperationsWeyerhaeuser Capital Management Process - Steven Harker, ProjectProcess Steven Harker, Project Bench markerChevronTexaco Project Development and Execution Process - Joe Gregory Projects Coordinator- Joe Gregory, Projects Coordinator

http://www nap edu/catalog php?record id=10343


http://www.nap.edu/catalog.php?record_id=10343

Thank You.Thank You.For more information, contact the author at [email protected] or visit our web pages at

www arcweb com


www.arcweb.com

Associating the Value of Automation with Project Funding

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