Innovation in megaprojects
Andrew Davies*PhD Course
Part 1: Innovation in Projects
BI Norwegian Business School
20-23 May 2015
*Professor Management of Projects, The Bartlett Faculty of the Built Environment
School of Construction and Project Management
Adjunct Professor, Department of Leadership and Organizational Behaviour, BI
What are megaprojects?
• Large-scale infrastructure is designed and delivered as megaprojects of $1bn or more (Flyvbjerg et al, 2003)– “Productivity paradox”: despite growth in
number and opportunities to learn, projects often fail
• Megaproject organisation:– Large temporary coalition of suppliers– Led by large client, prime contractor or joint venture
– Process tailored to the requirements of the project
• Opportunity to find new ways to improve performance– Success depends on new and innovative ways to manage uncertainty and
complexity
Megaprojects: poor performers
• RAND study of 52 major projects: average cost overrun 88%, only 50% performing as expected
• Channel Tunnel– Construction completed in 1994, £4.9bn,
80% over budget
• Boston “Big Dig”– Scheduled for completion in 1998 at $2.8bn
– Opened in 2007 at a cost of over $14.6bn
• Denver’s $5bn international airport– Nearly 200% cost overrun
Megaprojects – poorly understood phenomenon
• Infrastructure delivery, operation and finance is becoming a “business”– Private sector involvement UK privatisation of utilities, airports,
ports and railways since 1979– Private Finance Initiative (PFI) Public Private Partnerships (PPP)– Contracting out and outsourcing of public sector tasks
• “Surprisingly, however, infrastructure has still received limited attention in management studies” (Gil & Beckman CMR 2009)
Using Shenhar and Dvir’s (2007) model to understand megaprojects
• Megaproject is a case of a complex and uncertain project• Contingency theory: critique of “one size fits all thinking”• 1 dimension
– Shenhar (1993) 4 types of technological uncertainty
• 2 dimensions– Shenhar (1996, 2001) tech uncertainty and 3 levels of complexity
• 4 dimensional construct– Shenhar and Dvir (2007)
Complex project(e.g. Apollo Moon
landing; Challenger Space Shuttle)
Simple project(e.g. implement
existing radio base station; IT system)
Technology
Novelty
Pace
ComplexityArray System Assembly
Derivative
Platform
Breakthrough
Super-high-tech
Medium-tech
High-tech
Low-tech
Regular
Blitz
Fast/competitive
Time-critical
3 levels of complexity
Array project
• ‘System of systems’• systems with independent functions, but each with common goal
Airport• Channel Tunnel• New nationwide mobile communications system
System project
• single system - a common goal• platform with subsystems
• Aircraft• Air traffic control system• Building
Assembly project
• self-contained component• perform a function in a larger system
• Modular components and subassemblies• Computer stations
Complexity and organisation
• Assembly projects • Single organisation (often one functional group), with the help from other
functions
• Small team working in one location
• System projects• Main contractor responsible for deliver of product
• Tasks divided among several subcontractors, in-house or external
• Array projects• Central umbrella organisation – often separate entity or company and formally
coordinates programme and subprojects
• Deals with financial, logistical, legal and political issues
• Projects often spread over wide geographical area
Systems integration
Systems integrator
Parts suppliers
Subsystem suppliers
Operator and users
Component suppliers
Design and integrate hardware, software and services into functioning system
Systems integrator
• Organisation with the capabilities to coordinate the design, integration of components and subsystems– Client – involved in several projects– Prime contractor– Joint venture
• Creates a process to coordinate a large network of suppliers
Uncertainty and contractual approach
Cost-plus contract
• Risk and opportunity shared by client & contractor
• Client bears the cost of development and seeks to avoid less than optimal solutions
• Contractor has an incentive to produce best result and maintain profits
High Low
Fixed-price contract
• Contractor takes on all the risk
• Does not work well for high-tech uncertainty – creates risk for client & contractor
• Contractor loses money due to unexpected events
• Client gets inadequate product when contractor stays within the price range
Relative uncertainty
Group work: innovation in megaprojects
Each group examines the three cases: Heathrow Terminal 5, London Olympics and Crossrail
Each group answers the following questions:
1.Describe the main characteristics of the megaproject (e.g. systems integrator, organisation, etc)
2.What are the main innovation challenges?
3.What are the main similarities and differences across the projects?
Literature:– 2.2 Project-based production: complex products and systems
– 3.3 Megaprojects
– 5.1. Systems integration
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