John Noonan is the author of The Megaproject Paradox and director and principal consultant at JNC Pty Ltd, an Australia-based consultancy focused on managing complex organizations and megaprojects.
He has extensive experience working with large capital projects primarily in the energy, resources and defense sectors.
VELOCITY MAGAZINE: What is the Megaproject Paradox?
JOHN NOONAN: The term was originally coined by Oxford University professor Brent Flyvbjerg. Megaproject owners invest US$ Billions in the project preparation phase to simultaneously predict two very important numbers for Megaproject Execution: (i) An accurate estimate of how long construction will take, and (ii) a fact-based estimate of the construction cost. These predictions are almost always wrong. Individual projects routinely come in over budget in the order of US$ Billions, with global cumulative losses measured in the US$ Trillions. This is the Megaproject Paradox, and it’s a serious issue: In what other industry would we accept 100 percent failure rate all the time?
VM: What do you think are the biggest causes of megaproject failure?
Failure usually starts when the Owner lacks strategy & governance. If the Owner is disorganized, unclear on strategy or using traditional megaproject management methods that have proven to be inappropriate for large scale complex projects, then the Megaproject Paradox is guaranteed to arise. Owners need to look to new methods to avoid the paradox. One of the most comprehensive frameworks available for adoption is the Noonan Megaproject Parameters.
JN: Ignore those who say, “time to construct” and “cost to construct” are the only important benchmarks in the execution phase. I’ve suggested that there are at least twelve execution phase benchmarks or parameters, that matter. These parameters provide an Owner with a clearer picture of the project’s health. One of these parameters is Scope Complexity. Measuring Scope Complexity in capital projects has not been well studied. Megaprojects must manage massive amounts of design and construction data, massive groups of people, thousands or tens of thousands working together in the Construction phase, and large physical assets in the Execution Phase of the Megaproject Life Cycle. Scope Complexity measurements must consider design, staff, contracts, technology, and location in driving the risk profile of a Megaproject. Owners must also account for Execution Strategy, Culture, Organization Structure and Behavior. Companies that fail to account for at least these parameters are bound to see the Megaproject Paradox arise.
VM: What are the limits of the current risk analysis and benchmarking techniques for capital projects?
JN: Megaproject preparation phases are mired in traditional thinking that relies on the appointment of a so-called “A-Team” as well as the stage-gate system around which all decisions are made. Considering the failure rate of Megaprojects, Megaproject preparation has proven to be elusive and ineffective. I advocate for new, sophisticated digitally powered techniques that support high-level scenario planning and rehearsal for engineering, staffing, contracting, construction and collaboration. For these techniques to work, you not only need a well-trained and experienced team, you need a digital platform capable of handling massive amounts of digital information. We also need to automate as much as possible assurances with systems for Supervisory Control and Data Acquisition (SCADA) applicable to stakeholders’ collaboration. Only then will we effectively benchmark Megaproject performance and risk.
VM: What is the most important quality for a Megaproject management team?
One word: Agility. Companies must use agile management strategies in conjunction with traditional stage gate processes. Historically, Megaproject organizations have adopted project management techniques arising from the U.S. Department of Defense. These techniques typically tie down Information Technology and Telecommunications Technology (IT&T) specifications along with Construction Specifications during the definition phase of a Megaproject. These specifications are then mandated inflexibly for the entire Execution Phase of the lifecycle of the Megaproject. In the 21st Century, major IT&T technology advancements happen constantly, changing monthly if not more often. Megaproject Management techniques must reconcile the Megaproject Execution Phase life cycle with IT&T technological change time frames so that the best IT&T technologies are embraced across the Execution Phase of the Life Cycle. Agile Megaproject Management techniques can help do that.
VM: What is an Organizational Digital Twin, and why should companies care?
JN: A Digital Twin is a virtual representation of a system, a living model that allows a business to drive business outcomes using Engineering Design, Modeling, Simulation, Analysis and Verification processes prior to deployment of the system. The term Digital Twin is well understood for the asset engineering model. In the case of Megaprojects, we need to use real-time data and other sources to create a Digital Twin of the Megaproject Organization. The Organization Digital Twin allows the Megaproject Executive Leadership Team (ELT) to use scenario planning for the Megaproject Organization Design process. It allows the ELT to rehearse and plan Megaproject Organization performance before deploying the Organization. When massive numbers of people are working on extremely complex infrastructure in massive teams, new techniques are required to help the ELT coordinate work in an efficient and predictable manner. The best way to achieve this is through Organization Digital Twin Design, Planning, Deployment, and Monitoring of the Organization. The Organization Digital Twin allows Megaproject managers to take a snapshot of Organization performance at any given point in time and use that snapshot to most effectively manage Organization change within the Megaproject Execution Phase of the Life cycle.
The Organization Digital Twin enables sophisticated new digital platforms to merge with existing Engineering Digital Twins to ultimately resolve the Megaproject Paradox.