The challenges faced today by asset-intensive companies demand innovative solutions, including new approaches to standardization. Efforts to standardize the protocols and work packages in capital project management continue to fail, and for good reason.
It has been said that “standards arouse violent passions.” This is because standards are kingmakers. Outwardly, a standard-setting venture seems boring and tedious, but battles over industry standards are, at heart, battles for market share. Sometimes, they are even battles for total market domination. Winners can get rich, and losers can see entire corporate empires collapse.
It is no wonder, then, that the multi-billion-dollar capital projects industry has difficulty establishing standards.
Certainly, there have been many calls for standardization across the downstream and upstream industrial construction sectors. These have ranged from industry policy initiatives to technical interoperability initiatives. Most have failed to deliver with hundreds of industry reports and studies produced in decades past, with no clear ROI on that investment and no concrete results.
Other sophisticated industries ranging from information technology to aerospace have successfully established industry-wide standards, but the EPC industry has been slow to standardize.
i. Standardization is poorly understood, and pitfalls are ignored
This is partly because the discipline of standardization itself is poorly understood in the capital projects industry. For example, most research efforts fail to establish a shared definition of terms, and it is rare for deliverables to include a working knowledge architecture. This holds true whether the research concerns scope, cost, schedule, contracts, front-end loading, field execution or anything else. As a result, when the industry looks to adopt new concepts and practices, it is vulnerable to increased variability and lack of alignment on terms.
The pitfalls of standardization attempts – the practical impediments – are also generally ignored. In an elucidative piece entitled Why Standardization Efforts Fail, veteran standardization expert Carl F. Cargill explains, for example, that people come to a standardization exercise wearing many hats. They must balance professional pride, corporate and organizational goals, industry objectives, political and national interest and, in some cases, friendships. “One is hard-pressed to describe the outcome as a rational economic decision,” Cargill writes. This is rarely recognized by research organizations, leading to countless good ideas for standardization being killed very early in their lifecycle before these very same ideas are well researched and developed to handle alignment efforts. There are many other routes to failure, too.
The solution: let’s learn from past research experiences!
ii. Standards create interoperability, which can reduce market share
Legacy suppliers recognize that standards lead to interoperability, which can reduce market share – and this is where the aforementioned violent passions are aroused. There is little doubt that open standardization of engineering, processes and product specifications would facilitate market entry for new competitors; this may also be true of standards around processes, exchange files, contracting, hiring procedures, construction techniques, shipping methods, management benchmarks, deliverables and methods. The reality is : legacy suppliers may have little or no incentive to cooperate and who would be most successful in disrupting this situation is yet to be determined.
The solution: invest in more creative thinking about the business model related to project delivery technology!
iii. The capital projects industry is slow at adopting the lifecycle of innovation
The capital projects industry has also been inclined to the dogmatic application of imported management concepts, sometimes regardless of their impact on the bottom line, and in many cases regardless of their similarity to other concepts.
Many of the industry systems, practices and tools do complement each in many ways. For instance, the stage-gate system, lean principles and the Advanced Work Packaging system can fit together to make a stronger project delivery system.
However, there is an emphasis on distinctions that cause us to miss the opportunity to create standards that are most appropriate for capital projects.
Standardization comes at a cost. Creating, maintaining and improving a standard requires effort. Like any cost, there should be a return on investment – even if incalculable. We don’t standardize just because standardization is good; we need to articulate how it is good for each specific application.
Our start-up company was formed based on the belief in a purpose-built platform, a sort of an “operating system” where people, processes, and information come together in a seamless way to accelerate project delivery systems. You can use this platform to design and implement project practices for capital project development and management. With this platform, you can finally start evaluating practices you develop or adopt in a standardized way.
We have, as an industry, manifestly neglected to innovate from within. Internal innovation is the real solution, and this is what T-CON™ can help you achieve. Contact Concord today.