Arno Jansen is an engineer and veteran capital project manager who currently leads a megaproject in the Gulf Coast of the United States. With more than three decades in the industry, he has an in-depth understanding of and experience in capital project development, project management, structuring, and engineering management. In this article, he explores the impact that the COVID-19 pandemic is having on asset-intensive businesses, and makes recommendations for change.
It’s time to turn our attention to site-based projects, working to improve margin and to capture additional untapped value.
The COVID-19 pandemic triggered an unprecedented market collapse that reduced global capital from a gusher to a trickle overnight. This is especially true for those operating in asset-intensive industries, and it’s likely to be a long while before we’re flush with new money for major capital construction projects. For many, this means turning our attention to site-based projects and working to improve margin and to capture additional untapped value and synergies from assets we already own.
While it’s disappointing to see major projects on hold, all businesses can benefit from a sustained effort to step back, improve systems, and boost productivity. The overarching question we need to ask ourselves now is this: How can we emerge from this crisis more efficient and with a competitive advantage in the post-pandemic economy?
Small Margins, Big Benefits
Practically speaking, those of us working in asset-intensive industries will have to change our project management mindset if we want to weather this economic storm. In the short term, at least, we must set aside the fast-track approach to projects and revisit the benefits of a cost-driven project management model. We should focus on capturing more value from the assets we already own.
Predictability Thinking™ is a leadership paradigm that helps companies capture added value on their sites by defining a robust, detailed framework for contemplating improved capital project efficiencies. By evaluating your capacity to deliver projects predictably, you will, in due course, review just about every opportunity you have for enhanced effectiveness and productivity. As capital becomes increasingly scarce, it is more important than ever to be predictable in your project execution practices, which allows for more efficient and improved capital deployment across site-based project programs.
After a decade of rapid expansion, you and your organization may well benefit from hitting pause and revisiting the protocols and practices that underpin your business and dictate your margins. You may find that predictable, cost-driven projects are ultimately more profitable than unwieldy, fast-tracked, schedule-driven projects. Even if you return to fast-tracking when capital starts to flow again, you may find that learning to deliver projects more predictably yields a compelling ROI.
Fast Track To Failure
I want to take a detour here to talk about the risks of fast-tracking in the COVID-19 era. In my opinion, fast-tracking during a global pandemic without an executive commitment to predictability is a recipe for failure.
There is no question that, done well, fast-tracking gives your company an enormous competitive advantage. But fast-tracking is neither simple nor easy, and when it is done poorly, it can wreak havoc on your margins and bottom line. Fast-tracking always results in unexpected project costs: the additional complexity created by overlapping key project deliverables and phases makes miscommunication, poor scope definition and rework inevitable.
In a market flush with capital, these costs are easily offset by the benefits of quick construction. When money is scarce, and we’re focused on making every dollar work, it’s simply not logical to choose a path with higher costs and risks. There are companies that can fast-track without increasing costs, to be sure. But don’t kid yourself: these organizations are few and far between, and they are outliers. Before you consider fast-tracking now, be sure that you have unrivaled capabilities and capacities in project scope definition, Advanced Work Packaging, estimating and scheduling with a well-trained, high-performing team and strong leadership. Unless you’re ready, the impact of fast-tracking in these economic conditions could be devastating.
Embracing Stable, Predictable Project Delivery
Some are calling 2020 the year of The Great Pause. The skies have emptied, businesses have shuttered the world over, and production of all kinds has ground to a halt. The COVID-19 pandemic has been an unqualified tragedy, but the silver lining is that we have time to stop and think about how we’re doing business and have the unique opportunity to emerge with the right ingredients for a solid competitive advantage.
I believe that now is the time to invest in building a more stable, predictable project delivery system. Predictability Thinking™ can help you develop a robust plan to manage scarce capital today, recover quickly from the pandemic era, and thrive in the post-pandemic economy. Predictability Thinking™ gives you the tools you need to achieve these goals.