March 5th, 2020

If you’re reading this blog post, it’s safe to say that you either deliver or invest in capital projects. And if you are involved with capital projects, you’ve most likely experienced cost and schedule overruns and projects that have not delivered intended benefits. In fact, according to the Construction Industry Institute, less than 6% of capital projects deliver planned financial returns. That’s a staggering number.

There are many reasons why projects fail. Many of them are unique to individual projects. But in order to address a systemic issue, we need to look at what is common between projects to identify potential causes.

With that in mind, here’s another question: what software do you use to run your capital projects?

Chances are you are still using a combination of Excel spreadsheets and disconnected in-house or commercial point solutions – and not a single integrated solution designed for capital projects. If so, you’re in the majority.

 

Integrated Software Improves Capital Project Performance

 

According to KPMG, only about 34% of organizations in the engineering & construction industry use integrated project management systems.

 

Innovation Correlates to Better Governance, Controls, and Results for Capital Projects

Study from KPMG shows that organizations that are innovative and invest more in integrated project systems have better governance and controls, and fewer overruns.

 

Not all capital project failure can be tied to inadequate project software. But surely its not a coincidence that the industry’s “Innovative Leaders” tend to have better governance and controls, as well as fewer overruns after implementing integrated software systems to manage their capital projects.

Still not convinced? Here are five reasons why disconnected project software is lowering your chance of success on capital projects.

 

 

1. Disconnected Information

 

The construction technology ecosystem can be very complex and fragmented (McKinsey & Company), with many disconnected people, processes, and tools. It’s common for organizations to have 10-20 different point solutions involved in running a capital project. They are often entering the same data in many places. Not having a “single source truth” of increases the time and effort spent importing and exporting data from siloed systems. The result is more room for error, more frustration, and lower job satisfaction.

 

The Construction Technology Ecosystem for Capital Projects from McKinsey & Company

Mapping the ecosystem of on-site, back office, digital collaboration, artificial intelligence, analytics, supply chain, and digital twin technology that engineering and construction companies utilize to execute capital projects.

 

The real value of project teams is in analyzing data, and making decisions that will positively impact the outcome of their project. But in order to do so, they need to be confident in the data they are looking at.

Project review meetings are often derailed by a question about where a number came from, or how someone reached a certain conclusion. The trust in the data does not exist because different project stakeholders are working in siloes. Data is not consistent between team members, departments, functions, and business units. Without a common integrated project system, it is difficult to drill down into the details and be confident in your ability to answer tough questions.

 

2. Inaccurate and Outdated Reporting

 

Reporting difficulties are very common when you use disconnected systems and Excel spreadsheets to run projects. Compiling data, eliminating discrepancies, and running reports takes up so much time that there’s very little time left to analyze the data.

The value of project controls is in being proactive and forward looking. Without enough time to analyze reports, you’re missing out on key insights that could drive project-saving decisions. You need to be able to confidently make decisions based on accurate data, in real time. Without an integrated system to manage and control projects it can take more than a week to compile data and produce a monthly report. Not only is that a waste of time, but you can’t make good decisions base on outdated information. Add in the time spend correcting errors, and soon your project teams are spending as much as 60% of their time on low-value activities. 

Lack of Efficiency Before enterprise software for Capital Projects is Implemented

This chart shows that cost analysts and project teams often spend up to 60% of their time on manual reporting and error corrections.

 

Additionally, reporting from many different systems makes it hard for executives to interpret business results in a common way across the organization. This makes it hard to make strategic decisions, optimize resources, and fund future projects.

 

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3. Lack of Scalability

 

The Pareto Principle states that 20% of the causes generate 80% of the results. If you look at this from a project perspective, it means that the 20% of larger projects in an organization are responsible for 80% of the success or failure in an organization.

 

The Pareto Principle

20% of the capital projects an organization executes deliver 80% of the results.

 

The many smaller projects in an organization make up the red portion of the chart. But what if we can reduce the effort spent managing and controlling these projects while eliminating errors, driving standardization, and improving visibility?

If you’ve been involved with projects long enough, you’ve probably run across one or more “custom” in-house solutions. You may have even been involved with building one of them! While I’m sure you did a great job, it was most likely built for a single project or purpose.

Limitations of Point Solutions

In most organizations, the 20% of large projects have some systems supporting them. Custom in-house or commercial point solutions are often used to handle these projects. However, these tools lack the ability to go beyond their original scope. They are built for a specific process, project size, or project type. They are not scalable enough to easily deploy on all of the smaller projects an organization delivers.

The smaller projects often don’t require as much rigor. Consequently, they might not be following any standards. They may have limited controls or oversight. They might also experience generally looser management. This creates many potential problems and limits visibility into the performance of projects, and the organization as a whole.

The Ideal Solution

Contrast that with a single integrated solution that covers the entire project lifecycle. A solution that is fully scalable and flexible to meet the needs of any number of projects, regardless of size or type. You could add business processes to the solutions as you evolve and grow. You could drive standardization in the way you execute and report on projects. That way, you get the same benefits of efficiency and control across ALL projects, without any added effort.

Additionally, bringing everything into one system provides full visibility. Reporting can easily roll-up to give a picture of the entire organization.

 

4. No Standardization

 

It’s impossible to standardize business processes across your organization when Excel is the default tool for managing capital projects. If standard processes aren’t or can’t be built into your software, you’re sending a message that they are optional. If they are optional, they are unlikely to be followed. When was the last time you referred to the dusty binder of processes on the shelf behind you?

The lack of standardization makes it difficult for project teams to follow company and industry best practices for project controls. This decreases the chances of the project controls function having the impact it is capable of. It also makes it impossible for executives to compare projects. They cannot have full confidence in performance improvement measures when they’re seeing inconsistent reporting and forecasting.

Deloitte research found that improving project controls from basic to advanced can reduce remaining CAPEX spend by between 5 and 10%. That is a huge potential ROI!

 

Good Project Controls Reduces Capital Projects Cost

This table shows how investments in project controls can reduce final CAPEX spend by 5 – 10%

 

By using an integrated system to run your projects, processes and best practices can be standardized and controlled. If different projects and business units have unique needs, you can configure as needed. That way, everyone is using the same system so information can be rolled up consistently. Executives can see common reports, making it easier to spot trends and early warning indicators.

 

5. Limited Visibility

 

Simply delivering a project on time and on budget is no longer enough. Succeeding in today competitive landscape requires a broader perspective. Additionally, you need to ensure that ALL projects in an organization are doing their part to meet business goals and objectives.

“You can’t change the shape of the organization by just focusing on executing one project perfectly.”

If your project software doesn’t give you the ability to view all projects in your portfolio or organization, it means each project is operating in a silo. This is dangerous! A small overrun on one project might not seem like a big deal. But if you multiply that overrun across thousands of projects your organization, it has an extremely negative impact to the bottom line.

Having all of your projects in one system allows you to compare them to each other and identify trends. First, you can drill down into the data to quickly identify root causes of negative performance. Then, it is easier to evaluate and implement corrective actions. You can also identify common traits of successful projects and develop new best practices to be rolled out across projects.

With quick access to accurate data and full visibility into performance, the next step is improved predictability. This means forecasting the correct final project cost as early as possible. If properly rewarded within your organization, predictability improves your ability to take corrective action. If you can take earlier corrective action, you will deliver more projects successfully and realize those planned financial returns.

 

Conclusion: The Status Quo is Not Sustainable for Successful Capital Projects

 

Using disconnected point solutions and Excel spreadsheets is no longer a viable option for success. In fact, it is a barrier to success. All of the research points to investments in data centricity, governance, and project controls as key indicators of capital project and organizational performance.

So how can you be the hero? How can you turn the liability of your current project software into a competitive advantage?

Be the champion of a single environment that allows all stakeholders to work more efficiently and effectively together. Be the champion of an Enterprise Project Performance (EPP) strategy for your organization.

EPP is a mindset that expands from improving outcomes of individual projects to one that considers how ALL projects contribute to business objectives in an organization. EPP software helps deliver this strategy by integrating processes that span the full projects lifecycle into a single, flexible, and scalable solution.

To learn more about EPP, download “The Business Case for Enterprise Project Performance” eBook.


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