Managing large projects—the construction of a refinery, a power plant, or a ship, for example—has always been complex. It has become significantly more challenging in recent years, however, owing to a confluence of forces. These include larger projects, higher technological hurdles, increased regulation, greater volatility along the supply chain, and the emergence of formidable new competitors, particularly from low-cost countries. The upshot of all this is that hitting the mark with large projects—delivering them on time, on budget, and with the hoped-for competitive advantages established—requires more skill and planning than ever before.
Many companies have reacted to this environment by tightening standards and controls, launching internal audits, pursuing more favorable contract terms, and taking other such measures. Although these are logical steps that should certainly be explored, they tend to fall short, in most cases, because they focus primarily on the process rather than on the root causes—the strategic, operational, and people issues—of most large-project slippages.
We believe that established players in this space can, in fact, do much to maximize their likelihood of success in the current environment—but they need to tackle the challenge in a different manner. Specifically, they need to utilize a three-tiered approach, one that looks critically not only at the logistics of project management but also at the company’s broader strategic planning and at how each project fits in as part of a portfolio. Failure to think through and optimize all three of these elements will translate into project delays, cost overruns, and other problems.
In this report, we discuss this approach—the factors that necessitate it, its orientation, and the specifics of the thinking behind it.