Project sponsors have a tough time. The fundamental duty of the project sponsor is as guardian of the project’s business case; so how do you do that when previously accepted world views change fundamentally? Take the oil price for example, which plummeted in the second half of 2014 due to the huge increase in supply, particularly from U.S. shale oil production, and a drop in demand due to, weaker economic activity, efficiency measures and diversification of energy sources. Back in 1999 I was working on the route strategy for the Great Western Mainline railway between London and Bristol / Swansea. There had been rapid growth in demand on the railway and capacity was severely constrained. A development project at Paddington Station was being planned which would introduce additional platform capacity, the value of which was an important part of the development’s business case. That value was estimated using models which simulated the value of capacity based on forecast demand. However, a major factor in the demand forecast was the fuel tax escalator, which for almost a decade had been increasing tax on petrol and diesel above the rate of inflation, and therefore shifting demand from the road to rail. Amid protests by road users in November 1999 the escalator was scrapped and the modelled value of the new platforms decreased dramatically. The development was cancelled. Coming back to the present day, the Great Western Mainline is currently being electrified. The business case for this project must factor how reduced fuel costs act against rail demand in favour of road, and also how the case for electric traction compares to diesel.
Elsewhere in retail, the construction of grocery supermarkets fell by 20% in 2014. This was mainly as a result of the big four supermarkets losing market share to the deep discounters Aldi & Lidl. However, the rise of internet shopping and click and collect also continue to change the way we shop, making it much more difficult to define a long term strategy for retail investment than previously.
Whilst the effect of shale oil production has been very rapid, the nature of climate change has been an almost glacial paradigm shift, slow and momentous. Although great progress has been made with reducing our dependence on carbon, the halving of oil price will provide a tougher task for project sponsors to justify sustainable energy projects on business case terms. Fortunately, although technological progress in the shape of fracking may have led to the shale oil boom, technological development continues to improve the efficiency of sustainable energy technologies. The new “miracle material” graphene is 100 times as strong as steel, more conductive than copper and as flexible as rubber. Such a material could be the next significant technological game changer, shifting the paradigm in all sorts of areas. Some predict can be used to develop lightweight electric cars with the range of current petrol cars within a few years. Graphene can be used for its electrical storage properties as well as its strength. A car’s body could also be its battery. On a large scale graphene batteries might also provide the cost effective energy storage capacity so vital to solar and wind power that cannot always be harvested exactly when it is needed.
Of course if there wasn’t any change, there wouldn’t be any projects. Projects are conceived to deliver change required by corporate strategy. But there is incremental change, which lends itself to forecasting, and there are paradigm shifts which require a fundamental change in approach or underlying assumptions. What can a project sponsor do to safeguard a project business case, and what can a project manager do to help?
Firstly I think the examples noted already illustrate the need for constantly scanning the strategic horizon using STEEPLE (Social, Technological, Economic, Environmental, Political, Legal, Ethical). The earlier a project sponsor can spot significant change in these areas, the better he or she can be prepared to react and limit impact on the business case. Secondly, scenario planning, developed in the oil industry and honed in the military, is a useful tool for developing two or three coherent yet radically different models of the future, stemming from predictable drivers for change. The project sponsor should then try and develop strategies that are robust, i.e. which would have a sound business case in each scenario.
Finally, in a world of ever faster and deeper change, the faster a project can pay back the better. The project manager can help by finding faster and cheaper ways to deliver. I think it’s important to build trust within the project team so as to cut down the forming, storming and norming stages of team development, and get as quickly as possible to the performing. I know of a construction director for a major developer who believed in keeping the project team together from one project to the next, rather than procuring a brand new team for each project. However, the team must also stay fresh, inquisitive and innovative. Having framework suppliers may be a practical way to achieve these goals when using the same team on every project is not tenable politically or commercially.
David is a senior technical director with WSP|Parsons Brinkerhoff, a professional services consultancy specialising in property, transport & infrastructure, industry and environment projects.
David West graduated with a masters degree in Engineering Science from the University of Oxford, and later added an MBA. He is a chartered civil engineer, member of the Association for Project Management and also the Institute of Risk Management. He has worked on projects in the power, nuclear, petro-chemical, building, leisure, health, defence, rail, and development sectors. He has worked right across the project spectrum including roles as: designer, design manager, site manager, construction manager, project manager, project sponsor, risk manager, business unit manager, developer and project sponsor. He has also taught on the Open University MBA programme. He is the author of Project Sponsorship: An Essential Guide for Those Sponsoring Projects Within Their Organizations, ISBN 978-0566088889 published by Gower. Information about his Project Sponsorship paperback book can be found at http://www.ashgate.com/isbn/9780566088889