Innovation in megaprojects
Andrew Davies*
PhD Course
Part 1: Innovation in Projects
BI Norwegian Business School
20-23 May 2015
*Professor Management of Projects, The Bartlett Faculty of the Built Environment
School of Construction and Project Management
Adjunct Professor, Department of Leadership and Organizational Behaviour, BI
• Megaprojects
• Megaprojects: complex and uncertain
• Group work: innovation in megaprojects
What are megaprojects?
• Large-scale infrastructure is designed
and delivered as megaprojects of $1bn
or more (Flyvbjerg et al, 2003)
– “Productivity paradox”: despite growth in
number and opportunities to learn,
projects often fail
• Megaproject organisation:
– Large temporary coalition of suppliers
– Led by large client, prime contractor or joint venture
– Process tailored to the requirements of the project
• Opportunity to find new ways to improve performance
– Success depends on new and innovative ways to manage uncertainty and
complexity
Megaprojects: poor performers
• RAND study of 52 major projects:
average cost overrun 88%, only 50%
performing as expected
• Channel Tunnel
– Construction completed in 1994, £4.9bn,
80% over budget
• Boston “Big Dig”
– Scheduled for completion in 1998 at $2.8bn
– Opened in 2007 at a cost of over $14.6bn
• Denver’s $5bn international airport
– Nearly 200% cost overrun
Megaprojects – poorly understood
phenomenon
• Infrastructure delivery, operation and finance is becoming
a “business”
– Private sector involvement UK privatisation of utilities, airports,
ports and railways since 1979
– Private Finance Initiative (PFI) Public Private Partnerships (PPP)
– Contracting out and outsourcing of public sector tasks
• “Surprisingly, however, infrastructure has still received
limited attention in management studies” (Gil & Beckman
CMR 2009)
• Megaprojects
• Megaprojects: complex and uncertain
• Group work: innovation in megaprojects
Using Shenhar and Dvir’s (2007) model to
understand megaprojects
• Megaproject is a case of a complex and uncertain project
• Contingency theory: critique of “one size fits all thinking”
• 1 dimension
– Shenhar (1993) 4 types of technological uncertainty
• 2 dimensions
– Shenhar (1996, 2001) tech uncertainty and 3 levels of complexity
• 4 dimensional construct
– Shenhar and Dvir (2007)
Technology
Super-high-tech
High-tech
Complex project
(e.g. Apollo Moon
landing; Challenger
Space Shuttle)
Medium-tech
Low-tech
Complexity
Array System Assembly
Platform
Derivative
Breakthrough
Novelty
Regular
Fast/competiti
ve
Time-critical
Blitz
Pace
Simple project
(e.g. implement
existing radio base
station; IT system)
3 levels of complexity
Array
project
System
project
Assembly
project
• ‘System of systems’
• systems with independent
functions, but each with common
goal
Airport
• Channel Tunnel
• New nationwide mobile
communications system
• single system - a common goal
• platform with subsystems
• Aircraft
• Air traffic control system
• Building
• self-contained component
• perform a function in a larger
system
• Modular components and
subassemblies
• Computer stations
Complexity and organisation
• Assembly projects
•
•
Single organisation (often one functional group), with the help from other
functions
Small team working in one location
• System projects
•
•
Main contractor responsible for deliver of product
Tasks divided among several subcontractors, in-house or external
• Array projects
•
•
•
Central umbrella organisation – often separate entity or company and formally
coordinates programme and subprojects
Deals with financial, logistical, legal and political issues
Projects often spread over wide geographical area
Systems integration
Operator and users
Design and integrate
hardware, software
and services into
functioning system
Systems integrator
Subsystem suppliers
Component suppliers
Parts suppliers
Systems integrator
• Organisation with the capabilities to coordinate the
design, integration of components and
subsystems
– Client – involved in several projects
– Prime contractor
– Joint venture
• Creates a process to coordinate a large network
of suppliers
Uncertainty and contractual approach
Fixed-price contract
Cost-plus contract
•
•
•
Risk and opportunity shared by client
& contractor
Client bears the cost of development
and seeks to avoid less than optimal
solutions
Contractor has an incentive to
produce best result and maintain
profits
•
Contractor takes on all the risk
•
Does not work well for high-tech uncertainty
– creates risk for client & contractor
•
Contractor loses money due to unexpected
events
•
Client gets inadequate product when
contractor stays within the price range
Relative uncertainty
High
Low
• Megaprojects
• Megaprojects: complex and uncertain
• Group work: innovation in megaprojects
Group work: innovation in megaprojects
Each group examines the three cases: Heathrow Terminal 5, London
Olympics and Crossrail
Each group answers the following questions:
1.Describe the main characteristics of the megaproject (e.g. systems
integrator, organisation, etc)
2.What are the main innovation challenges?
3.What are the main similarities and differences across the projects?
Literature:
–
–
–
2.2 Project-based production: complex products and systems
3.3 Megaprojects
5.1. Systems integration
Heathrow
Terminal 5
1. What are the
main
characteristics
of the
megaproject?
2. What are the
main innovation
challenges?
London Olympics Crossrail