Digital Transformation – McKinsey Practices

Understanding where value can be unlocked and realized, in the construction focused digital transformation space, is still elusive. Companies are making huge strides, mostly on backend support services such as HR and general employee services, such as online training, however, I personally do not believe these areas are where value is created. It is more an issue where cost has been eliminated as opposed to value creation.

For me, value is generated out of simple smart execution of our projects. When we can arrange for a pump to be installed right off a truck onto a foundation, have a mechanical crew available to commence work on it, and know that pump is on a critical path towards project completion: that is where we realize value.  When we can realize that differing rates of installation (linear planning), will force certain commodities to be the pivotable drivers to our schedule, understanding that delaying the commencement of later activities is actually a value adder due to the efficiency gains (or re-arrange your area handover to complete some areas without having to wait for everything). These are obviously simplistic examples: but, we need to be grounded, and understand the problems we face, and be clear on where digital transformation can support solutions to these problems.

In the realm of lightweight digital strategy, my series on the subject hit some good points

Digital Strategy in Construction – The Videos

In the realm of Project Management, I think the use of AGILE and the tools that have spawned from the Agile revolution will play a part in smart digital transforamtion

Agile In Construction

However, if we expand to a much broader topic, I think turning to companies like McKinsey is a good place to start. One of my favorite documents on this subject is

Decoding Digital Transformation – By McKinsey

The 5 Key practices outlined by McKinsey to capture the full value of digital initiatives:

  • Focus on fixing pain points, not installing IT solutions.
  • Implement digital use cases that promote collaboration.
  • Reskill and restructure engineering teams.
  • Adjust project baselines to capture value.
  • Connect projects to unlock impact across the enterprise

In my world or project controls, we perhaps interact with these practices in different ways. What follows is my personal take on these topics and what they mean to me and how I believe we can embrace them to extract value from digital transformation

Understanding FEL and where value exists

Before I really begin to discuss each item, what I really want to bring to the table here is the concept of WHEN. Major construction projects all operate under some sort of front of loading process

Front End Loading (wikipedia)

Most value gained in project development is during the FEL Stages. As I primarily work on the execution project management side of things, my perspective on what is valuable to me in the exuection space is different. Therefore understand that way you embrace the 5 practices will be a function on where you are at in the FEL process for a specific project, and your overarching project development lifecycle for what may be a variety of projects

Some of the practices (my personal belief) are more geared towards early studies, while others are more geared towards Execution. Below is my quick take on what practices are relevant to consider in each stage of your project development. This is more a strawman for discussion, and exactly why I write these blogs – to try to stimulate discussion on these topics.

The first 2 topics are in my view, more applicable to the execution environment. As such I have some good perspectives and existing material on them. The remaining are more study focused.

FEL1 FEL2 FEL3 EXE
Focus on fixing pain points, not installing IT solutions. 0% 0% 20% 80%
Implement digital use cases that promote collaboration. 0% 0% 20% 80%
Reskill and restructure engineering teams. 80% 20% 0 0%
Adjust project baselines to capture value. 0% 50% 45% 5%
Connect projects to unlock impact across the enterprise 80% 20% 0% 0%

With that, lets now jump in and unwrap what each of the 5 key practices mean to me.

Focus on fixing pain points, not installing IT solutions

A few years ago, I was called in to a project to assist in the implementation of EcoSys. I have a good amount of experience with cost systems and it was nice to know someone could lean on me help them install their new “IT Solution”.

However, immediately, it was apparent the initiative was doomed to fail. The issue was exactly what McKinsey indicates – the company was not focused on the “pain points”. For this particular project, visibility into the build up of a specific contract final forecast cost (FFC) is the day in day out function of the cost team. However, that build up of data is not easily managed inside EcoSys. Creating “detail items” for each site instruction, when you have 100s of site instruction on each contract, and 10 major contracts – and that is only the cost need for site instruction – you quickly realize that information needed to be managed elsewhere.

Obviously the project already had an existing, more bespoke, system that allowed them to manage the build up of the contract FFCs. So, installing a new tool that just extracted the bottom line number from one system and consolidate it – was of no value to the project. Quite the contrary, extra work is required each period to now update Ecosys with summary level data. Now, as part of another key practice (Connecting Projects), having access to enterprise wide data is important; however, I would query where the value add is before pursuing that option.

My video on EXCEL Hell is a good primer on where you can look for understanding where PAIN POINTS exist

So, I can’t stress enough, before you begin pursuing a digital transformation, look at what you are doing and dive into the “PAIN POINTS”. More often then not, when you start looking into the weeds, you realize that a specific IT solution might not be the silver bullet.

Implement digital use cases that promote collaboration.

I am a huge proponent of collaboration. In the McKinsey position, they focus on interdisciplinary interfaces. In the project controls world, this is our bread and butter. We constantly need to get information from Engineering, Procurement, Contracts and all functions and merge this all into a manageable project management framework – either being the schedule, specific management plans, or our estimate and cost forecasts.

Anything that can positively influence collaboration as opposed to simply forwarding emails and excel files, is a huge win-win.

I have discussed my position of trying to implement a tool such as JIRA. I have a key quote

“how do we interact as a TEAM”

That concept is a core premise – dive into how your project interacts. Look at how information and data is shared. Who edits what- how – where does it go – what does someone do with it?

So when we look at collaboration and implementing a specific solution for a use case, ensure that use case touches many people in different functions. From that, if you are successful, that will immediately leverage you for future wins

Reskill and restructure engineering teams.

I can’t stress enough, real VALUE on construction projects is delivered by ENGINEERING.  Although, value can be retained via efficient execution, truly innovative approaches and step changes in value have to be driven by ENGINEERING.

A clear example we have seen in the past few decades it the use of Modular construction, and focused Pre-Assembly. This is not specifically new, but is not perhaps as embedded into our culture to keep driving the limits for what is possible.

To achieve gains, your engineering team needs to be at the forefront of technology. You need to empower your engineering teams to constantly venture out into the real word and see what everyone else is doing and to not be afraid to mashup something they see elsewhere and try new things. The risk adversity of owners oftentimes restricts this. So, you need to be careful implementing new ideas, no question there.

All I can reference here, is perhaps the way TESLA has designed and engineered their cars. There application to smart control systems on cars is revolutionary and now makes every other car made look anachronistic. You only get that solution by engaging an engineering team willing to think outside the box.

A critical aspect of engineering teams, is the need that there is negative value into trying to implement restructuring of engineering teams during Execution. Or at least, if you do truly pursue that approach, you have de-facto moved your project OUT of Execution and back into a study phase. Again, always having a clear mindset in where you are in your project development cycle is critical in how you make decision and interact with digital solutions.

Adjust project baselines to capture value

One of the most important terminologies in the planning world is DRAG. DRAG is the opportunity that a project has in pulling back the critical path until a secondary sequence of work becomes critical.

When a change in execution caused by smart digital tools impacts the critical path, you are limited by your DRAG. Past that point, further gains are no possible (without also changing something else). Therefore, the balance between smart execution and reality need to be constantly played off each other.

Another aspect that is key in this practice, is that we need to perhaps understand where this adds value. In the FEL 2&3 phases, or perhaps better known simply as the feasibility studies, this is where baseline development occurs. Thus, this is exactly where you want to dive into how digital solutions can impact the execution of a project. In my initial example of seeing clearly the linear quantity limitations a project might have. Making decision that either increase a productivity rate, or split the project into more access points needs to be done duration a study phase to add value. Opportunity exists to extend this concept into execution, but careful management of changes in execution would be needed.

Connect projects to unlock impact across the enterprise

Executing a true program of work is the nirvana of every project. I have seen clients are limited in their abilities to run a program of works (outside the government sector). Often times instead, you have competing owners executing competing projects at the same time.

Personally, this practice might be better replaced with concepts or partnerships and teaming arrangements to perhaps unlock value among an industry, not just 1 company. McKinsey makes specific reference to:

consolidating cost and schedule data from multiple projects and business units to increase the accuracy of bids for future tenders, thereby increasing the margin

gaining an enterprise-wide view of resources to optimize resource loading and respond quickly when project demands change

creating central repositories for designs at the element, package, and project levels so those designs can be repurposed on future projects

Consolidating cost and schedule data: Reference Estimate data is a “great to have”; however you will be again limited. Good estimate data will likely reside OUTSIDE your company and a better practice is to have closer alignment with delivery partners.

Enterprise view of resourcing to adapt to changes: Again, project are delivered by a much wider matrix of differing companies. Aligning resources is something I always hear discussed, but have never seen in practice. Here to, a better practice is to have alignment with delivery partners. Only when you can act as an industry team, can this happen.

Central repositories for designs: This is something that I don’t feel is notable. Obviously it is important and is something every engineering company and client will keep. I don’t feel as as if this really belongs as a novel practice. This is more standard business as usual.

Bottom line is that I believe that a much better practice, as opposed to aligning projects from an enterprise wide view, is to instead ensure better contracting relationships with delivery partners and executing smart engagement to extract value from engineering delivery partners.

Closing Thoughts

Huge gains from smart implementation of digital strategies can be had. With a good framework of practices. I think all effective digital transformation is led by PEOPLE. While we have noted 5 key practices, never loose sight that digital transformation is a direct function of the people involved. Great ideas can fail if not implemented by great people. My view is that the common theme linking successful digital initiatives is people – and communication. In the end, nothing is substitute for plain ole good project management ideals.

When you look at your projects and begin to discuss how digital transformation can positively be implemented, pay close attention to WHEN in your project lifecycle you are. Some initiatives are more focused on what you can do during execution, while others provide value earlier on and are not effective during execution. Having a digital framework to ask key questions as certain points in your project lifecycle is a natural extension to implement these ideas.

 

Published by Darrin Kinney

Darrin is a senior project controls professional with 20 years of experience in project cost control, planning, and finance. Darrin has worked for Fluor, Bechtel, Jacobs and Samsung C&T. Serving mostly the EPCM and EPC business, Darrin’s job experience runs the full spectrum from all sides of project controls and almost all businesses. He has worked at Oil Refineries, Roads, Bridges, Telecommunication, Infrastructure, Rail, and Mining from both a site and home office location. Darrin has extensive international exposure having held positions in Asia, the Middle East, United States and Australia. A core understanding of project control fundamentals, systems, change management and EVMS (including the use of Ecosys, PRISM, Primavera, and databases) allows Darrin to ensure efficient project delivery and clear visibility into progress, forecasts and costs. The use of digital integration and systems is embedded into his management approach.

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