Realising the extraordinary: Enabling effective strategy and performance
In the fifth report of our ‘Realising the extraordinary’ series, we explore the overarching strategic challenges facing infrastructure projects and programmes – and what can be done to enable effective enterprise strategies and sustain great performance throughout their life.
The Covid-19 pandemic has seen governments around the world investing heavily in stimulus packages to drive growth and kickstart economies – with the built environment, high tech, and social infrastructure at the heart of this investment. It has also seen a rebalancing of what is considered important in how we live our lives and do business; organisations, governments and populations are now prioritising and investing much more in agendas and enterprises that support social value, inclusivity and sustainability.
In organisations, a structural and cultural shift has also been kickstarted – there is greater demand for demonstrable value for money, agile/lean organisational structures to enable the right capability at the right time, and more outcome-based decision making. Business operating models and planning are being rethought as organisations find new ways to support supply chains and people, work digitally and strategically plan their future roadmaps. After years of inertia, real change is finally happening.
Strategy challenges in a changing world
Successful programmes must have a clear strategy and purpose. They must be properly set up and consider the longer-term structures required for organisations to not only predict the future but be agile.
Most people overestimate what they can do in one year, and underestimate what they can do in ten years.
Our interviews with organisations globally confirm Bill Gates’ statement. We have found that organisations are now needing, and willing, to take bolder steps to create a successful roadmap that can be followed at pace over the long term. Their objectives are to both enable a swift recovery and create a much stronger footing for the future.
Building an effective organisational or programme strategy demands a better way of predicting and scenario planning for the future – before starting the journey. It is like planning to drive a car: the head-up display is needed to predict the future, a clear windscreen for looking at the road ahead for any immediate approaching obstacles, and a rear-view mirror to monitor and evaluate if past decisions enabled a more positive outcome. The whole car must also be agile and flexible so that it can be adapted, based on conditions on the road ahead. All of these are essential, and must be considered before the journey. If we look ahead to future journeys, the future car would also be autonomous, considerate of sustainability or maybe there would be another way to undertake the journey all together.
It is vital to adopt a similar approach to planning before embarking on a major programme. This is supported by tools, systems, capability and agility to adapt as the market or programme progresses.
Interviews carried out by our business in 2020 have identified key factors that have significant impacts on how programmes need to be developed and planned in the future. We explore these below.
- The rise of environmental, social and governance (ESG) on the corporate agenda: No longer is an infrastructure project solely about what is being built; it must also deliver ESG benefits as part of its outcome solution and, along the way, in how it is set up and delivered.
- Competition for investment: As governments drive economic recovery by investing in social infrastructure, there is greater competition than ever between the private and public sectors for precious funding, capability, and resources. The business case, confidence in delivery success, and validity of future needs are more important than ever to secure investment.
- Demonstrating value for money: With the pressure to deliver more for less, innovative solutions – such as new methods of manufacturing or digitalisation of processes – are being prioritised by businesses. These not only deliver value for money (VfM), but also give confidence and predictability. We are seeing schemes with stronger confidence in delivery surpassing schemes that show the potential for greater VfM.
- Data is more valuable: The value of data has greatly increased as organisations focus on their ability to predict long-term outcomes, undertake evidence-based decision making and benchmark. As a result, the acquisition of data – and the aggregation and visualisation of it in real-time format – has become a priority for leadership teams. Companies focussing on ‘top-down’ style programme data/reporting – such as only focussing on what information they need to run their business/programmes – are making the biggest strides in maintaining control, while reducing their overheads at the same time.
- Brilliant basics: Organisations and leadership levels are focussing on core disciplines and requirements at the highest possible level – or those essential to outcomes. Sometimes this involves stripping back requirements to those driving the critical path, or focussing on the minimal viable solution to meet the original business case.
- Stronger supply chain engagement: Understanding the tier 1 to tier 3 supply chain is key for most programmes going forward, in order to enable real control and drive value throughout the supply chain. Organisations must view and value their supply chain in the same way as they would a function within their organisation and bring them into strategic discussions early, understanding their role, ensuring value is unlocked together and agreeing genuine mutual goals.
- Organisations are redefining people strategies: Organisations are adopting flatter hierarchies because this both empowers individuals and greatly reduces unnecessary overheads. Our findings demonstrate how having the right leadership and capability – aligned to the programme operating model – allows organisations to create the right culture and energy, where everyone can deliver great results. By achieving the right balance in the people strategy, an organisation becomes integrated, inclusive, empowered and controlled, which gives people the home and unity they crave, with an energising and inspiring purpose.
Enabling performance-led strategies
What does a postcard from the future look like? See below.
1. An ecosystem approach
As a society, we will always need clean water, hospitals and schools, energy security and other commodities or services to properly function. As a built environment sector, we need to move away from the short-term execution and disrupt our thinking to be long term. A linear capital lifecycle process is rarely effective on complex programmes and our experience has shown that fundamentally changing how a business thinks about its assets – taking into account the full life of the programme – is key to enabling a performance-led strategy.
An ecosystem business approach is an exciting proposition and creates a series of key building blocks, which enable connecting activities to work together to create an adaptive model. The adoption of a structure such as this – underpinned by a systematic approach – enables support and responsiveness. It helps the right thinking to happen at the right time and be connected to associated strategies. This approach maps out the fundamental aspects of the programme and by focussing first on the key areas of relevance – while also understanding which other areas these decisions will be impacting – allows the right progressive change to happen at the right time to keep the programme going forward, in a controlled way.
An ecosystem approach to strategy development doesn’t have to be complicated, but if done well it can unlock untapped value opportunities. Without this rigorous approach, areas that remain unchanged and anchored in the past will inadvertently hold back progress, preventing benefits from being realised. The success of the ecosystem, therefore, also relies on fundamental shifts in values, behaviours, knowledge, capability and processes.
2. Rethink value and drive value-based decision making
Our experience has shown that fundamentally changing how a business thinks about its assets and how it moves towards a more integrated/structured approach in its services and build solutions, requires a rethink of value from multiple lenses. For example, carbon and environmental sustainability is now seen as a minimum requirement in business cases to secure funding. However, quite often the organisational structure prevents the integrated thinking needed to address this, because the roles of asset management, capital build and operations usually sit under different executive functions. As a result, accountability for value-driven strategies, like ESG, sits too high up in the organisation to effectively be delivered and a part of daily decision making.
In the past 12 months, we have seen more organisations driving value through integrated outcomes, and not being held back by the organisational construct of their business. This helps drive a focus on reducing operating overheads by reducing early-stage design thinking and the construction, operating and maintenance costs of assets. This is also helping to drive wider corporate goals, such as reducing carbon and digitalising tech platforms that help flow work across key functions as a single risk-based lifecycle. This approach lends itself to successfully navigating turbulent or unforeseen market conditions as it is outcome focussed.
Successful leadership teams are also establishing a value-based framework and decision making, which focuses on productivity and achieving outcomes at all stages of the lifecycle. This approach means considering reputation, finance, safety, carbon and other factors as part of decision making. The weighted importance of these different factors needs to be agreed at executive level to enable an empowered and agile business that will help manage compromises throughout the life of infrastructure projects.
Key to value-based decision making is data. It is essential to have the right data available at the right time, and having an accurate view of performance in the short and long term can help projects pre-empt and navigate their future. It will also support the identification of opportunities for efficiency and cost reduction, by giving an understanding of primary conditions of change or cost and supporting any replanning.
3. Focus on the benefits, value and development phases
Too often in the construction industry there is a drive to move projects forward quickly, thinking that this will drive better value. We have seen this historically in the infrastructure sector where teams of engineers and architects have a natural tendency to focus on capital delivery phases, rather than planning how assets will be used, maintained and operated and engaging all stakeholders at the earliest development stages. This has commonly resulted in delays, cost overruns or difficulties at different stages of handover. This is often masked by trying to speed up other phases of the programme, which can compromise key value stages, such as the procuring and integration of the supply chain.
To counter these historic challenges, the industry is starting to adopt more early-stage collaborative approaches with stakeholders and their supply chain. These include engaging everyone from the outset – using contractual measures that foster collaboration – and having an intelligent client with strong data to hand, to help them control cost and performance when they can’t use market competition to help drive and manage the right price.
Through this more collaborative approach, scenario planning can be undertaken more robustly by leadership teams. For example, the defence industry and military experts actively explore the possible future threats of a potential world, looking decades ahead. This is then translated into future needs, and subsequently solution requirements and future investment programmes. The lead time in technology development means nations cannot wait to reach a crisis before kickstarting a new defence programme. The same principles and rigour should be applied to organisational strategy development to drive a level of constant change, rather than more risky dramatic step changes, which are created to respond to an immediate threat/issue.
Develop future strategy and performance solutions now
Organisations can fundamentally change their business models, but the boldness and agility they require to do this cannot be underestimated. The level of wholesale change required in multiple areas to move to this new model might be too much for many organisations – but the need to dramatically change is coming, ready or not.
Leadership teams must consider how they can make change in a structured and systematic way that creates a clear future operating model, where functions understand how they will fit into this together, with clear integrated outcomes. This approach will balance the service, performance, processes and people across the business asset lifecycle, rather than the functions trying to do this themselves.
Short-term actions to consider now
To start the evolution, there are some short-term actions for organisations to consider now:
Embrace automation and processes which drive efficiencies:
- Standardise functions by considering the outcomes, not outputs.
- Standardise risk-based process flows with retrospective governance (supported by top-down, real time data).
- Use cloud-based technological solutions to enable continuous capability growth and drive tactical performance and strategic insight decisions.
- Adopt learnings from other industries to enable new approaches through outcome-based thinking.
- Look at where different functions can be reorganised to be more effective or efficient. In many instances, automation, slicker processes and greater resource utilisation can be realised through adopting new models or appropriate outsourcing.
Use a building blocks approach:
Identify the standard building blocks that can be combined to create a ‘bespoke’ style solution, limited to only a few base options – greatly reducing design and build costs, as well as enabling faster builds. This may involve exploring modular design solutions that enable assets to grow in line with capacity needs, rather than single large solutions. Adopting off-site manufacturing can also create localised manufacturing, which can provide employment opportunities for communities.
Remove the anchors of tradition:
- Identify parts of the business which anchor thinking back to the past. These may include engineering teams/policies, design houses, internal governance/process based around inputs and fixed activities.
- Focus functions on outcome-based requirements, strategic thinking and strategic performance management.
These simple actions, supported by a more modern and forward-looking strategy, will drive outcomes and performance in major infrastructure projects. Forward planning and having a flexible approach enable the ‘drivers’ of our car – or leaders of organisations – to look to the future. They give confidence to not only look ahead, but all around and draw on the tools, capabilities and systems to help. Organisations can then head for their destination, knowing that they have the vehicle and driving approach to reach it successfully.