Strategic Capability Build To Support Complex Company Pivot

Context

A medium-sized industrial equipment delivery company with an annual revenue of €80 million decided to transition to becoming a comprehensive system supplier. This change aimed to offer end-to-end solutions for clients. However, this shift uncovered significant challenges that needed resolution to realize the vision.

Challenges

• Inadequate existing approach as projects became more complex.

• Engineers without sufficient training and broad perspective were placed into project management roles.

• Neglected Areas: Focus on engineering complexities led to oversight in scheduling, commercial and logistical considerations, and warranties.

• Scope Creep: The pursuit of technical perfection has led to over-engineered projects that deviate from commercial viability and lack a solid business case.

What this meant

• Frequent project delays and budget overruns.

• Reactive management style due to increased workload.

• High inefficiency and rework caused frustration and burnout among staff, resulting in high turnover rates.

• In an industry with a 5-9% margin and project sizes from €2 million to €50 million, impact of cost over-runs were massive, emphasizing the need for effective project management.

Turning Point

The company recognized the necessity for a fundamental change in project management when almost every major project experienced delays and exceeded budget. It wasn't sufficient to have skilled engineers leading the projects. They required dedicated project managers with a strategic perspective.

What We Did

• Built up a dedicated PM unit as a strategic capability:

  • Established a dedicated Project Management (PM) department, acknowledging that project management is a specialized discipline requiring distinct skills and training.

• Building Awareness and Training:

  • Launched an awareness campaign to emphasize that project management is not a subsidiary task for engineers. It requires a comprehensive view and a strategic approach. As a result, engineers were enrolled in extensive project management training and coaching programs.

• Transformation Project:

  • Reorganized the company’s structure and established new workflows. Implemented customized project management processes balancing agility and process reliability.

• Training and Cultural Shift:

  • Instructed the team in comprehensive project planning, risk management, and contract and change management. Supported the team during implementation to diminish uncertainties and ensure lasting commitment.

Results

• Controlled Projects Within Budget:

  • Successfully managed 10-15 projects collectively within parameters and budget valued at €80-100 million. Promptly identified and proactively addressed challenges and risks - saving the company millions.

• Empowered Culture Of Proactive Management:

  • Transitioned from reactive to proactive management, empowering the team to anticipate and address issues before escalation. This significantly lessened employee stress and workload, enhancing morale and reducing turnover.

• Sales Cycle Efficiency Gains:

  • Sales cycle decreased due to quicker and more accurate calculations, resulting from standardized processes and enhanced project planning.

• Significantly Increased Accuracy Of Estimates:

  • Enhanced project calculation accuracy significantly reduced the risk of budget overruns and unexpected costs. Introduced a stage gate process ensuring only thoroughly assessed projects advanced, optimizing resource use.

Conclusion

This transformation wasn't just about altering processes, but also about shifting mindsets. The company discovered that proficient project management requires specific skills, and training engineers to become strategic project managers was crucial for success. Currently, the company effectively controls its projects, managing risks proactively and delivering within timeline and budget. The insights gained from this experience highlight the importance of organizational adaptation and the need for a concentrated project management strategy when dealing with complex projects. The investment in coaching and training for competent project management was minor compared to the substantial losses from poor project execution.

At A Glance

Challenges

• Increasing project complexity

• Insufficient PM capabilities

• Neglected key areas

• Scope creep issues

Benefits

• Controlled project budgets

• Rapid skill acquisition

• Proactive management culture

• Efficient sales cycle

• Accurate project estimates.