Shifting to a Product Mindset for Capital Projects
Some new industry terminology has entered the vernacular, which alters the way that ‘projects’ are conceptualised and defined. This change as arisen through the rise in adoption of agile project management and it relates to an ongoing transition from running “projects” to managing the creation of “products”. It is especially prevalent in IT PPM – for software implementations or developments - and it is the way we work at Project Objects when developing new versions of our PPM software.
Based on our experience, we also believe this way of thinking about products rather than projects is equally applicable to capital project management. In fact, taking a product mindset for capital project and portfolio management will deliver a significant business advantage, because it maximises stakeholder engagement and ensures greater benefits realisation. This article will explore why.
What’s the difference between projects and products?
Firstly, looking at the definitions, a project is a temporary initiative, with a beginning and end date, plus a clear definition of what needs to be delivered and by when. It is run by a dedicated team who often get disbanded when the project is complete and then reassembled when the next project begins. The important thing is that customers (or stakeholders) don’t really care about the projects themselves, they care about the value being delivered.
Conversely, products are designed to create ongoing value for customers by solving their problems. They are more permanent, have no set end date and follow an ongoing life cycle of iteration and evolution over time. Rather than having a defined overview of what is required, products continually evolve to suit customer (or stakeholder) need. When they are no longer valuable, they are retired.
3 key characteristics of projects vs products
|Set beginning and end date||Permanent (until removed)|
|Single focus on delivery||Focus on customer improvements|
|Up front planning||Ongoing planning|
Projects are established to deliver a set outcome or range of activities over an agreed period of time, for an agreed level of cost. By formalising an initiative as a project, it receives the necessary focus and resourcing, it can be tracked and measured over time. Stakeholders can be engaged accordingly and the organisation moves towards achieving the relevant outcomes. A project is run by designated teams, whose remit is to deliver on time, under budget and within scope. Once accomplished, it can be considered a success (or failure).
During this process, software tools like Project Objects can be used to monitor costs, time, resource allocations and target milestones. All these things are essential, but where projects can suffer is due to a mindset that completing the project successfully is the end in itself.
Particularly in IT projects, this way of thinking has changed together with the rise of agile approaches. Agile prioritises the ultimate value of the end result – the product - for the customer over the actual delivery of the product. Timescales, budget and scope are important, but in the end, maximum value for the customer needs to be generated.
Think ‘capital products’
When developing software for end users as in IT PPM, it is obvious how a product rather than a project mindset is beneficial. It is less so in other industries, like oil and gas, construction or manufacturing, where projects tend to be centred around capital investments. But are they really any different? Isn’t there always a customer? Shouldn’t value continually be optimised? Shouldn’t the PMO always be acting according to the long term strategic interests of the organisation? This is why product orientated thinking is so relevant and should be considered for capital projects, because the emphasis on customer value creation – and the ability to demonstrate how the value is being created - is so important.
If projects can become products for IT developers, why can’t capital projects evolve to become capital products. The outcome of any capital investment is typically a physical asset and ‘customers’ are very similar in principle to software users. Isn’t it just another term for stakeholders along the value chain? They may be employees, sub contractors or contractors, as well as end customers. Thinking more about products as opposed to projects emphases the value behind the initiative more strongly, making all those involved more focused on value and benefits realisation.
Case study demonstrates potential
A case study published by the Project Management Institute (PMI) verifies that this type of agile thinking centred around products as opposed to projects, can indeed successfully be applied to capital projects, with an example in the construction industry. This found that agile tools, methodologies and thought processes can add significant value to non-IT projects, if applied correctly. In this case study, the ‘product’, a $US350 million R&D program to support the development of a new commercial uranium enrichment plant support system was successfully brought to fruition. The execution of the project, using agile tools and methodologies, was completed on schedule and under budget, with no safety issues. The integrated agile approach, which emphasised the delivery of a customer ready product, also resulted in significantly higher than average productivity for a construction project, and significantly higher than average productivity for a nuclear construction project.
A further benefit of emphasising products rather than projects is that they also have a longer lifetime than projects, again emphasising the longer term impact and value creation of the capital investment. By focusing on outcomes rather than delivery, those involved are far more mindful of ultimate purpose and more critical of how resources are being utilised.
4 ways to adopt an agile, product mindset for capital projects
- Document the ‘product’ strategy and vision;
- Focus on achieving customer / stakeholder excellence;
- Balancing priority, risk, value, learning opportunities and resource interdependencies to determine the roadmap next steps;
- Seek to maximize revenues, benefits realisation and ROI.
For oil & gas, construction and engineering capital ‘products/projects’ particularly, we are observing a gradual shift away from simply constructing a product for a customer, to creating something of value over a lifecycle. Projects are becoming products, which in turn are transforming to become services, these things are all interchangeable. PMOs need to change their mindsets and treat projects, products and indeed services as conceptually being the same, with an ongoing lifecycle based around the core stages of Build, Enhance, Deliver, Support and Sunset, each supported by PPM software.