1 Per Willy Hetland Statoil Project Academy Project owner General contractor Project functional units/ Sub-suppliers Engineering contractor Contractual governance
Jan 02, 2016
1
Per Willy HetlandStatoil Project Academy
Project owner
General contractor
Project functional units/Sub-suppliers
Engineering contractor
Contractual governance
2
The new wave in project management New realities for managing projects New leadership principles New project challenges New competencies Shift in mindsets Change of behaviour Excerpts from Statoil Project Executive Programme
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Maturity
Time1950 2000
Enhancing Business Value
Execution Excellence
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CorporateBusinessStrategies
LeadershipPrinciples
New ProjectChallenges
NewCompetencies
Shift inMindset
Change ofBehaviour
ProjectBusiness Value
5
Stimulating new ideas and creativity Chasing business opportunities Challenging accepted truths Entering unfamiliar territory Setting ambitious targets
That increase uncertainties and risk simultaneously sharpen personal accountabilities to deliver as promised
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Increasing variety and complexity New technology New business practices Unfamiliar locations Turbulent geopolitical contexts
That require new and enhanced project competencies
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Craft and apply project execution strategies that: Enhance business value Over the complete project life cycle Considering uncertainties, risks and opportunities By applying the new leadership principles
The new world for project managers requires a step change from the past practices where focus was on delivering projects as specified on time and within budget to deliver project business value
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THE PAST
ConceptDevelopment
BusinessStrategy
Project Execution Planning
Quality (Performance)
Time Cost
Deliver as specified on time and within budget
Comply with prescriptive project execution proceedures
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THE PRESENT
ConceptDevelopment
BusinessStrategy
Project Execution Planning
Quality (Performance)
Time Cost
Strategy
Execution
Stage gated approach to reduce risks
Align project execution to project strategy
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THE FUTURE
•New Project Challenge (1)
•Shift in Mindset (2)
•Added Knowledge (3)
•Change of Behaviour (4)
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34
Leadership driven project value enhancement
Drive project business value and master risks
PE AlumniM0 ME
M1
M2 M3
M4
Conte
xt
Context
Conte
xt Context
Turning Business Opportunities into Project Strategies
Exp
lora
tive
Beh
avio
r
Adapting to geo-political context
Adaptive Behavior
Driving Execution
Excellence
Skills
Skills
Skills Skills
New Knowledge
Del
ive
ry-o
rien
ted
Be
hav
ior
CHANGE OF BEHAVIOR
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Project strategies Project environments The project supply chain Project eco-systems Project contract archetypes Conventional pricing Conventional dilemmas Alignment of interests Incentive contracts
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Project
ExecutionSanction Hand over
Development Implementation
Value p
otentia
l
Value cre
ation
Value delivery
Business o
pportunity
Productio
n start-up
Abandon
Hand over
Sanction
Development planning
The project owner perspective
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ProjectBusiness case
Corporate
Supplier’s external project environment
Supplier’s internal project environment
External environment
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EC
IC
CVNV
FCMS
MaterialTake Off
Vendorinformation
Drawings
Materials
Modules
Services
Horizontal ties
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Vertical ties
O
V
FC
IC
Project owner
1st tier suppliers
2nd tiersuppliers
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The General Contractor StructureProject owner
General contractor
Project functional units/Sub-suppliers
Engineering contractor
Contractual governance
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LegalAspects
Aspects ofTrust
CommercialAspects
IncentivisedConcepts
ConventionalPricing
RelationalContracts
PartneringContracts
MarketContracts
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Probability
Cost
+ -Motivational effect
EV(P) EV(0) EVC
-+
Competition Moral hazardHRLR
Client net benefit
Riskpremium
PriceBasedContract
CostBased Contract
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Owner interests
Supplier interests(fixed price contracts)
Supplier interests(reimbursable contracts)
Conventional pricing formats
Incentivised contracts
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Contractor’sProfit margin
Contractor’s Costs
Fixed price bid
Estimated Contract costs
Calculated Profit margin
Calculated Risk premium
Risk Cap
Risk free “bid”
Client incentive
Contractor incentive
Gai
n s
har
ing
Risk transferredto customer
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Vive la difference! Projects are different Strategies are different – effectiveness or efficiency Strategies are different - determinism or dynamism Strategies are different - implications for project risks
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• Projects are different• Project environments are different• Project strategies are different
DEFENSIVE
ADAPTIVE
OFFENSIVE
RobustnessResilience
VersatileMalleable
Agile
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Closed Open
More of the same(status quo)
Incremental improvement
Don’t know what to doBut can’t stay here(quo vadis)
Radical change
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Customize
Standardize
Reuse Innovate
Increasing efficiency
Increasing effectiveness
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Fuzzy specifications
Functional specifications
Stretched targetsPROJECT OBJECTIVES
Guidelines
Value engineering
Re-engineeringDefensive concepts
Adaptive concepts
Offensive concepts
DEFINITIVE CONCEPTS
OPTION VALUE
PROJECT DYNAMICS
PROJECT PROCESSES
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Detailed specifications
Fuzzy specifications
Stretched targets
Functional specifications
Moving targets
Defensive concepts
Adaptive concepts
Offensive concepts
Definitive concepts
Project sanction
Incr
ea
sin
g e
xecu
tion
ris
ks
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Project internal decisions Project external decisions One-directional state variables Two-directional state variables
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Ran
dom
var
iatio
ns
Doi
ng th
ings
righ
t
Doi
ng th
e rig
ht th
ings
Doing things w
rong
Doing the wrong things
IMP
AC
T O
N C
AP
EX
, LC
P, N
PW
+
_
Opportunitymanagement
Riskmanagement
FREEDOM TO ACT
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INTENTIONALDISRUPTIVE
INTENTIONALSUPPORTIVE
IMPACT ON CAPEX (-), LCP, NPW
+
_
Proactive involvement
Constructivedialogue
Reactive critique
Interference
Attack
Incompetence
Risk management
Opportunity management
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IMPACT ON CAPEX (-), LCP, NPW+
_
FORCE OF VARIABLE
Planned for
Cost of Risk buffer Worse case
scenarioCost of resiliencemeasure if activated
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IMPACT ON CAPEX (-), LCP, NPW+
_
FORCE OF VARIABLE
Decrease Increase
Sales prices
Factor prices
Planned for
Break even
Loss
Bancroft
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Offensive management of uncertainties Contractor influence on CAPEX Influence on Life Cycle Profit, LCP Influence on Net Present Worth, NPW
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NPW
EVCE
Cost of risk
p
p
p
NPW
NPW
CE EV
Cost of risk
Cost of risk
Reduce risksIncrease opportunities
DEFENSIVESTRATEGIES
OFFENSIVESTRATEGIES
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CAPEX
TIME
Influ
ence
San
ctio
n
Co
ntr
act
awar
d
Give away value potentialIn lump sum contracts
Potential risks inDecision variables• Owner’s decisions• Contractor decisions• Effects of sunk cost
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1
2
3
4 5
6
7
1 Start production 4 Planned downtime2 Production built-up 5 Unplanned downtime3 Plateau production 6 Start tail production
7 Abandoning
Added value
Pro
ject
san
ctio
n
LCP
TIME
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Option value: Investments in future extensions
Corporate risk exposure: Portfolio relevant risks Corporate strategy risk Reputation risk
Sanction Hand over TIME
NPW
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Clients don’t buy project deliveries anymore
They buy project business value