Why Productivity in Project Businesses is Flatlining?

The following article is the part two in a series of four on 'Project Business' and is authored by Daniel Bévort - part one certainly seemed to draw some interest and some comment so please, like, share and comment on this one as well

Project Business is a significant portion of all companies. Approximately 20 to 25 percent of all businesses are Project Businesses, companies that provide products and/or services for their customers through projects. Unfortunately, failure to identify as a Project Business and the lack of Project Business thinking can lead to many problems that impact business performance, productivity and ultimately, profitability.

Once you look at the fundamentals and recognize your business as a Project Business, you can start to see:

·      Why your business isn’t running as well as it could

·      Where the problems are

·      What you need to do to solve them

By structuring your Project Business processes you will be able to analyze what systems need to change and what solutions are possible.

Let’s take a step back and discuss why Project Businesses are not optimized for success. Why do they suffer from low productivity?

Compared to other industries, where productivity has steadily increased, productivity in Project Businesses has remained stagnant and even declined.

If we look at this McKinsey & Company study, one of the main reasons stems from poor project management and the lack of technological innovation and adoption. The inability to utilize technology to improve processes and information flow is a major reason why Project Business lags in productivity. More specifically, why they are often faced with budget overruns and project delays.

Let’s dive a little deeper into the specifics:

Poor organization: Project Businesses tend to have separate systems and sets of data for different stages or parts of their projects. This disjointed structure not only causes delays, but also hinders insight. In addition, most Project Businesses lack standardization and integration. Processes aren’t uniform, and they often rely on individuals who take extreme liberties with them. As a result, it’s difficult to control the business functions and create standard metrics to measure performance.

Inadequate communication: When managing projects, establishing the right communication strategies ensures that all stakeholders are on the same page. Scheduling, timekeeping, resource management, accounting, budgeting, can all be managed in separate systems. It’s important to create the right sequence of processes and proper networks across the organization so everyone who needs to be informed has access to the data at any point during a project’s life cycle. Inconsistences in reporting mean that stakeholders don’t have a common understanding of how the project is doing in real time.

Flawed performance management: Oftentimes, Project Businesses run their business units and projects as independent entities, without consistency across the portfolio and company. This leads to the “silo effect.” Project Businesses that don’t standardize their operations and project reporting across the company aren’t able to manage their risks as well as they could. In addition, they cannot apply the best practices discovered from one project to the next. Let’s face it, if you can’t measure performance, you can’t improve it. The key to operational excellence is scalable and predictable business processes.

Missed connections: There are different levels of planning, from high-end preparation to day-by-day programs. Schedulers need to know if the daily work isn’t done so they can update the priorities in real time. However, they often don’t have this information. Today’s real-time economy demands visibility into what’s going on inside your company. Failure to integrate all project functions into one system leads to organizational inefficiencies, delays, budget overruns and poor performance.

Insufficient risk management: Although Project Businesses pay considerable attention to long-term risks that they identify at the beginning of a project, they tend not to give the same attention to the kinds of risks that might crop up during the project in real time. In order to manage milestones and deadlines to ensure the successful delivery of projects, it’s important to be aware early on when project plans slide. A lack of real-time insight into your operations will result in increased risk and ultimately, decreased profitability.

The Way Forward

When you recognize that the bulk of what you do is projects and you are a Project Business, you develop a new way of thinking and the ability to recognize new solutions. Project Businesses need to operate with similar transparency and control as traditional industries. As projects get bigger in size and complexity, it’s critical to implement a Project Business structure that improves the chances of success of those projects.

The next blog will cover three key steps Project Businesses need to implement in order to improve productivity, better manage projects and lessen the chances of budget overruns. 

Peter: This is also something my friend Oliver F. Lehmann would acknowledge and support through his Project Business Foundation https://www.dhirubhai.net/company/project-business-foundation/ as do I , having worked in the world of 'Project Business' for most of my working life.

Daniel Bévort: Founder & CEO

Prior to founding ADEACA, Daniel was a principal architect of Axapta at Damgaard Data, which was acquired by Microsoft in 2002 for $1.6B and became Microsoft’s ERP offering, now called Dynamics 365 Finance & Operations. Daniel recognized that every traditional industry has systems to integrate and control all their business processes, but that is not the case for project-based industries. ADEACA was founded to accomplish that same vision for these neglected industries and find a way to run project business with real-time information and much better control.