case study

Case Study – What Happens When Corruption Meets Incompetence - Krestovsky Stadium

 

Some time in 2005 as part of preparations for a (highly controversial but nevertheless successful) bid for the 2018 FIFA World Cup the government of Russia decided to build a brand-new soccer stadium in Saint Petersburg. The building phase started in 2007 with the government allocating US$268 million for the construction of the stadium.

Interestingly enough the construction that was initially supposed to end in March of 2009 continues until now, with “some cosmetic changes to be finished soon”. As of right now the stadium is astonishing 518% late and 548% over budget (see Tables 1 and 2).

Table 1 - Timeline

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Table 2 – Budget

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Unfortunately there are no official reliable sources of information regarding the root causes of these failures. However, based on the reports of various newspapers there were two major causes of delays, cost overruns and quality issues: poor planning and rampant corruption.

Some of the issues encountered during the construction of the Krestovsky Stadium.

Case Study – Project Portfolio Management Failures – The New Ashgabat Airport

Introduction

On September 17th, 2016 the president of Turkmenistan Kurbanguly Berdymukhamedov has officially opened a new US$ 2.3 billion dollar ultra-modern Ashgabat International Airport shaped in a form of a falcon (see video below). The entire complex is comprised of 190 buildings spread on a 1,200-hectare site. The airport is designed to handle up to 17 million passengers (remember that number!) combined with 200,000 tons of cargo every year.

Video:

At the opening ceremony the president claimed that Turkmenistan has “all the opportunities to become a transport bridge facilitating economic cooperation between Europe, the Asia-Pacific region, and South Asia.” He also added that the new airport was needed to accommodate a massive influx of tourists eager to visit Turkmenistan.

The official position of Turkmenistan, is understandable since the country’s income have heavily depended on the export of natural gas. As a result of plunging energy prices and foreign currency shortages the government is now forced to develop the tourism and transportation sectors of the economy.

The Problems

There is however an array of problems associated with the new Turkmen initiative. For starters, due to very restrictive visa regulations the country has been visited by anywhere between 7,000 (if you choose to believe World Bank) and 100,000 tourists (if you prefer to rely on official Turkmen government reports). For comparison neighboring Kazakhstan had 4.5 million visitors, while Kyrgyzstan saw more than 2.8 million tourists in 2014.

Here is an additional compilation of facts about Turkmenistan if you are planning to visit that country any time soon:

Case Study - Shah Deniz 2 - Megaprojects Can Be Successful After All!

 

Very proud to have participated on this project as a project management consultant!

Background

Shah Deniz (The King of the Sea) gas field is the largest natural gas field in Azerbaijan. It is situated in the South Caspian Sea, off the coast of Azerbaijan, approximately 70 kilometres (43 mi) southeast of Baku, at a depth of 600 metres (2,000 ft). The field covers approximately 860 square kilometres (330 sq mi). The Shah Deniz gas and condensate field was discovered in 1999. Stretching out over 140 square kilometres, the reservoir is similar in size and shape to Manhattan Island.

Shah Deniz 1

Stage One development of the Shah Deniz gas field started production in 2006, with a capacity of 9bcma of gas and roughly 55,000 daily barrels of condensate. The capital expenditure on Shah Deniz 1 to date is estimated to be $6bn. As of 2013, the field has produced 47.3 billion standard cubic metres (1,671 billion standard cubic feet) of gas and 99.5 million barrels of condensate.

Shah Deniz 2

Shah Deniz-2 discussions started in 2008 with the main discussion topic being the selection of transportation routes for additional gas volumes. Five-year-long intense negotiations finalized with signing of Final Investment Decision (FID) on 17 December 2013 in Baku, Azerbaijan.

Shah Deniz platform - Photo Shahin Abasaliyev - Statoil_0.jpg

Nine companies agreed to sign a gas sales agreement (GSA) with the consortium:

  • Axpo Trading AG
  • Bulgargaz EAD (Bulgaria)
  • DEPA Public Gas Corporation of Greece S.A. (Greece)
  • Enel Trade SpA (Italy)
  • E.ON Global Commodities SE (Germany)
  • Gas Natural Aprovisionamientos SDG SA (Spain)
  • GDF SUEZ S.A. (France)
  • Hera Trading srl (Italy)
  • Shell Energy Europe Limited (UK)

Out of total 10 bcm intended for Europe, 1 bcm will go to Bulgaria and Greece and the rest will go to buyers in other countries, mainly Italy.

 

Case Study - Project Portfolio Model - Global Satellite Operator and Manufacturer

 

Yet another company to be presented in our ongoing project portfolio management series is a satellite operator and producer that operates several dozen satellites providing communication services to businesses and government agencies, and broadcast TV and radio channels to audiences worldwide.

Despite an acceptable financial performance the executives of the company felt that there were several challenges awaiting the organization in the near future. One of the potential problems were saturated existing markets and stiff competition from other satellite operators.  As a result the company could not assure the same growth rates as were achieved in the previous years.

The organization needed to move into the new emerging markets and develop new products and services for both developed and developing countries.

 

Strategy

As a result of the analysis of the challenges facing the organization the executive management created the following strategic plan for the upcoming five years:

  • Maintain market shares in developed countries
  • Increase investments in the developing countries
  • Improve innovation
  • Improve vertical integration of the organization (develop end-to-end solutions)

 

The Scoring Model

The scoring model developed by the company management consisted of the following six variables (see also Table 1):

  • Strategic Alignment
  • Customer Need
  • Synergies with the Existing Business
  • Technical Feasibility
  • Profitability (Payback)
  • Commercial/Technical Risk

 

Table 1

Sat-op-portfolio.JPG

The first variable added to the model was the popular "strategic alignment" category. The points have been allocated in the following fashion:

  • Fits 1 of the criteria - 1 point
  • Fits 2-3 of the criteria - 5 points
  • Fits  4 of the criteria - 10 points

The strategic fit variable has been deemed to be a "kill" category. If the project reflected none of the company strategies it would be automatically removed from the list, unless it was designated as "joker" or a regulatory project.

Case Study - Project Portfolio Model - R&D Department of a Product Company

Introduction

In my professional engagements I very frequently get to develop project portfolio management models together with the executives from various companies. Today I wanted to share yet another very interesting case study with my readers: the company we are going to examine is a very successful bearings manufacturer. As a matter of fact for a number of years they have focused all of their research and development efforts solely on the bearings production.

However, under a considerable pressure from their sales team, the executives of the company has at one point of time decided to review their strategy. The sales department has been for several years insisting that when they talk to their customers, they keep asking questions about other bearing-related products such as sealants, lubricants and electronic components which the company has not been producing at the time.

Strategy

As a result of the above-mentioned events the company management came up with the new strategy for the R&D department that consisted of the following  initiatives:

  • Develop new (i.e. lubricants, sealants and electronic components) product families
  • Develop attractive products (i.e. something that is really demanded by our customers)
  • Increase revenues and profitability by developing new product families
  • Increase market share in the new markets

The Scoring Model

The scoring model developed by the executives included the following variables (see Table 1):

  • Strategic fit
  • Possible synergies
  • Financial value
    • Payback
  • Technical complexity (skills in-house)
  • Market attractiveness
  • Competition and IP

Table 1

Jamal's Musings - How One Simple Question Can Cut the Project Budget from 500K to 2K

Today I wanted to share a very interesting story that, in my opinion, demonstrates the importance of asking questions while working on the projects. This example comes from my personal experience while working at an IT department of a very large international financial institution.

My boss: “Risk Management is having problems with their desktop statistical analysis software. They are asking for an Enterprise Edition of the software and a dedicated server. Our initial ballpark estimates for this project are at $500,000 and we have neither the money in our budget, nor the resources to accomplish that. You mission is to explain to them that they are not getting this stuff in the next couple of years!”

Me (going over to the Risk Management Department): “What is the problem?”

Risk Management people: “We have to store files on the shared server because of the privacy laws and access them through our desktops. Processing times are very slow. We have to upgrade to the Enterprise Server Edition and get a new server”

Me (calling Network and Infrastructure people): “But why is the processing slow? Is it the network issue or the overloaded server?”

Network people: “We checked the network and it does not appear to be overloaded”

Infrastructure people: “Are you kidding me?! The entire building is using this server. Of course it is overloaded and slow”

Me: “So, what can we do?”

Infrastructure people: “We will give them a dedicated NT server; we have one lying around here somewhere …"

Result: The $500,000 project was diminished to a $2,000 server and 3 man-days of work-problem solved.

Case Study - Project Portfolio Model of a Global Oil and Gas Producer

Introduction

The company to be discussed in this article is one of the largest oil and gas producers in the world. In this particular case we will examine the portfolio management system designed by one of the organization's regional IT departments.

The situation at the company was such that all the major IT projects were undertaken by the company headquarters, while the local IT departments were responsible mainly for servicing the needs of the offshore platforms. The executives of the regional department felt under constant pressure as many of the projects proposed by them, were denied by the headquarters an, yet, they remained responsible for the safety, reliability and security of all the offshore operations.

As a result they felt that creation of a portfolio scoring model would help them with (a) prioritization of their project proposals and (b) demonstration of the importance of their initiatives to the executive managers at the headquarters.

Strategy

The overall company strategy has been developed at the organizational headquarters and consisted of approximately ten strategic initiatives. However the strategies directly related to the regional offices were:

  • Safety and reliability of all the operations
  • Fiscal responsibility
  • Simpler and more standardized procedures

The Scoring Model

The scoring model created as a result of a one-day facilitated project portfolio management session is presented in Table 1.

 

Table 1

As can been seen it was a very unusual model when compared to other scoring matrices described in the book. One may call it a purely risk-based approach to project prioritization.

The model included the following variables:

Case Study - Project Portfolio Model of an Eastern European Electricity Company

 

Introduction

The energy company to be analyzed in this section of the chapter is an Eastern European electrical company that has until recently enjoyed a full monopoly, selling the electricity at one fixed rate irrelevant of whether it was dealing with private residences, small, medium or large businesses or government agencies. However the recent legislation by the country's government allowed for the deregulation of the electricity market. This implied that any energy company from the three or four neighbouring countries would be able to enter the market and compete with the former monopolist when it came to selling electricity to both private residences and businesses.

In addition the company management felt that the value of the projects they have been delivering so far was too low. Also, the executives mentioned that they seemed to have too many initiatives on the go while utterly lacking the resources (primarily human) to deliver all of them on-time and on-budget.

 

Strategy

The company strategy has been well-defined before the project portfolio workshop and, considering the recent deregulation, consisted of the following elements:

  • Need to design attractive products. This implies:
    • Various size of electricity packages
    • Fixed and variable rate packages to suit different customer needs
    • Extend loans to the customers needing them, especially the start-up businesses
    • Create different packages for households and businesses
  • Increase revenues and profitability
  • Improve public relations damaged by the years of monopolistic presence in the market
  • Social responsibility - initiate more green programs

 

The Scoring Model

The scoring model developed during the facilitated portfolio management session contained the following variables (see Table 1):

  • Strategic Fit
  • Competitive Advantage
  • Market Share Increase
  • Time to break-even
  • Resources
  • Technical Complexity

 

Table 1

Jamal's Musings - Project Management in History: The University Construction

A government of one of the countries in the Gulf region decided to embark on a project of building a multi-campus university in several - at times remote - locations. It was decreed that the said project should take five years to implement and the cost should be around US$200 million. It is not completely clear even after talking to several people actually involved in the endeavour right from the very beginning whether these constraints were just "dropped" from the very top of the government levels or if these were at least a very high-level estimates generated by a qualified party.

The scope of the project, at least at a very high level, was also thought to be well-understood. It included the following requirements:

  • Engineering design of all five campuses (both conceptual and final)
  • Construction of classrooms and lab training facilities
  • Construction of dormitories
  • Procurement and installation of all necessary equipment
  • Setup of a new IT infrastructure including several data centers
  • Design, development and delivery for over100 new courses,
  • Setup and customization for a web e-learning portal

The primary contractor has decided to proceed with five different vendors to be responsible for different parts of the scope of the project. As a result, each vendor was requested to provide his version of the solution with respect to their vertical area of expertise. The primary contractor decided to simply aggregate individual scopes provided by the vendors into one united program scope. Consequently no thought was given to the proper integration between different scopes.

Finally, it turned out that the original RFP issued by the customer neglected to mention that the university will be constructed in an open desert with no water, electricity, sewage or roads. And since the primary contractor neglected to verify the existence (or absence, to be more precise) of all these ingredients, the budget and duration for the project mentioned in the original contract were, to say the least, inadequate.

Case Study – Portfolio Scoring Model - Western European Pharma

Company assets were in dozens of billions of dollars in 2012 whereas its income was measured in billions of dollars. Despite an overall strong position of the organization, the executives of the company were somewhat concerned with a slow growth in revenues (4-8% per year) and net income (1-3% per year). Consequently they felt that the company was been falling behind the competition and, in the long-term, in danger of losing the leading position in the pharmaceutical industry.

The case study below is focusing on the organizational R&D projects – both pharmaceutical and diagnostics – while ignoring the maintenance and stay in business ventures.

Strategy

Just like in the previous example the company executives have developed a very clear unequivocal strategy void of any ambiguous goals. The strategy consisted of four pillars:

  • No OTC products – the company decided to avoid the generic drug market altogether and focus on the prescription drugs only due to IP protection and higher profit margins.
  • Five research areas – the company decided to focus its R&D efforts on five key pharma field including cardiology, cancer, infectious diseases, diabetes and neuroscience.
  • Focus on personal healthcare - attending to the physical needs of people who are disabled or otherwise unable to take care of themselves
  • Personalized drugs -  drugs that can customized exactly to the needs of a particular patient, including the exact dosage and combination with other medications.

Scoring Model

The portfolio committee decided to employ the following variable in the construction of their scoring model:

  • Market Attractiveness (How many patients are out there?)
  • Strategic Fit
  • Innovativeness
  • Risk (both technical and market)
  • Effectiveness
  • Cannibalization
  • Core competencies
  • Competitors
  • Financial (Revenue)

Table 1

Selection Criteria

Points Awarded (Maximum possible 135)

Joker