Five Rules for Managing Large, Complex Projects
Recent research on megaprojects — defined as projects costing more than $1 billion — reveals five lessons that can help executives manage any large-scale project more effectively.
Topics
“Megaprojects” — defined as projects with budgets exceeding $1 billion — are important contributors to numerous sectors, including health care, defense, mining, telecommunications, transport, energy and water infrastructure, sporting events, science, and manufacturing. They represent a significant proportion of many nations’ economic activity and profoundly affect productivity, social cohesion, and the environment.1 Yet megaprojects have proved notoriously difficult to deliver on time and on budget; one estimate suggests 90% of them end up over budget.2 Two prominent examples are the Sydney Opera House in Australia, which was 10 years late and a staggering 1,400% over budget when it opened in 1973,3 and the “Big Dig” Central Artery/Tunnel Project in Boston, Massachusetts (original estimate $2.6 billion, actual cost $14.8 billion).
Why are megaprojects so difficult to manage? The reasons include technical challenges, changes in design and operational requirements, increases in costs, disputes over responsibility, and new regulations. Complexity usually increases with project scale, and complexity can give rise to uncertainty and an inability to foresee the difficulties, changing conditions, and unanticipated opportunities that will be encountered once the project is underway. In this article, we argue that one way to manage the uncertainties is to innovate throughout the course of the project. What’s more, we believe our suggestions are applicable to all large-scale, long-term projects — not just projects with billon-dollar budgets.
Specifically, we’ll distill five rules for innovation in large, high-risk projects, providing managers with guidance on how to modify their plans and processes when opportunities arise or conditions change. Our findings are based on more than 10 years of research into megaprojects. (See “About the Research.”) The projects we studied included:
- High-Speed 1 (1998-2007), a high-speed, 109-kilometer railway from London to the Channel Tunnel, which cost £5.8 billion (roughly $7.5 billion at today’s exchange rates)4.
- Heathrow Terminal 5 (2002-2008), a new airport terminal, hotel, car park, subway line, and air traffic control tower, which cost £4.3 billion.
- Infrastructure for the London 2012 Olympics (2006-2012), which cost £6.8 billion.
- Crossrail (started in 2007, scheduled to open in 2018), a 118-kilometer railway across London that has a budget of £14.8 billion and includes 42 kilometers of new railway tunnels and 10 new and 30 upgraded stations.
References
1. B. Flyvbjerg, N. Bruzelius, and W. Rothengatter, “Megaprojects and Risk: An Anatomy of Ambition” (Cambridge, U.K.: Cambridge University Press, 2003); and B. Flyvbjerg, M. Garbuio, and D. Lovallo, “Delusion and Deception in Large Infrastructure Projects: Two Models for Explaining and Preventive Executive Disaster,” California Management Review 51, no. 2 (winter 2009): 170-193.
2. B. Flyvbjerg, “What You Should Know About Megaprojects and Why: An Overview,” Project Management Journal 45, no. 2 (April-May 2014): 6-19; and A. Davies, M. Dodgson, and D.M. Gann, “Innovation and Flexibility in Megaprojects: A New Delivery Model,” in “The Oxford Handbook of Megaproject Management,” ed. B. Flyvbjerg (Oxford, U.K.: Oxford University Press, 2017), 313-338.
3. B. Flyvbjerg, “Introduction: The Iron Law of Megaproject Management,” in “The Oxford Handbook of Megaproject Management,” 1-18.
4. “Committee of Public Accounts – The Completion and Sale of High Speed 1: Written Evidence From Andrew Bodman,” https://publications.parliament.uk.
5. D. Sull and K.M. Eisenhardt, “Simple Rules: How to Thrive in a Complex World” (New York: Houghton Mifflin Harcourt, 2015); and K.M. Eisenhardt and D. Sull, “Strategy as Simple Rules,” Harvard Business Review 79, no. 1 (January 2001): 107-116.
6. A. Davies, D. Gann, and T. Douglas, “Innovation in Megaprojects: Systems Integration at London Heathrow Terminal 5,” California Management Review 51, no. 2 (winter 2009): 101-125.
7. House of Commons Transport Committee, “The Opening of Heathrow Terminal 5: Twelfth Report of Session 2007-08” (London: The Stationery Office Ltd., Oct. 22, 2008), https://publications.parliament.uk.; R. Thomson, “British Airways Reveals What Went Wrong With Terminal 5,” Computer Weekly, May 14, 2008, www.computerweekly.com; and E. Clarke, “Counting the Cost of Crisis at Terminal 5,” CNN, April 4, 2008, www.cnn.com.
8. See “Awards We’ve Won,” Heathrow website, www.heathrow.com.
9. National Audit Office, “Case Studies: Improving Public Services Through Better Construction” (London: 2005), www.nao.org.uk.
10. S. Lenfle and C. Loch, “Lost Roots: How Project Management Came to Emphasize Control Over Flexibility and Novelty,” California Management Review 53, no. 1 (fall 2010): 32-55.
11. See www.neccontract.com.
12. A. Davies and I. Mackenzie, “Project Complexity and Systems Integration: Constructing the London 2012 Olympics and Paralympics Games,” International Journal of Project Management 32, no. 5 (July 2014): 773-790.
13. A. Davies, S. MacAulay, T. DeBarro, and M. Thurston, “Making Innovation Happen in a Megaproject: London’s Crossrail Suburban Railway System,” Project Management Journal 45, no. 6 (December 2014-January 2015): 25-37; M. Dodgson, D. Gann, S. MacAulay, and A. Davies, “Innovation Strategy in New Transportation Systems: The Case of Crossrail,” Transportation Research Part A: Policy and Practice 77 (July 2015): 261-275; and T. DeBarro, S. MacAulay, A. Davies, A. Wolstenholme, D. Gann, and J. Pelton, “Mantra to Method: Lessons From Managing Innovation on Crossrail, UK,” Proceedings of the Institution of Civil Engineers - Civil Engineering 168, no. 4 (November 2015): 171-178.
14. See the i3P website, www.i3p.org.uk.