AGILE IN CAPITAL INTENSIVE PROJECTS
Authored by Mark Laurence, ADAPTOVATE
Capital-intensive businesses, characterized as those requiring significant investments in long-lived assets, have been slower to adopt Agile ways of working despite well-documented benefits across most industries.
The perception that Agile doesn’t apply to Capital Intensive projects is unfounded. Agile ways of working unlocks significant value and helps organizations gain and maintain a competitive advantage. Businesses commonly divide capital projects into three phases – Planning, Design, and Execution. Agile ways of working help during the Planning and Design phases by enabling faster decisions and reduced rework (less wastage). Physical construction through the Execution Phase makes a waterfall approach more applicable to this activity.
This article explores how organizations might realize the benefits Agile brings to the Planning and Design phases. We consider the impact on business risk and adaptability and recommend how to use two of the most popular Agile methodologies, Scrum and Kanban.
Planning Phase
The Planning Phase of a project begins with teams considering a large set of opportunities and assessing each option’s likely approaches and success. This phase may involve:
- Sketches and idea generation
- Alignment with regulatory bodies
- Feasibility/cost/benefit studies
- Scenario modelling
At this stage of a capital project, ambiguity is highest, and certainty is lowest.
Some of the common challenges in the planning phase can include:
- A low conversion rate of approved project business cases for implementation results in a lot of work being done at a low return of business value
- Slow pace from planning to execution phase resulting in a small timeframe for implementation
- Business cases include sound technical engineering decisions with sometimes limited consideration of broader requirements on site (e.g., shutdown periods, materials required, etc.)
Agile in the planning phase helps enable faster decisions through iterative delivery with smaller increments of work and quicker feedback from key stakeholders.
Agile ways of working break complex problems into manageable modules and delivers working solutions in each cycle of work that are ready for stakeholder feedback. Each cycle of work is delivered over a short time-boxed period (sometimes called a “sprint”). Completing a small iteration in each sprint realizes business value sooner and helps check the progress made against the stakeholder’s intention. By the very nature of being a smaller increment, the piece of work will be completed sooner.
Using an Agile framework in the planning phase encourages aligning with key stakeholders early & establishing regular feedback cycles over shorter periods (eg feedback every two weeks instead of 3 – 6 months). Regular stakeholder feedback reduces rework and the amount of work completed, which in hindsight, was unnecessary. The team focuses on doing just the amount needed and iterating based on regular feedback, enabling faster decisions in the planning phase.
Using an Agile approach, an International Oil & Gas firm reduced time spent in the planning phase by 85% and reduced costs by $500m. The team used constant feedback cycles to reduce the number of rework requests as they better understand stakeholders’ needs early in the process, even if those needs were not evident at commencement.
Another Oil & Gas firm was able to adapt planning mid-process using agile ways of working to allow for new information to be included in their planning. The team started the planning by analyzing a set of possible approaches that would mitigate existing potable water leakage on-site, forecast to cost millions of dollars per annum. Following the outbreak of a pandemic and an oil price war, the team was challenged to revise the strategy mid-planning to adapt to the changing commercial circumstances presented.
Design Phase
The Design Phase of projects involves establishing greater detail for work scoped in the planning phase. A design might include detailed drawings, timelines, contractor relationships and regulatory approvals. At this point, the project has less ambiguity than the planning phase. Plans enabling the above will need to be delivered, requiring higher specialization amongst stakeholders and contractors – for example, detailed drawing packages.
Some of the common challenges in the design phase can include:
- A small change request has a large flow-on effect on the wider deliverable creating significant rework
- The visibility of workflow between trusted contracting partners and the contracting organization can be limited, which acts to slow effective decisions and introduce waste to the process
Agile in the design phase helps reduce waste through increased transparency and less rework.
Cross-functional teams with members from trusted contractors and your organization can help break down silos and improve efficiency and overall decision quality by engaging the right people with the right skillset at the right time. Increased transparency helps break down silos as the cross-functional team has a single source of truth to drive more effective decision-making.
Increased transparency also helps reduce uncertainty around the progress of work achieved to date, dependencies within and across teams, and clear accountability for work to be delivered. A clear understanding of accountability and dependencies within and across teams helps reduce the amount of rework needed.
ADAPTOVATE helped a major oil company that was designing infrastructure to transport oil from a subsea reservoir to an onshore plant. Using an Agile framework through the design phase helped them determine the competitiveness of various transport options in terms of cost, time and difficulty. Their estimated cost reduction was 35% through the design phase, which they attribute to better alignment with stakeholders and lower rework. Additional agile pilots demonstrated the elimination of rework and defects, achieving a tight timeline and even allowing for new process change management.
An ADAPTOVATE client perfectly described what Agile brings to the design phase of a Capital Intensive project. “You have the ability to converge and diverge quickly on design and without much regret – once you start laying concrete, you’ve got a big problem to change”.
Agile reduces risk and increases adaptability
An Agile framework helps reduce risk and increase adaptability compared to a traditional approach. In traditional project management, risk only decreases near the end of the project when unknown variables become known. Using an agile framework with frequent stakeholder check-ins, showcases and prioritized work to business value, we hope to solve those unknowns earlier, thereby reducing risk. Internal and external stakeholders can provide feedback on an iteration to determine feasibility, alignment with expectations, and required or requested amendments. Each time stakeholders check in, the risk is reduced a little bit more.
Typically, using a traditional approach, the team assemble all the stakeholders, note their requirements and requests sign-off from all the key stakeholders. Once sign-off is given by the key stakeholders, the project plan is set in stone. If they want (or need) any changes, the team must submit a change request document. A hallmark of Agile practices is the ability to change requirements whenever required, for example, when new information becomes available. Because the team expect new and changing requirements throughout the project, they can build processes to accommodate them. Adaptability is as much a mindset change as it is a process change. The team needs to view changes as a step toward a better final product, not a failure.
There can be a misconception agile means less or even no governance. Agile does not involve any reduction in rigor surrounding governance. In fact, the opposite is true: agile structures increase transparency such that corporate governance is enhanced. Agile processes sit comfortably within the existing phase-gate approach used for large-scale capital projects at all delivery phases while demonstrating significant improvements in results: cost, time and output quality. Agile complements corporate governance by mapping accountable persons and processes to the existing governance framework, and Agile processes work best with consistent, accountable leadership with single decision points at appropriate detail levels.
Scrum and Kanban
Two common Agile structures are Scrum and Kanban. Although both follow the core Agile principles, each framework has its benefits and trade-offs.
Scrum uses fixed-length sprints where a team commits to delivering a piece or pieces of work within that sprint. Scrum allows the team to effectively plan the next sprint regarding resource allocation and how to achieve the work.
By contrast, Kanban creates a continuous flow of work but limits how much is in progress at any time. The team prioritizes finishing work before picking up new work from the backlog. There are two key benefits to Kanban. First, you can continuously prioritize the backlog to achieve the most valuable work sooner. Second, work of varying sizes is placed in the backlog as is; no need to create uniform-sized chunks.
At a Capital Projects discussion ADAPTOVATE hosted, a panelist told the audience, “You need to be agile in the deployment of Agile. Use the parts that work best for your business.” Her comments resonated with the other panelists because it was an issue with which they had all grappled. Recognizing that different teams can use different Agile frameworks lets you better adopt a way of working that fits within your organization’s DNA.
For example, a team still defining potential options in the early stages when ambiguity is high may choose Scrum. They benefit from the regular feedback loop, which occurs every sprint. Closer to the end of the project, when more options are confirmed, Teams may choose Kanban as it allows them to get on and continuously deliver the work.
Conclusion
Agile ways of working are useful during the planning and design phase of Capital Intensive Projects. Regular feedback reduces how far teams progress before rework is required, and smaller iterations deliver business value sooner. Agile allows greater flexibility to develop creative solutions in a constrained environment when changes in later stages may become expensive or impossible.
Learn more about how ADAPTOVATE can assist your heavy industry organization with Agile Ways of Working at scale.
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