Hello, my name is Eoin O’Murchu and welcome to the Deloitte’s podcast series Futureproofed. This podcast explores and challenges how technology and innovation is disrupting the delivery of complex programmes across the wider real asset sectors, including infrastructure, major capital projects and real estate.
Today's episode is all about the Infrastructure Initiative Project 13, a global industry change movement focused on the delivery of major infrastructure programmes, and I'm delighted today to be joined by two experts in their respective fields.
Melissa Zanocco OBE is Head of Programmes for the Infrastructure Client Group. She’s co-chair of both the Project 13 Adopter Community and the Digital Twin Hope Community Council, as well as a member of the Construction Leadership Task Force and Florence Julius is a Deloitte director within the Real Assets Advisory Practice with over 20 years consultancy and industry experience working across the wider infrastructure sector. She's worked extensively with clients in transport, water and nuclear under asset related challenges, with a particular focus on intelligent client capability and cost efficiency.
Welcome to you both.
Melissa, my first question to you, the challenges around the real asset and construction sectors are well documented at present, including the current inflationary pressures in the market. From an industry perspective, where are organizations facing the greatest barriers to success?
Melissa Zanocco: Well, I would probably pick out three key points, and the first being that we need to focus on achieving better outcomes for people and nature through investment and infrastructure. So, outcomes, or you could call it the purpose of what we are delivering currently gets lost in the emphasis on business case cost benefit ratios. And the second one is that in our vision for the built environment, which has been translated into policy in IPA’s Transforming Infrastructure Performance, it refers to the built environment as a system of systems where economic and social infrastructure is inextricably linked with the systems of the natural environment. But currently we deliver siloed standalone projects rather than seeing them as interventions on the overall system. And then the third one would be around value. And that value cannot be defined through competition. So, we need to understand value in terms of outcomes and affordability, not in terms of the lowest cost to deliver a scope of work.
That value and competition point and the tension around it is really interesting, particularly when we consider the challenges in delivery across the wider supply chain at present. How can we best drive value in that supply chain in a consistent manner?
Melissa Zanocco: Well, I would say that by moving away from approaches that seek to transfer risk to the supply chain. So instead, we need approaches that recognize the value in long term relationships and particularly in relation to capability development and supply chain resilience.
Florence, just picking up on what Melissa said there, where do you see the greatest barriers to success in the delivery of major capital programs?
Florence Julius: For our clients within the transport and water sectors budgetary constraint is impacting on their affordability to deliver projects to enable them to continue to deliver a reliable service level to their customers and also meet regulatory obligations. So, they have to prioritize what gets done and when. The ability to prioritize is often challenging due to the maturity of the business capability to do so.
So, when you mean capability, what are you referring to specifically?
Florence Julius: So, we’re talking about data capability on the asset base to inform investment planning and prioritization and process capability. And I’ve seen one of our clients actually do this well, where they’re taking a market-led approach to investment plan based on demand and supply of services. But on a final point to this it is having the ability to draw on the capability of the supply chain, understanding when they need to buy and where they need to spend money to maximize value from the market. Some of our clients in the nuclear and transport sector are actually shifting towards being an intelligent client, and I’ve seen some really well, others still on their maturity journey. But what this requires most is the ability to be outcome based driven, to have that outcome driven mindset when scoping and commissioning a project. And it goes back to what you were saying earlier on, Melissa around focusing on the outcomes.
That’s all really interesting and I think your focus with really tangibly point their capability outcomes etc. Melissa, how did the challenges that you and Florence have outlined compared to other industries and sectors?
Melissa Zanocco: And that’s actually a really good question because it touches on a fundamental reason for why the infrastructure client group was set up, because it was slow realization that everyone has the same issues at the end of the day. So, the ICG members and the Project 13 adopters represent transport and water, energy, nuclear and broadband. And we find that the greatest learning across sectors as within a sector, you tend to gravitate towards believing that your view is right, but real change comes from those outside who do things differently. But I will say that we are behind in comparison to other sectors, for example, manufacturing. But that also means that we have the biggest opportunity.
So, there’s a commonality between projects and sectors that isn’t always recognized readily, basically.
Melissa Zanocco: Yeah so the ICG has been on a journey from the assumption at the start that each project is completely unique and therefore the clients couldn’t learn from each other to understanding that what actually sits beneath most issues is people, culture and behaviors. And we stay at the strategic and the principles level so that it’s more widely applicable and there are lots of other organizations looking at the detail. So it’s important for the ICG to actually focus on the things that only clients need to lead on and that are the biggest levers to change. And I should also say that Project 13’s part of a programme and ICG programme includes task groups on digital transformation and carbon as well, because they all enable each other and will resolve the problems together.
It’s together points, really interesting, I think one of the challenges I’ve seen in cross industry is that we’re not really good at sharing insights and lessons in a structured manner, and there’s a tendency for major problems to be somewhat inward facing in terms of their priorities and objectives. As you’ve just highlighted Melissa. Florence is the current model fit for purpose, how we deliver programmes or does it need to be reassessed?
Florence Julius: Well, I wouldn’t necessarily say it’s broken and I wouldn’t say it’s perfect either. There are multiple players trying to work towards a common set of objectives. This itself brings a layer of complexity to how projects are delivered. So, the way I see it is you need a delivery framework and human architechture that is accommodating and adaptable to support this complex environment throughout the project life cycle stages, because this often changes throughout the project cycle. But just on that point, I’d like to bring Melissa in on this, because you’ve been working closely with the infrastructure client group and industry to impact change in the wider industry through Project 13 Initiative. So really, it’ll be good to get your views on this.
Melissa Zanocco: Well as you said, Florence, multiple parties trying to work together an enterprise does not happen on its own. So Project 13 is underpinned by five pillars which reflect this, so three of the pillars there is governance, organisation and integration are about setting up the enterprise to operate as a high performing team. So, with the right governance and leadership in place and the capability to operate in an integrated fashion, I.e., moving from construction to production and almost assembling assets rather than constructing them. And then the last two pillars are capable owner and digital transformation, and these are both enablers and they determine the pace at which change can happen. And the maturity of whether you have simple collaboration or a high preforming enterprise.
I think when you outline it in those pillars, it really resonates particularly with people who are experiencing industry. How can we impact the outcomes of programmes for the better using these and how can we apply them in principle?
Mellisa Zanocco: Yeah, well as well as the pillars and the Project 13 framework includes a set of principles, and these lay out the key changes required to deliver more effectively and efficiently. And they’re based on best practice that already exists in the industry and some of those key changes we’ve touched on, it’s focusing on outcomes for the ultimate customer rather than outputs and seeing projects as interventions on the overall system, but also rewarding based on outcome performance and allocating risk according to capability to mitigate it and where possible, jointly owned.
I think it’s exciting and refreshing to hear the impact and particularly around the risk allocation. That’s a really interesting point and I’m sure the application of a project routine has required a concerted effort to shift culture and current ways of working that a lot of organisations are used to. Florence, where is the greatest level of investment required to unlock the potential of project 13 and its initiatives?
Florence Julius: There’s two areas that I’ve seen. I think one of them is the willingness to change from the traditional ways of working to be more outcome based focused and build that investment in people capability to be able to define outcome based requirements, scope work and package work in a way that allows them to better work with the supply chain and also be more cost efficient.
Melissa, you mentioned digital transformation previously. Do you view this as being fundamental, as an enabler to effecting positive change across the delivery of major programmes?
Melissa Zanocco: Well, so what we’ve learnt is that Project 13 and Digital Transformation enable each other. So Project 13 creates the enabling environment to exploit digital to the full. And by this, I mean getting the full benefits of any digital intervention. So, like, for example, digital twins across the whole lifecycle of the asset rather than in just one bit, like, for example, the construction phase. And it can also enable it to use it across the program or across the portfolio or across organizations. But then equally, digital transformation allows the flow of data and information across the enterprise. And when the current adopters lasted the maturity matrix assessment, their biggest gap between where they are currently and where they aspire to be was in digital transformation. We actually do an annual benchmarking report and we identified some of the reasons for this and one of the gaps is between the increase in data that we see available but actually decrease in better decision making and what we see as being the needed to fill those gaps is investment in digital operating models and common data environments to ensure that information gets to the right people.
There’s probably a piece there around as well investing and where you invest in that digital technology. Can you talk to any of that in any regard, how we prioritize investment?
Melissa Zanocco: Yes. Well what also came out of the survey is that there’s a starting to be an awareness with the board that they need to invest in digital, but we’re not actually still unlocking that investment. And again, what we think would fill that gap is the articulation and quantification of benefit.
Melissa just following up on that and digital transformation creates additional space for innovation, doesn’t it? What can major delivery and management organizations do now to embed a cultural change across their organization?
Melissa Zanocco: Well, I would probably choose three things for that. The first is that projects and within that procurement compete on capability and ideas rather than cost or scope with value being defined at the outcome level. Number two, saying the fact that the capable owner procures for the capability to achieve the outcome and they get to choose those who offer the most innovative solutions. And then the third one is that the partners in the integrator are jointly incentivized to outperform. So they work together to come up with innovative ways to do things more effectively, but also they can respond to external shocks like Covid or inflation or something like the war.
And Florence just picking up on that. I guess from what Melissa has talked to, there are a lot of practicalities of it, but what are some of the risks associated with that?
Florence Julius: I mean, what I’ve seen is that we’re really good at coming up with innovative initiatives and solutions, but where we tend to fall off is in implementing them. And this requires strong leadership and buying from the rest of the business. So, the ability to get people on board on the journey and have that strong communication and that culture of change, these are some of the risks that we’ve seen.
I think while brief, we discussed a lot of really interesting points around Project 13, particularly around the digital transformation element, which has been really, really interesting. I guess finally the last question I want to ask you both is out of all the aspects we’ve discussed today, what is the most fundamental element to setting capital project and real asset organizations up for success?
Florence Julius: There needs to be a change in mindset to how we view the establishment of asset management and capital delivery organizations. And that shift needs to be moving towards being outcome based rather than how we normally do things, being prescriptive and constrained by what we know and how, so that there needs to be that change.
And Melissa.
Melissa Zanocco: Well, I’m actually going to pick up on something Florence just said earlier about people. For me, it’s about people and particularly leaders. So, none of these things work if you don’t have people that walk the talk and that want it to work. And we also need boundary spanning leadership. So that’s people who can see the system of systems that makes up the built environment and understand how what they do fits into the system.
I really like that how people and systems coming coming together to deliver great programs. It sounds ideal and I think that’s a really good place to leave it. My thanks to both Florence and Melissa for being excellent guests and giving great insights and perspective. It’s fair to say that Project 13 is a fascinating topic with lots to cover and really is shaping the future delivery of programmes.
If you enjoyed this episode, please do take a moment to like share and subscribe. Keep an eye out for future episodes and topics such as digital transformation, delivery excellence, and other exciting, interesting themes in the capital projects and real assets space.
If you want to know more about Deloitte, please search Deloitte Real Estate Advisory Online, where we have a host of blogs, for you to explore. Please also check out Alice technologies.com for more insights on construction optimization.
So until next time, thank you all for listening.
