When the Business Environment Changes Suddenly, a Rapid Reassessment of Strategy Is in Order
By Olusola Olubadejo, PMP
After global crude oil prices dropped precipitously between 2014 and 2016, Nigeria's economy slipped into recession. At Cakasa, where we earn revenue primarily by executing projects for major oil-and gas-producing companies like Shell, ExxonMobil and Chevron, the impact of the price drop was swift and profound. So we re-evaluated our strategy and operations to both ensure the organization's survival and position it for post-recession growth.
We decided to do something counterintuitive: form alliances with rivals to reduce overhead and share risks.
In the end we enacted two significant updates to Cakasa's strategy—and streamlined project execution processes to drive efficiencies.
With several competitors in the Nigerian market similarly challenged by the recession, we decided to do something counterintuitive: form alliances with rivals to reduce overhead and share risks. After getting clients’ buy-in—assuring them an alliance won't impact quality or cost, for example—we shared resources such as personnel, office space, computer hardware and software. Paradoxically, by working together we gained a competitive advantage.
We sought new project opportunities in two ways. First, we went local. International oil companies were scaling back projects in Nigeria and divesting assets to locally owned companies, so we pivoted to increase business among these Nigerian firms. The projects were smaller and less profitable than what we were used to, but they helped sustain us.
Secondly, we followed an idea of the late University of Michigan business school professor C.K. Prahalad. He once argued that firms should not seek to simply position themselves well within a market, but should seek to redefine markets in their favor. Although Cakasa's engineers were primarily experienced in the design of oil and gas facilities, we are trying to adapt these skills to other areas and have bid on projects in the power and infrastructure sectors.
The benefits of more efficient project execution are straightforward. By reducing the cost and duration of delivery, we could offer more competitive prices to clients, thereby growing the business.
Our first approach in this area was to reduce the number of review gates for deliverables. With fewer gates, a project would require fewer resources. Typically we'd have four or five gates: issue for interdisciplinary check, issue for review, issue for approval, issue for design and, sometimes, issue for construction. By merging the review and approval gates, we ended up with three or four gates, depending on the project scope.
Our second approach was to push for more face-to-face review of deliverables. Our traditional process was to issue deliverables to the client, then wait for a response. But this approach often slowed the project. Once we explained to clients that more face-to-face reviews could reduce a six-month schedule by as much as one month (saving them money!), they were on board. It was a win-win—and one more way we've weathered a painful economic storm. PM
|Olusola Olubadejo, PMP, is a strategic planning manager at Cakasa in Lagos, Nigeria.|