Managing Volatility — Adapt or Fail

Transcript

Narrator

The future of project management is changing fast. On Projectified™ with PMI, we’ll help you stay on top of the trends and see what’s really ahead for the profession—and your career.

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Stephen W. Maye

Hello, I’m Stephen Maye, and this is Projectified™ with PMI. I’m here with my co-host Tegan Jones, and today we’re talking about managing volatility. Disruption has become a constant force in the marketplace, upending entire industries and reshaping longstanding business models.

We’re seeing tech giants entering traditional industries and fundamentally shaking things up. I just saw that Amazon made a play to buy the prescription management service PillPack, and you could imagine that would have major implications for how drug companies operate.

Tegan Jones

Yeah, it could be a real game changer. And this kind of thing is happening everywhere. In fact, according to a recent survey from PwC, 56 percent of CEOs—and this is across sectors—predict a big company from another industry will move into their industry and become a disruptor. This kind of volatility in the business landscape can mean chaos for project teams as priorities are shifting and organizations are pivoting to try to stay competitive. But it also gives project and program managers an opportunity to shine.

Stephen W. Maye

Right. And project leaders are the people who make those pivots work. I recently saw a report by Deloitte that discussed how organizations can deal with volatility, and it said the key is having a system in place to deal with unexpected change, a system that would do four specific things: accelerate discovery, confront bias, prepare for surprise and, my personal favorite, scan ruthlessly.

Tegan Jones

Well, you’ve got to be ruthless, right? You don’t want to miss a thing.

Stephen W. Maye

Well, you can’t afford to. And I just thought that was interesting because these methods for dealing with disruption really align with what project management brings to an organization.

Tegan Jones

Yeah, I think that’s right—objectively gathering information, identifying, planning for risk, managing change. That’s the kind of stuff Deloitte is talking about, and those are the practices that really keep an organization agile.

Stephen W. Maye

And we have some great guests lined up to talk about what this looks like in the real world. We’ll hear from Jennifer Mercer, the program manager for arctic research support and logistics with the National Science Foundation in Washington, D.C. I had the chance to talk to her about what it takes to manage projects in a place where the ground is literally moving under her feet. And James Stewart, who’s the vice chair for KPMG in the U.K. He discusses how project managers need to adapt their skill sets to better manage uncertainty.

Tegan Jones

But we’re going to start with John Donohoe, the director of change management and the program management office for Star Alliance Services GMBH, the global airline network. I spoke to him about how his company has changed the way it works to deliver online offerings that can quickly adapt to these changing customer demands.

Stephen W. Maye

You know, it can be a challenge to keep up with consumer expectations anyway, and then to do it in a large, complex business operating in a highly regulated industry, I’m anxious to hear what he has to say.

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Tegan Jones

The Star Alliance Network serves 28 member airlines—including heavy hitters like United, Lufthansa and Swiss Air. Taken together, the network accounts for 170 billion US dollars in annual revenue and serves nearly 730 million passengers each year. And these travelers are comparison shoppers—always seeking out the best customer experience. John Donohoe and Star Alliance’s PMO are tasked with delivering projects that hit this ever-moving target.

John Donohoe

The change that I’ve seen over the last five years is more than I’ve seen in the last 10 years combined. From an impact standpoint from our enterprise PMO, primarily what we’re seeing is, is that we need to really be more innovative in the way we go about developing our products, which then really cascades down into the way then we manage our projects.

We’ve incorporated design thinking and really taking advantage of data analytics in the upfront so that we make sure that at the end of the day we’re building the right product, and we’re doing it much quicker and much more efficient.

Tegan Jones

The PMO uses the latest and greatest in technology to prioritize the projects that will create the biggest impact for consumers.

John Donohoe

There have been vast improvements and innovation over the, particularly the last two or three years, particularly when you think about artificial intelligence, robotics, data analytics, blockchain, things like that. And what we’re doing and how that impacts our projects is really we’re teaming up with some startups, particularly that are more adept at some of those technologies to try to leverage them, to meet the customer’s expectations and needs.

If you want to fly, for example, from Chicago to Beijing, you might have to fly on two different airlines, or go to somewhere in China, you maybe fly on two or maybe three different Star Alliance carriers. And so for us, the challenge is really that the customer experience is seamless as possible, and that the customer is really in charge of their journey, and gets the information and can control their journey, particularly when something that we don’t count on happens, such as weather.

Tegan Jones

Planning for volatility means the PMO must have a broad set of approaches at its disposal—and be ready to use the right tool for each job.

John Donohoe

You need to be much more adaptable, much more flexible and much more scalable as far as looking at what you’re trying to develop and applying the right, what I call, product development process, to that—whether that’s being traditional, whether that’s being more agile, or maybe even more like a lean startup where we’re just trying to test the market and try different things. And again, that has an impact on the project approach that we have, and the project management process that we put behind that.

Tegan Jones

While project and program managers do need to develop a wider set of technical skills, John Donohoe says soft skills make the biggest difference in this shifting business landscape.

John Donohoe

What I look for in an exceptional project manager, it’s to have really great relationship building and interpersonal skills. And particularly for us, the team dynamics are changing such that we’re not more command and control; it’s more about teams and joint accountability.

And one of the things that is important when you come to that type of self-organizing team, in my opinion, is just to be able to not only be a good listener but to be very open to the others’ ideas and really take advantage of the power of diversity on the teams that you have, and not hold on to particular things that you might think coming into a meeting, but be very open and be able to change and adapt according to what the team believes.

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Stephen W. Maye

One of the central themes that really came through in John’s comments was this idea of looking at data analytics upfront and prototyping early in the process, and doing this in a way that helps his teams make sure they’re building a product that customers actually want. It’s interesting to hear that coming from someone working in a global airline. I mean, that's a pretty traditional sector, and that’s a pretty progressive point of view on major projects. I don’t think we would have heard that from someone in that particular role in that sector even a few years ago.

Tegan Jones

Yeah. It seems like things are definitely changing, and organizations of all types are placing a lot more stock in the ability to execute projects faster and more efficiently. I think that people are seeing that they really have to plan proactively for different scenarios to see how they could impact specific initiatives and create response plans accordingly.

Stephen W. Maye

This is something that our next correspondent knows a lot about. James Stewart is the vice chair for KPMG in the UK. James has worked on infrastructure projects for the past 20 years. That experience has given him a valuable perspective on how to deliver strategic projects that are designed to withstand the test of time. When we think about infrastructure projects, we’re very often talking about significantly long time frames. If you take, for example, the U.S. interstate system, which was authorized in 1956, well, that’s the project that’s the origin of the interstate system that serves the U.S. up to this day.

Tegan Jones

Yeah. And with that kind of life span, you really need to get it right, so let’s hear how James does it.

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James Stewart

Companies need to think about anticipating change and managing risk in this increasingly volatile world, and the only thing that’s certain is that things will become more uncertain. So my advice to companies is don’t plan on a single scenario. Plan on multiple scenarios, and create the flexibility within your plans to cope with change. My one additional comment is if you think about the contracts that are signed, the change clauses in those contracts are really inflexible. And I think what we’re going to have to do is introduce much more flexibility within contracts, subcontracts to cope with the changes that are coming.

Big picture trends are dramatically altering the project landscape, and project managers need to adapt with the greater change that’s going to be there. And I think one thing that the project management profession needs to think about is significantly shorter asset lives. So to give you a very simple example: If you’re signing a concession for a car park, which may be 30 years old, you have to think about the fact that within that 30 year time scale, automated vehicles are going to come in and, within city centers, that could render that car park completely redundant.

With all this change and the shifting of the ground, project managers have an enormous obligation to help organizations plan their projects and ultimately achieve their goals, and they’re going to need some new techniques. And I think at the heart of these techniques will be evidence and data. And the way they present that data to the decision makers. I think another change will be the fact that this data needs to be presented in real time. There needs to be much closer reporting and closer connections with those decision makers, rather than the dreadful monthly report that slams on someone’s desk every month, and then they never read it.

Project managers are going to have to think about how they create plans given this greater uncertainty and how they help companies create future strategies, and I think one of the main points I would make on this is that timing horizons need to shorten. So these plans need to be more rapid. They need to be renewed more often, and they need to be presented in a way with real-time data that companies can make decisions very quickly as things change.

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Stephen W. Maye

Tegan, we keep coming back to this theme of managing unknowns. There’s just so much changing at every moment that project teams have to be ready to adjust, adapt and really course correct at any point in the project.

Tegan Jones

Yeah, there’s actually evidence to suggest that project teams are having to manage a greater number of risks than ever before. So the World Economic Forum releases its global risk report every year, and the 2018 survey shows that there’s more risks on the landscape than there have been in any other year in the past. The top four risks that it says are impacting projects this year are environmental degradation, cybersecurity breaches, economic strains and geopolitical tensions.

Stephen W. Maye

I’m sure we would see a few of those risks overlap on projects run by the National Science Foundation, which is where our next guest works. Jennifer Mercer is a program manager for arctic research and logistics, and spends a large portion of her time working way up north in one of the world’s harshest environments.

Tegan Jones

You know, I’ve covered several different projects taking place in the arctic for different issues of PM Network. And every time, the teams just have these fascinating stories to share. I can’t wait to hear what she has to say.

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Stephen W. Maye

Jennifer, I’m eager to learn more about what it takes to run projects in the arctic. Working in such a remote and shifting environment, I know you have a lot to share about dealing with the unexpected. Thank you so much for being here.

Jennifer Mercer

Thank you, Stephen. It's a pleasure to be here.

Stephen W. Maye

You know, it’s been said that the teams that you support work in some of the harshest environments in the world. Tell us a little bit about what that means.

Jennifer Mercer

Sure. So throughout my career, I’ve worked for many years in Antarctica, but now I primarily focus on the arctic and Greenland in particular. But I’ve worked in other harsh environments as well, including the jungles of Brazil and the Australian outback conducting research projects for science.

Stephen W. Maye

When you think about these environments—and you’ve described a broad range there—what does volatility mean in these environments? Sometimes we think about volatility, and we’re talking about environments that exist entirely in corporate America. But what does volatility reference in environments like the ones where you’ve worked?

Jennifer Mercer

To me, volatility or turbulence within a project is the combination of known and unknown risks, with changes, whether those changes are anticipated or not. So in harsh environments such as the remote arctic, that can be anything from your snowmobile not starting because the temperatures are just way too cold to having a polar bear come into your camp, to something larger like a volcano erupting in Iceland or Alaska and disrupting air travel for a week or more. So more often than not, it boils down to some environmental aspect or act of nature as opposed to financial markets where I think a lot of us hear the term volatility more often. But there are also things that can cause volatility within our programs that are similar to other areas of the world or maybe more similar to our familiarity with the word volatility, and those are, those are things like rapid fluctuations in fuel prices or aircraft being grounded due to mechanical concerns.

Stephen W. Maye

So tell me a little bit about how you get out ahead of that. How does that affect project planning?

Jennifer Mercer

By and large we have fairly experienced project managers on our teams. We never start somebody who’s brand new to working in those environments as a lead project manager or program manager. A lot of times it comes down to people’s experience working within those environments.

And they can provide examples and plan for known things that we’ve experienced in the past. But then something can always happen that we've never had happen in our programs before or didn't anticipate within a specific project. That can mean added cost that was unanticipated. Because scientific research is typically funded with federal government dollars, there’s not a lot of contingency planned into project budgets. So that can mean a reallocation of cost within a program budget to bring in a rescue aircraft, or it can mean spreading a project timeline out to account for bad weather days.

Stephen W. Maye

It’s funny. When you break it down, it sounds like you’re describing very similar impacts in terms of timeline, cost, you know, very similar impacts to what we would think about in most any major complex project. What are some of the implications of your project disruptions that may be foreign to most of the rest of us?

Jennifer Mercer

Well, you’re right. It still comes down to that same project management triangle of cost, scope and schedule. But I think that, you know, added on top of that, so if you’re working in the environment of the arctic, you also have a limited operating window each year when you can feasibly conduct work. When you start to plan a project and you do a start-to-finish timeline and you resource load everything, you can be constrained on either end—your start date or your end date—by things like available daylight and/or sea ice in harbors, so you can’t necessarily bring in a ship’s worth of construction supplies all year-round.

Stephen W. Maye

In doing this kind of work in the arctic, do you literally have a risk framework where you say, we know we look at these 15 factors every time that we talk about risk, or we know we look at these five, or we look at these 25? How do you approach risk from a structured standpoint?

Jennifer Mercer

We have definitely moved in that direction in recent years, where we have a risk register, particularly for our large projects. And certainly for our science projects, where we have I would say higher safety risk because people are really in remote areas with limited rescue options and things. So, we do have risk registers. They look a little bit different depending on whether it’s research or a construction project. And we do revisit those throughout the life of the project.

Stephen W. Maye

If you were to leave these extreme highly volatile environments and were to start leading a project in, you know, just pick your American city, leading a project in Chicago. What would you carry from that? What has that extreme example taught you that would actually make you better even in much less dramatic or volatile environments?

Jennifer Mercer

Well, I think that being flexible is really important, and that in the project management role or the program management role, if you’re too rigid or you approach things with a sort of black-and-white mindset, I think that increases the chances of failure. But if you can see ways to work within the gray area, and I don’t mean violating regulations or laws, but within that gray area of project planning and management, so you know, for efficiencies and completing projects, then you always have the option of completing parts of the project even if things go kind of awry. Or you maybe can complete all of the project on a delayed time scale. But if you can be flexible and you can communicate—you create space with strong communication with all of your stakeholders and good transparency—then you can communicate those options as well so that others can see the benefits and that there are ways to still make gains, even if you run into obstacles or volatility within your project.

Stephen W. Maye

If you were talking to someone who was going to go for the first time to what you would consider a highly volatile environment, whether that's a natural environment or not, but to do a project in a highly volatile environment, what is the top of your advice list? What do you tell him or her?

Jennifer Mercer

I think there are three things that I would say, and that would be prepare yourself for the environment so that you understand what the environment is, what it can do, what it’s capable of. And what it’s like working in that environment. Factor in safety in a volatile environment. And I think that’s true whether it’s safety on paper with planning your budget, or it’s human safety and making sure that you’re not going to fall out of a vehicle.

And so, you know, so you have to factor that in. And then keep an open mind and to be flexible.

Stephen W. Maye

So prepare for the environment. Prepare for safety. Keep an open mind and be flexible. And with that, Jennifer Mercer gets the last word. Jennifer, it has been a pleasure to meet you and a pleasure talking with you. Thank you for being here with us and for sharing your experience.

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