Nothing is more inspiring than a big vision that becomes a triumphant, new reality. Think of how the Empire State Building went from a sketch to the jewel of New York’s skyline in twenty-one months, or how Apple’s iPod went from a project with a single employee to a product launch in eleven months. These are wonderful stories. But most of the time big visions turn into nightmares. Remember Boston’s “Big Dig”? Almost every sizeable city in the world has such a fiasco in its backyard. In fact, no less than 92% of megaprojects come in over budget or over schedule, or both. The cost of California’s high-speed rail project soared from $33 billion to $100 billion—and won’t even go where promised. More modest endeavours, whether launching a small business, organizing a conference, or just finishing a work project on time, also commonly fail. Why?
In this interview, I speak to Oxford professor Bent Flyvbjerg, dubbed “the world’s leading megaproject expert.” We discuss the findings from his recent book How Big Things Get Done, and the tools, techniques, principles and models we can use to lead projects at all scales.
Q: What is the reality of how well [or not] most major projects go?
[Bent Flyvbjerg]: …let’s delve into our portfolio. It’s a comprehensive database, boasting over 16,000 projects, meticulously compiled over years, and continually expanding. Within this database lies what we term the ‘iron law of project management.’ This law consistently reveals projects going over budget, missing deadlines, and yielding underwhelming benefits. The statistical clarity of this pattern is remarkable, exhibiting a level of significance rarely seen in the typically variable realm of human behaviour.
To offer a clearer picture with specific figures, only 8.5% of projects meet or exceed their time and budget expectations. This means that a staggering 91.5% fail to stay within budget or meet deadlines. However, the situation becomes even more pronounced when we consider the primary goal of these projects: delivering promised benefits. Shockingly, a mere 0.5% achieve this goal within the allocated budget and timeframe. Illustrating this graphically is challenging, as this half percent is barely noticeable against the backdrop of the total 100%. In essence, only this minuscule fraction of projects can be deemed successful if we define success as delivering on promises within the agreed budget and schedule.
Q: How does bias impact major projects?
[Bent Flyvbjerg]: Projects are significantly influenced by a range of cognitive and political biases. Among these, overconfidence bias stands out prominently. This bias often leads us to initiate projects before fully understanding their scope and requirements. We are innately predisposed to such biases. Notably, optimism bias is perhaps the most prevalent. While optimism is essential and beneficial in many aspects of life, it can become a hindrance in the realm of large-scale, costly projects. As highlighted in our book, misplaced optimism in multi-billion-dollar investments is particularly problematic. It often signals impending financial shortfalls. Optimism, in these instances, can lead to a significant underestimation of the required resources, resulting in projects running out of money.
Q: What is the importance of purpose in major projects?
[Bent Flyvbjerg]: In our book, we emphasise the importance of starting a project by asking “Why?” This approach isn’t a random suggestion; it’s a practice we’ve observed among successful project leaders. They don’t just dive into a project; they begin by exploring its purpose. If they’re working with a client, their first question is often, “Why are you undertaking this project?” They don’t move forward until they have a clear understanding of this ‘why’, dedicating considerable time to uncover its various facets.
Once they comprehend and agree on the project’s purpose, they gain a clear direction and focus. This ‘why’ acts as a North Star, guiding every phase of the project. It’s essential to have this guiding principle, as it helps answer the fundamental question of why the project is being done, regardless of the project stage or size. Having this North Star makes the process more efficient and significantly increases the likelihood of delivering the project effectively and as planned.
Q: What are some of the key learnings we can take on risk management in major projects?
[Bent Flyvbjerg]: Absolutely, risk is a central theme in our book. It’s often said that project management is essentially risk management, and some might even argue that life itself is about managing risk. This concept of risk is pivotal. In our discussions, we’ve identified that the greatest risk often lies in people’s biased perceptions of risk itself. These biases, both psychological and political, tend to lead to a dangerous underestimation of risk.
Our advice, backed by data and methodologies we’ve developed, is focused on debiasing risk. The challenge is: how do you debias risk when everyone’s perception of it is inherently biased? To address this, we’ve developed and popularised a method called reference class forecasting. This approach involves examining comparable past projects and their outcomes to better estimate risks. It’s a shift from the traditional, introspective method of risk assessment to an ‘outside view,’ a term borrowed from Nobel Prize winner Daniel Kahneman.
By creating a reference class of similar past projects, we obtain an empirical risk profile, offering a more objective and reliable estimate of risk. This isn’t just our assertion; several independent scholars have studied and validated the accuracy of this approach. It’s not about believing in our methods; it’s about seeing the objective reality revealed through empirical data. The data’s track record speaks for itself, presenting an undeniable risk profile that stands on solid empirical ground.
Q: What is the role of governance in major projects?
[Bent Flyvbjerg]: …the governance structure is indeed crucial. It’s imperative to eliminate any system that dilutes or biases information as it ascends the organisational hierarchy. For top leaders, particularly CEOs of companies or government organizations, it’s their duty to ensure the organisation accurately and realistically relays pertinent information.
It’s a known fact that some leaders prefer biased information, possibly because it simplifies project approvals, presenting lower budgets than actual. Such a culture is perilous, as it can lead to believing in these misrepresentations. With significant projects, organisations don’t need many to fail before facing potential bankruptcy. This isn’t hypothetical; the collapse of Carillion in the UK and a similar situation with a longstanding company in Denmark are stark reminders of the dangers of underestimated project costs.
The first piece of advice I give leaders is to be wary of this game. Even if misinformation is part of the strategy, the harsh reality still exists and ignoring it can have severe consequences. Leadership needs to understand and accept the truth, regardless of their preferences.
Secondly, to establish an effective governance structure, top leadership, including the C-Suite, must take an active interest in projects. They should foster a culture where bad news is welcomed, not just good news. Unfortunately, many leaders shy away from negative updates. However, if a leader inadvertently suppresses bad news, creating a culture where the messenger is punished, it results in a dysfunctional governance structure.
Effective governance requires more than just project management; it needs a supportive environment above the project team. This higher layer is vital for providing a rational, well-organised context that encourages project success and discourages failure. A robust governance structure, therefore, is essential for the overall health and success of any organisation handling significant projects.
Q: Why is it important to think slow, act fast?
[Bent Flyvbjerg]: …the approach of “move fast and break things” or the idea of a minimum viable product (MVP) might work well for small-scale, easily reversible projects like developing a piece of software. But consider applying this philosophy to large, irreversible projects like constructing a bridge, skyscraper, or tunnel. It’s impractical to think you can just dismantle a skyscraper and start over if it doesn’t meet expectations. For these types of projects, this approach simply doesn’t work.
Our focus shifts to what we call the maximum virtual product, which involves extensive simulation before actual construction or execution. This method allows for experimentation, iteration, and testing before the physical development begins. In architecture, this might involve mock-ups or physical models. In filmmaking, as we discuss using Pixar as an example, it’s about simulating the movie before actual shooting starts.
This is the essence of ‘thinking slow’ in project management. We emphasise in the book that projects often don’t just go wrong; they start wrong. The seeds of failure are often sown right at the beginning, leading to problems later on. Recognising this, successful project leaders invest in thorough planning and simulation upfront, understanding that a project’s success is largely determined by how it starts. This approach is crucial for complex, irreversible projects where the cost of failure is high.
Q: Where can (and can’t) you use modular “lego” approaches to major projects?
[Bent Flyvbjerg]: Nuclear power, as discussed in our book, is a prime example of a sector struggling with bespoke and slow processes. Each nuclear plant is uniquely designed, leading to incredibly high costs and some of the largest cost overruns across the 23 product types we studied. However, there’s a potential, albeit uncertain, future solution: small modular reactors. This concept, which even includes ‘modular’ in its name, represents a hopeful shift in nuclear power development. These reactors are being explored to address the significant issues of high costs and delayed schedules in nuclear energy.
The urgency of the climate crisis highlights the limitations of traditional nuclear power. If we were to rely solely on nuclear energy to meet climate goals, such as the 2030 deadline, it would be impractical. Starting a nuclear plant today wouldn’t result in a completed facility by 2030, and the same challenge extends to 2050. The inability to scale nuclear power rapidly is a major impediment in its contribution to solving climate-related issues.
On the other hand, airports present a different scenario and lend themselves more easily to modular construction. An airport can be broken down into modules, such as gates, which can be further subdivided. Essentially, an airport is a series of corridors assembled together, and these corridors can be treated as modular units. These units can be manufactured off-site and then brought to the construction site to be assembled like Lego blocks – click, click, click. This modular approach, resulting in the quick assembly of corridors and gates, demonstrates a more efficient construction method compared to traditional techniques.
Q: How can major project techniques be applied to scale-up business?
[Bent Flyvbjerg]: In our research, we aimed to identify the most universally applicable principles in project delivery. This approach extends to business operations, where running a business can be viewed as managing a large-scale project. The key lies in discerning between reversible and irreversible decisions, especially in the context of a growing business or a startup evolving into a scale-up. The nature of these decisions can critically impact the venture’s success.
Take Amazon as an illustrative example. They place significant emphasis on identifying whether a decision is reversible or not before proceeding. This distinction guides their strategy. For reversible decisions, they adopt a more experimental approach, embracing the ‘move fast and break things’ model. This allows for rapid experimentation and learning. However, when faced with irreversible decisions, their tactic shifts to a more deliberate and considered approach. They understand that it’s not a one-size-fits-all situation. The type of decision dictates the strategy, debunking the notion that it’s a choice between one method or the other. This nuanced understanding of decision-making is crucial for any business aiming to succeed in today’s dynamic environment.
Q: What are some of the key skills needed by leaders, to lead major projects?
[Bent Flyvbjerg]: There are indeed two distinct aspects here: the leadership skills of project leaders and the necessary qualities of the C-Suite for overseeing successful projects.
Focusing first on the C-Suite, a critical realisation is that big projects should not be viewed merely as opportunities to delegate responsibility. This is a common yet grave error. Big projects shouldn’t be pushed down the organisational ladder; instead, they should remain a priority within the C-Suite. Considering the vital role of projects in many contemporary organisations, it may even be prudent to introduce a Chief Project Officer. This role ensures that project-centric thinking is maintained at the highest level. And as for the board members, they need to grasp the basics of project management and statistics, which isn’t typically beyond the scope of their usual responsibilities.
Regarding project leaders, the key to success lies in their approach and experience. They should adopt a ‘think slow, act fast’ mentality, avoiding hasty plunges into projects. Experience is crucial – it’s fundamental to hire individuals who have previously managed similar projects. Too often, organisations overlook this, leading to disastrous outcomes where the project becomes a costly learning experience for the inexperienced leader. Effective project leaders also excel in de-risking and de-biasing, often learning these skills through hard-won experience. They know the importance of asking ‘why’, thinking critically, and applying lessons learned to become adept in their roles.