ARC's Dave Woll's Value of Automation Presentation at ARC's 2008 Industry Forum

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ARC's Dave Woll's Value of Automation Presentation at ARC's 2008 Industry Forum in Orlando, FL.

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ARC's Dave Woll's Value of Automation Presentation at ARC's 2008 Industry Forum

  1. 1. Associating The Value of Automation With Project Funding Dave Woll Vice President ARC Advisory Group dwoll@arcweb.com
  2. 2. 2 © ARC Advisory Group Best Practice Development Process  Understand issue • Recast as actionable  Perform Research • Primary Research • Direct Interviews • Deploy Web-Survey  Analyze Research • Organize into Performance Measures and Practices • Identify Leader’s Performance Measures • Compile Associated Practices • Order Results & Classify into Leaders/Competitors/Followers • Construct a Maturity Matrix • Review in Orlando Forum Session  Develop and Publish
  3. 3. 3 © ARC Advisory Group The Issue  Assignment: • “Best Practices to show $$ benefits associated with investments in automation”  Approach: • Develop a Best Practice Report based on “ Associating the Value of Automation with Project Funding”  Initial findings: • The degree to which projects satisfy their original justification varies widely between Leaders, Competitors and Followers • The understanding of the value of automation varies widely between Leaders, Competitors and Followers • The degree to which projects are funded varies widely between Leaders, Competitors and Followers • At the Leader level there is a correlation between all three
  4. 4. 4 © ARC Advisory Group Performance Analysis Projects Satisfying Initial Justification  Leaders are More Satisfied with Their Projects 0% 25 % 50 % 75 % 100 % Followers Competitors Leaders 21% - 40% 41% - 60% 61% - 80% 81% - 100%
  5. 5. 5 © ARC Advisory Group Performance Analysis Understanding of the Value of Automation  Leaders Better Understand Project Value 0% 25% 50% 75% 100% Followers Competitors Leaders Excellent Good Fair Poor
  6. 6. 6 © ARC Advisory Group Performance Analysis Percentage of Projects Funded  Leaders Get More Projects Funded 0% 25% 50% 75% 100 % Followers Competitors Leaders 0% - 20% 21% - 40% 41% - 60% 61% - 80% 81% - 100%
  7. 7. 7 © ARC Advisory Group Performance Analysis Effectiveness of Controlling Capital Projects  Leaders are More Effective in Controlling Projects 0% 25% 50% 75% 100 % Followers Competitors Leaders Somewhat Dissatisfied Somewhat Satisfied Completely Satisfied
  8. 8. 8 © ARC Advisory Group Performance Analysis Predictability of Original Cost & Schedule  Leaders are Better Able to Predict Project Costs & Schedule 0% 25% 50% 75% 100% Followers Competitors Leaders Excellent Good Fair Poor
  9. 9. 9 © ARC Advisory Group Performance Analysis Safety Record 0% 25% 50% 75% 100% Followers Competitors Leaders Good Excellent  Projects Following Leaders’ Best Practices have a Superior Safety Record
  10. 10. 10 © ARC Advisory Group Best Practice: Include Value of Non-Quantifiable Benefits – HSE, In-Direct Benefits and Lifecycle  Most Companies include Non-Quantifiable Benefits 0% 25% 50% 75% 100 % Followers Competitors Leaders No Partially Completely
  11. 11. 11 © ARC Advisory Group Best Practice: Include Lifecycle Value  Most Companies now include Lifecycle Value 0% 25% 50% 75% 100% Followers Competitors Leaders Other No Yes
  12. 12. 12 © ARC Advisory Group Best Practice: Process for Controlling Capital Projects  Decision-driven predominant  Surprising how many companies use "Regular Reviews“ (over one third) 0% 25 % 50 % 75 % 100 % Followers Competitors Leaders Other Activity-driven Decision-driven Regular reviews
  13. 13. 13 © ARC Advisory Group Best Practice: The Use of Front End Loading Relative Time spent  Leaders focus more on Design basis 0% 20% 40% 60% 80% 100% Followers Competitors Leaders ProjectDesignBasis Definition Business Needs Definition ProjectExecutionPlanning Capital Alternative Analysis ProjectRiskAnalysis
  14. 14. 14 © ARC Advisory Group Best Practice: The Use of Front End Loading Project Risk Analysis  Red shows amount of time Respondents spent doing Risk Analysis  Research suggests Leaders spend less time on Risk Analysis 0% 25% 50% 75% 100% Followers Competitors Leaders 1 2
  15. 15. 15 © ARC Advisory Group Best Practice: Automation of Front End Loading  Leaders use internally developed tools to manage front-end loading 0% 25 % 50 % 75 % 100 % Followers Competitors Leaders Not Automated Excel Internal Tool Commercial Tool
  16. 16. 16 © ARC Advisory Group Best Practice: Dedicated Project Champion  Most users keep same project manager for duration of project 0% 25% 50% 75% 100% Followers Competitors Leaders Other No Yes
  17. 17. 17 © ARC Advisory Group Best Practice: Independent Project Analysis Membership  Leaders and competitors are more likely to be members of IPA 0% 25% 50% 75% 100% Followers Competitors Leaders No Yes
  18. 18. 18 © ARC Advisory Group Best Practice: Major Companies Assume Project Control, Estimate and Market Fit Responsibility  Most Leaders take primary project responsibility 0% 25% 50% 75% 100 % Followers Competitors Leaders Sometimes Always
  19. 19. 19 © ARC Advisory Group Best Practice: Benefit Identification and Estimation for Small Projects  From a Leader perspective • Consultant, the Financial Balance, and Rules of Thumb are used equally • Best Operator and Simulation are used about half as much 0% 25 % 50 % 75 % 100 % Followers Competitors Leaders A dynamic process model Best Operator Consultant estimates Data Reduction Financial & Energy/Mass Balance Rules of thumb Safety Margin Reduction
  20. 20. 20 © ARC Advisory Group Best Practice: Benefit Identification and Estimation for Medium Projects  From a Leader perspective: • Most use the Consultant approach • Rules of Thumb and Simulation are used about one third as much 0% 25 % 50 % 75 % 100 % Followers Competitors Leaders A dynamic process model Best Operator Consultant estimates Data Reduction Financial & Energy/Mass Balance Rules of thumb Safety Margin Reduction Simulation
  21. 21. 21 © ARC Advisory Group Best Practice: Benefit Identification and Estimation for Large Projects  From a Leader perspective • Simulation is used about 38% of the time • Dynamic Simulation and Consultants are used 25% of the time • Safety Margin Reduction is used 13% of the time 0% 25 % 50 % 75 % 100 % Followers Competitors Leaders A dynamic process model Best Operator Consultant estimates Data Reduction Financial & Energy/Mass Balance Rules of thumb Safety Margin Reduction Simulation
  22. 22. 22 © ARC Advisory Group Best Practice: Calculation for Economic Return  Research Shows that ROI is Dominant 0% 25 % 50 % 75 % 100 % Followers Competitors Leaders Other Economic Value Added (EVA) Return on Capital Employed (ROCE) Return on Invested Capital (ROIC) Return on Investment (ROI)
  23. 23. 23 © ARC Advisory Group Best Practice: Automated Economic Return  Leaders use more internal tools 0% 25 % 50 % 75 % 10 0% Followers Competitors Leaders Not Automated Excel Internal Tool Commercial Tool
  24. 24. 24 © ARC Advisory Group Best Practices Reference  The Elements of Project Systems Excellence – Edward Merrow, Founder and President of Independent Project Analysis Inc.  DuPont’s Role in Capital Projects – James Porter, VP Engineering and Operations  Weyerhaeuser Capital Management Process - Steven Harker, Project Bench marker  ChevronTexaco Project Development and Execution Process - Joe Gregory, Projects Coordinator http://www.nap.edu/catalog.php?record_id=10343
  25. 25. 25 © ARC Advisory Group Thank You. For more information, contact the author at dwoll@arcweb.com or visit our web pages at www.arcweb.com

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