In his book, “Industrial Megaprojects,” Edward Merrow discusses megaprojects and defines it as a business project, or projects, costing more than a few billion dollars, needing proper planning to be successful.
In 1928, John Raskob had the idea that he could build the tallest building in the world, a megaproject of his day; he pushed through the plans and recieved the necessary permits, building the Empire State Building within two years of his initial idea. Quite a feat.
Then there is the Freedom Tower, the replacement of the World Trade Center twin towers that were destroyed during the 9/11 attacks. This took about nine years to be completed after initial conception. Granted permitting, regulations and technological enhancements were vastly different, but it’s still just two buildings. Although, with megaprojects, trying to finish a project too quickly is often more detrimental to its success than trying to keep the project under cost, which is why the Empire State Building sat half empty for a decade. Another factor was something called stakeholders.
Note that, while your next business project may not be considered a megaproject in terms of dollar amount, it could still be a megaproject to you in terms of its size relative to your business. It pays for you to treat your new projects as if they are megaprojects, so you can put more emphasis in planning and execution.
According to Merrow, one of the things that needs to happen in order to avert cost overruns in a major project is to have the stakeholders on board in advance and going in the same direction. The stakeholders may include companies involved, financial backers, employees and local governments. Naturally, getting such diverse entities coordinated takes a lot of effort, but it is worth it for the project to be successful.
Obviously, a small project has less effect on all stakeholders such that no one is going to care enough to hold things up. As the project gets bigger, though, these stakeholders will want to be more involved. And if you do not get them involved early (and often), then later on in the game, just when a project is set to be finished, a stakeholder can get in the way and stop its completion.
One way to ensure the success of a given project is to reward investors according to their input. That is, if you give 10% of the costs and inputs then you get 10% of the value. In that way, no single stakeholder will try to gain extra rewards above and beyond his inputs over the other stakeholders. This agreement should be codified at the outset and will help get everyone on board.
Consider the Alaska Highway. With a war in full bloom and the highway to Alaska an obvious necessity, most stakeholders backed the 1400 mile project and it was completed in record time — from February 1942 to October 1942 — in only 8 months.
Interestingly, it was the army that built the Alaska Highway, and it was the army that would gain all the initial reward in terms of national security for having finished it. Plus, Canada was finally interested in a connecting road, too, after Pearl Harbor; whereas before, Canada did not want to help and indeed hindered such a road when proposed years earlier.
Compare that to the trans-Alaska oil pipeline of 800 miles, which took three years to build and did have delays in its construction that a closer alignment of stakeholders may have averted. Admittedly, the trans-Alaska oil pipeline and the Alaska Highway were different sized projects with different rules, permitting, capital equipment and worker requirements; yet the pipeline took three years to build compared to an international road that took eight months.
So, consider your stakeholders. Carefully align their interests. That should help propel your large project toward successful completion and without dramatic cost overruns or delays.
One of the more interesting stakeholders of the Empire State Building was the City of New York itself. You see, the Empire State Building became the tallest building in the world one year after the Chrysler Building achieved that same honor just 11 blocks away. The Chrysler Building, in turn, became the tallest building in the world three months after 40 Wall Street (now the Trump Building) did so. That is to say the entire city was interested in seeing what new, incredible skyscrapers could be built at the end of the roaring 1920s.
Douglas B. Reynolds is a professor of Economics at the University of Alaska Fairbanks’ School of Management. He can be contacted at DBReynolds@Alaska.Edu. This column is brought to you as a public service by the UAF Community and Technical College department of Applied Business and Accounting.