A Wall Street Journal article with megaprojects expert Dr. Bent Flyvbjerg recently found that 99% of megaprojects are over-budget or overdue. Construction and real estate firms have turned to customer value to combat waste and inefficiency and inform how they approach large-scale project management.
Customer value is the cornerstone of lean construction, which strives to minimize waste while maximizing value. Defining value is critical to the success of any large-scale project that involves hundreds or thousands of people. By focusing on value, you will foster a culture of continuous improvement that maximizes efficiency and delivers results for all project stakeholders.
Why Defining Value at Every Level Is Crucial to a Project’s Success
Let’s say a building project must be completed within three years to deliver value to the customer. Additionally, the end-users of the building are based in a major metropolitan area, so the building must be located within 10 miles of that city. With these parameters in mind, you can swiftly eliminate options that do not align with the project’s value, like contractors that can’t start a new project until next year or suppliers that are too far away from the job site.
Value is more than just what the customer wants — it’s also why they want it. But in construction and real estate, value goes far beyond the customer. A major building project, like a hospital or university, holds value for all project stakeholders, including the owners, architects, engineers, suppliers, general contractors, subcontractors, and end-users.
Because large-scale projects like construction and real estate take years to complete, seemingly small instances of waste — whether it’s rework, wait time, transportation, or overproduction — build up over time. The customer doesn’t receive what they were promised, the contractors and suppliers have to work longer than planned, and the end-users can’t use the building — all of which directly impacts the project’s value.
Defining value at the start of a project helps you pinpoint areas where you can optimize complex processes over time and avoid waste. Continuous improvement is the process of constantly assessing and reiterating during each stage of a project so you don’t have to sacrifice cost, quality, or safety to complete it successfully.
Ultimately, centering a project around value enables large-scale project managers to tailor processes to the people, materials, and resources needed to create a positive impact for all stakeholders.
4 Best Practices for Defining Value in Real Estate and Building Projects
Let’s go over four best practices for building, evaluating, and replicating a process of continuous improvement that puts value at the center of each stage of large-scale projects.
1. Determine What Success Looks Like
Once you know what your project needs to succeed, making the right decisions to get you there becomes much easier. Even the most organized project will become chaotic if it’s not aligned around a shared definition of success. The customer’s definition of success might be completing the project under budget, no matter what, while general contractors may see success as meeting high quality standards.
To determine what makes a project successful, start by establishing its Conditions of Satisfaction (CoS). The CoS is a core tenet of lean construction where all project stakeholders commit to meeting all of a customer’s requirements for the project to be successful. To know if the project has objectively succeeded, define satisfaction using tangible metrics, such as:
The number of months in which the project is delivered
The number of change orders
The number of requests for information (RFIs)
The percentage of below-market cost
The percentage of improvement in productivity
It’s important to remember that these Conditions of Satisfaction are requirements, not idealistic goals, and ultimately drive decision-making throughout the project. For large-scale projects in construction and real estate, aim for no more than 15 distinct conditions so none end up being neglected at the expense of another condition’s success.
2. Identify Variables That Impact Value and Decide on Priorities
When defining value, consider the countless variables that affect the project, then prioritize what’s most important to all stakeholders. Some of the most common variables in real estate and construction are:
Project stakeholders, like owners, builders, architects, engineers, and end-users
Choosing By Advantages (CBA) is a lean construction decision-making strategy that considers multiple variables to deliver the most value to all stakeholders. The CBA method recognizes that all decisions are subjective while encouraging stakeholders to make them based on objective facts, like the project variables.
Once you’ve assessed the variables, use value engineering to make decisions based on the highest priorities for the customer and other stakeholders. This approach helps you arrive at a solution that delivers the most value to everyone involved, not just the customer, while allowing for flexibility in decision-making.
Suppose you need to advise a customer on choosing the location for the job site. A job site in the center of a large city is located closer to contractors, reducing transportation and labor costs. In contrast, a greenfield site doesn’t require any removal or rebuilding before construction can start, which results in a shorter project timeline.
Although the final decision depends on the customer, start by considering the priorities of other project stakeholders first since they typically carry less weight. For instance, the owners and architects might prefer a job site in or close to a major metropolitan area for easier access.
From there, the right choice comes down to the customer’s priorities: do they want lower labor costs or a shorter timeline? Each option reduces costs differently, so knowing your customer’s preferences will help you make a decision that delivers the value they expect.
3. Communicate in Alignment With the Project’s Value
A holistic perspective of the project’s value is a “superpower” that enables more effective communication and collaboration. Simply put, when you understand the motivations and pain points of the people involved in the project, you can work together toward a solution that maximizes value for everyone.
Suppose you know that a specific decision doesn’t align with the project’s value. In that case, it’s better to address it as soon as possible — even if it means pushing back against an owner or designer at the beginning of a project.
Let’s say an architect wants to use a specific type of foundation, but you know it won’t last long given the job site’s climate. You bring up your concerns right away and suggest an alternative, explaining that while it costs more upfront, this foundation is more durable and will provide greater value in the long term. The customer is grateful to get your input on maximizing value, and the builders are glad they won’t have to redo the foundation in the near future.
By aligning communication with value, you will create a sense of harmony between everyone involved in the project. This makes it easier to overcome issues like complex designs, tight schedules, and inflexible budgets. Mitigating conflict early on also helps you reduce total project waste because all stakeholders agree on the decision instead of requesting rework later on.
4. Plan, Do, Study, Act
Once you’ve created a plan for a large-scale project, you need to execute each stage with constant communication and feedback from project stakeholders. From there, you can evaluate your progress and reiterate to improve processes and establish standards of work.
This approach is known as agile project management, which drives the culture of continuous improvement in construction. Agile enables you to make iterative changes to consistently deliver value as the project evolves.
A popular framework for continuous improvement is Plan-Do-Study-Act, or the PDSA Cycle:
Plan a project based on its goals and requirements for success.
Do the project according to the plan.
Study the plan by monitoring its results to identify signs of success or possible areas for improvement.
Act on what you’ve learned by changing or standardizing processes across the project.
The PDSA Cycle creates a continuous feedback loop that makes it easier to rigorously test your hypotheses and gain as much information as possible before introducing systemic changes. By evaluating processes on a smaller scale, you can more frequently determine if they align with the project’s value and adjust accordingly.
How Skanska Centers Large-Scale Project Management Around Delivering Value
International construction group Skanska uses lean methodologies to foster collaboration and improve efficiency in large-scale building projects, like hospitals, stadiums, data centers, K-12 schools, and universities. In an episode of Quickbase’s Age of Agility podcast, Robert Penney, National Director of Continuous Improvement at Skanska, explains how he uses purpose and impact to define value when starting new construction projects:
“What is the intent of this building? What value will it give to the end-users? ... There’s a lot of meaning behind the work for these people. [The impact is] understanding what the design means to the architect. What will this building mean to the company? What will it mean to the tradespeople out in the field?”
According to Penney, starting with purpose and impact helps you return to the value promise of large-scale projects like construction and real estate. Let’s consider an example of a building project in Seattle, WA. For the project to succeed, Skanska must build ethically and safely according to its unique requirements. This includes environmental considerations such as:
Preventing sediment runoff from going into the water for salmon-safe operations
Avoiding ecological damage in the wetlands
Recycling materials to reduce the project’s carbon footprint
Getting a LEED certification
Constructing bike parking spaces
Installing electric vehicle charging stations
In this case, the value of the project is much more than what the customer wants. If Skanska completes the project under budget and within the timeframe but fails to meet standards for protecting the ecosystem, then the project’s value will significantly diminish. Going back to the purpose and impact for all stakeholders is one of the most reliable ways to ensure that a project delivers on its value proposition.
Implement a Project Management System to Maximize Value
Large-scale real estate and construction projects involve countless stakeholders and other variables that are difficult to track. Defining value is a proven method of centering all the moving parts of a project around a shared goal. Many large-scale project managers have incorporated technology into their workflows to simplify the process of defining value and tracking its progress.
Learn more about how to use technology in large-scale projects in our article on successfully implementing a project management solution.