Andrew Davies Rules for managing innovation in megaprojects The Bartlett, University College Innovation

A novel product, process, service or form of organization that changes the prevailing order (Freeman 1997; Van de Ven et al 1999)

Innovation ranges from incremental to radical

Effective innovation depends on a strategic approach

Montreal, June 12-14, 2019 Andrew Davies UCL 2 Innovation strategy: Theoretical background

Dynamic capabilities of firms or organizations (Teece et al 1997) • Searching – seeking and assessing market and technologies • Selecting – choosing amongst options resulting from search

Open innovation (Chesbrough 2006) • Sources of novel ideas increasingly external to the firm harnessed to drive innovation

Strategy is more effective if there are simple rules (Sull & Eisenhardt 2012)

Montreal, June 12-14, 2019 Andrew Davies UCL 3 The research

Thames Tideway Tunnel

Crossrail High-Speed 2

Heathrow Terminal 2 London 2012

2005 2010 2015 2020 Montreal, June 12-14, 2019 Andrew Davies UCL 4 Rules for innovation in megaprojects*

Rule 1: “Assess what’s worked before” *‘Five Rules for Managing Large, Complex Projects’, Rule 5: Rule 2: MIT Sloan “Harness “Organise for the Management innovation from unforeseen” Review, Fall 2017, start to finish” 5 rules for Andrew Davies, Mark innovation Dodgson, David M. Gann, and Samuel C. MacAulay Rule 4: “Calibrate & Rule 3: apportion risks “Rehearse first” appropriately”

Montreal, June 12-14, 2019 Andrew Davies UCL 5 Purpose

• Learn externally • Learn internally • Evaluate risk and uncertainty Rule 1: “Assess what’s worked before”

Practices

• Case studies and site visits • Recruit relevant expertise

Montreal, June 12-14, 2019 Andrew Davies UCL 6 Preparing for Heathrow Terminal 5

External learning

Traditional approach (fixed price and risk transfer)

T5 would be: Internal learning • £1bn over budget • 1 year late • 6 deaths Montreal, June 12-14, 2019 Andrew Davies UCL 7 Purpose

• Adaptive organization • Flexible process • Deal with unexpected events and rapidly changing conditions Rule 2: Organise for the unforeseen

Practices

• Flexible contracts • Share risks and rewards • Collaborative project teams

Montreal, June 12-14, 2019 Andrew Davies UCL 8 T5 Agreement: flexible and adaptive

“…flexibility and adaptability are key objectives for T5. Conventional processes and solutions are therefore not tenable. It will require flexibility of approach: flexibility of solutions; latest responsible decision making, etc.” T5 Delivery Handbook

Montreal, June 12-14, 2019 Andrew Davies UCL 9 T5 Air traffic control tower

• Tower construction • Middle of the airport • Prefabricated mast sections • Jacking system

• Sections failed to fit together • Tower had to be ready one year early • Or delay the opening of the airport

• Using the T5 Agreement – Client carried the risk – Team developed a new manufacturing process – Made up most of the delay with an additional cost of £2m

Montreal, June 12-14, 2019 Andrew Davies UCL 10 Purpose

• Identify risks and explore options • Prototype, prove and improve Rule 3: • Identify and reduce uncertainty “Rehearse first”

Practices

• Off-site trials • On-site tests • Simulations and solution development

Montreal, June 12-14, 2019 Andrew Davies UCL 11 Trials, tests and simulations

• Heathrow Terminal 5 • Roof constructed first in off-site trial

• Heathrow Terminal 2 • Prepare for “soft opening”

• London 2012 Olympics • Complete construction one year early

Montreal, June 12-14, 2019 Andrew Davies UCL 12 Purpose

• Decompose project into component packages of risk and uncertainty • Identify right approach to deal Rule 4: with them “Calibrate & apportion risks appropriately”

Practices

• Suite of contracts tailored to risk and uncertainty • Change to address emergent problems and opportunities

Montreal, June 12-14, 2019 Andrew Davies UCL 13 Suite of contracts for London 2012

• Foreseen risks • Unforeseen uncertainties • Standardized venues • Iconic venues • Fixed price contract • Flexible contract • Share risks • Transfer risks

Montreal, June 12-14, 2019 Andrew Davies UCL 14 London 2012 Olympics

• Velodrome project

• Flexible contract • Exploited an opportunity to improve performance and outcome • Switch from steel to cable net roof • Savings in time and money

Montreal, June 12-14, 2019 Andrew Davies UCL 15 Purpose

• Establish a structure and process drive innovation • Transform ideas into solutions that Rule 5: improve project performance “Harness innovation from start to finish”

Practices

• Use innovation to achieve project goals • Digital platform to develop, capture and share novel ideas • Safe place to experiment with new ideas

Montreal, June 12-14, 2019 Andrew Davies UCL 16 Changing the rules of the game

• World’s 1st innovation strategy for an infrastructure project

• “sent a powerful message that it was OK to generate new ideas, something that is not always typical of major construction projects” Andrew Wolstenholme, CEO (2011- 2018)

Montreal, June 12-14, 2019 Andrew Davies UCL 17 Crossrail Innovate18 digital platform

Montreal, June 12-14, 2019 Andrew Davies UCL 18 Investing in innovation

Ultra Low Carbon Concrete Collaboration with

Sprayed Concrete Lining Digital Image Correlation Collaboration with

Safety Glove Messages Collaboration with

Light weight Aggregate Collaboration with © Nustone Limited and

Automated Near Miss Reporting / Observation Collaboration with

Layar App Trials Collaboration with

Montreal, June 12-14, 2019 Andrew Davies UCL 19 Innovation strategies for UK projects

Montreal, June 12-14, 2019 Andrew Davies UCL 20 Infrastructure Industry Innovation Platform

https://www.i3p.org.uk

Montreal, June 12-14, 2019 Andrew Davies UCL 21 Rule 1: “Assess what’s Conclusion worked before”

Rule 5: Rule 2: “Harness “Organise for the • Innovation now pervades London’s innovation from unforeseen” megaproject ecology start to finish” 5 rules for innovation

• Personal ties, core teams, organizations Rule 4: “Calibrate & Rule 3: and epistemic communities (e.g. i3P) apportion risks “Rehearse first” appropriately”

• Can something similar be replicated elsewhere?

Montreal, June 12-14, 2019 Andrew Davies UCL 22