Aligned operating model key for EU competitiveness

24 March 2015 Consultancy.uk

Competitiveness continues to be a difficulty for many European companies. In a recent study from A.T. Kearney the perceived state of competitiveness is surveyed, finding that a company’s competitiveness is directly affected by its approach to transforming its operating model and balancing key capabilities.

The financial crises and its aftermath left many European companies vulnerable to international competition. Companies in Europe now need to deal not only with a depressed economic environment but must in a stressed position transform themselves to again be globally competitive. To identify how the companies are doing, the A.T. Kearney asked 831 business leaders spread across European countries and industries, about their competitive situation and how they expected it to develop. The study then asked about the companies’ approaches to five key building blocks for their operating models, as well as three key elements of corporate fitness.*

AT Kearney - Signature

The study finds that in general there is a positive outlook around the confidence of businesses to “weather the economic doldrums and compete with other regions,” with 55% of surveyed executives indicating their belief in the improved competitiveness of all European companies. The positive sentiment was particularly strong in UK companies, followed by Iberia and then Germany; France and Italy had the most pessimistic expectations.

While the consulting firm finds good news, the survey results also highlight that businesses in Europe continue to miss out on opportunities in developing strong core competiveness. The study finds that for companies to be succesful, an aligned operating model and a balanced approach to capitalising key capabilities are key. 

Fit Transformation framework

The firm finds that of the five building blocks in an operating mode, the surveyed companies tended to focus on the first three “hard” capabilities while the “soft” aspects of a company – its capabilities and culture – were marginalised. According to the authors of the study, this lack of focus in soft capabilities has a detrimental effect on how the companies rated their own competitiveness. “75% of companies that addressed four or five of the blocks had a positive outlook on their competitiveness, whereas less than 20% of the companies that had addressed no building block had a positive outlook,” explains Hagen Goetz Hastenteufel, Head of A.T. Kearney’s Organisation & Transformation Practice in Europe and lead author of the study.

Further results from the survey indicate that companies that are well versed in the three elements of “corporate fitness” tend to also score higher in perceived competitiveness and positivity about future success. However, from the participants in the study, only 10% had addressed all three in a balanced way.

Hagen Goetz Hastenteufel, A.T. Kearney

According the consultancy, the study “demonstrates that a company’s competitiveness is directly affected by its approach to transforming its operating model and balancing the strength of its capabilities, its market responsiveness, and its cost advantages.” With larger companies creating new functions that streamline the process of transformation, with implementers like ‘Head of Transformation’, companies that, according to the research “perceive themselves as more competitive.”

Hastenteufel concludes: “Nearly all companies understand the need to initiate transformation activities, but many companies have opportunities to do so more holistically. Success depends on aligning all of the building blocks of your operating model, and also balancing strength, agility, and cost with the mixture appropriate to your situation. The study shows that succeeding at this balance and alignment will determine the future of European competitiveness.”

* Both building blocks and elements of corporate fitness are taken from the A.T. Kearney ‘Fit Transformation’ framework, which helps companies identify internal success factors for competitive positioning. The building blocks include technology, processes, organisation & governance, resource configuration, and capabilities & culture. The elements of corporate fitness include deep capabilities (“strong”), market responsiveness (“agile”), and structural cost advantages (“lean”).

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Project management industry adds £156 billion of value to UK economy

15 April 2019 Consultancy.uk

Project management has grown into one of UK’s largest areas of business over the past decade, amid the increasing ‘projectification’ of work. With the gross value added to the UK economy by project management estimated to be £156 billion, this trend is likely to continue in the coming era.

Despite the huge success of project management in recent years, until now there has been relatively little data available on the size of project activity. As a result, there has been a great deal of debate on things like the number of people involved in the sector, the number of projects, and how it contributes to economic output. Due to this need for clarity, APM, the UK’s professional body for project management (the largest organisation of its kind in Europe, with 28,000 individual members) commissioned economists from PwC to shed light on the industry's economic impact.

The research concluded that the profession makes a more significant contribution to the UK economy than the financial services sector. 2.13 million full-time equivalent workers (FTEs) were employed in the UK project management sector, generating £156.5 billion of annual gross value added (GVA). In comparison, the financial services sector contributes £115 billion, and the construction industry adds £113 billion.

Gross value added to UK economy

Commenting on the discovery, Debbie Dore, Chief Executive of APM said, “Project management runs as a ‘golden thread’ through businesses, helping to develop new services, driving strategic change and sector-wide reform.”

Who is a ‘project manager’?

To reach these estimates, PwC’s researchers used detailed models to map out the value of project management activity. They ultimately defined relevant ‘projects’ as “temporary, non-routine endeavours or rolling programmes of change designed to produce a distinct product, service or end result… [with] a defined beginning and end, a specific scope, a ring-fenced budget, [and] an identified and potentially dedicated team with a project manager in charge.”

Building on this, they then went on to define what the act of project management actually is. The job consists of applying “processes, methods, knowledge, skills and experience” so that clients can meet their objectives and bring about planned outputs or outcomes. The analysts added that this includes “initiating the project, planning, executing, controlling, quality assuring and closing the work of an identified and dedicated team according to a specified budget and timeframe.”

Importantly, it should be noted that the profession is not exclusive to only roles explicitly labelled as ‘project manager’, but to any role where specialist project management skills are used. This means that across sectors these roles can have very different titles, from the self-explanatory contract managers of procurement, or the campaign managers of advertising, to the likes of festival co-ordinators in the events sector, and many more. The roles in question also span all strategic levels of the profession, from strategic to tactical and operational positions.

Gross value added of project management profession

From a sector perspective, the financial and professional services, construction and healthcare industries make up almost two-thirds of the total project management GVA. At the same time, understandably, the UK Government has a huge project portfolio, which further drives the size of the GVA the sector contributes, thanks to megaprojects like HS2 and Crossrail.

Commenting on this to the report’s authors, Oliver Dowden, Minister for Implementation remarked, “Project delivery is at the heart of all Government activity, whether it’s building roads and rail, strengthening our armed forces, modernising IT or transforming the way government provides public services to citizens. Getting these projects right is essential if we are to ensure that we build a country that works for everyone.”

Throughout 2019, 26 major government projects were delivered, representing a fifth of the overall Government Major Projects Portfolio (GMPP) of 133 projects. According to the IPA annual report 2017-18, these represented a whole life cost of £423 billion. In addition to this were a plethora of smaller scale projects, and those in early development.

Elsewhere, with the increasing digitalisation of the economy impacting entities of all shapes and sizes, IT and digital transformations tended to dominate the projects of the UK scene alongside new product development projects, with a respective 55% and 46% of organisations in the research sample having undertaken these types of project in the past year. At the same time, this varied across sectors, and unsurprisingly, in the construction and local government sectors, fixed capital projects were the main project type undertaken.

Outlook

Looking to the future, 40% of business leaders expect project management will grow in the coming years due to the increased use of projects – or the ‘projectification’ of the UK. In a trend that has been witnessed elsewhere, organisations have to rapidly and continuously change in the digital age of business, driving the need for project management.

Outlook for project management services

An increased focus on value over cost – especially in the construction sector – and a forecast increase in the number of international projects are predicted to be key drivers of growth, according to the expert contributors. However, this will not happen in the absence of challenges; more than half of organisations expressed concern over the perceived impact of political uncertainty in the UK. Skills and capability shortages were also cited as a potential barrier by a third of organisations.

With regard to budgets, meanwhile, a third of those surveyed by PwC said they expect the size of project budgets will increase in the coming three years, while 40% anticipate a growth in project size. As the profession continues to mature, and as the recognition of the importance of good project management grows, it is expected that a greater proportion of project work will gain more distinct attribution to the profession itself, giving more recognition and appreciation to the role of the project manager.

Speaking on the findings of the study, Sandie Grimshaw, a Partner at PwC, concluded, “The project management profession is relatively new compared to some other professions, such as lawyers, teachers and doctors. However, as project management is a core competence vital to organisations in the UK, the profession is critical and will continue to grow in stature.”