As the twentieth century gave way to the twenty-first, the European continent was on the verge of significant economic change. Between January 1, 1999, and early 2002, the euro was introduced to international financial markets and began circulation as the common currency of the Eurozone. This transition not only established new trade ties among the continent’s 17 member states but also signaled the beginning of significant industry consolidation throughout Europe.
As cross-border mergers and acquisitions heated up in the Eurozone, more managers were faced with challenges related to the integration of new workers, clients, resources, and business processes. Often complicated further by language barriers, the operational complexities of expanding Europe-based multinational organizations—if not managed properly—threatened to dramatically dampen the benefits of these mergers.
Management at MBDA, a defense manufacturer with operations in France, Germany, Italy, the United Kingdom, and the United States, understood this reality. Created in December 2001 from the merger of the major missile producers in France, Italy, and the UK—and further expanded with the 2006 acquisition of German subsidiary EADS/LFK—the newly formed MBDA signaled a major restructuring of the missile defense industry in Europe. But numbers show the results of that complicated work: In 2011, the company of 10,000 employees produced approximately 3,000 missiles and built an order book of €10.5 billion. MBDA now works with more than 90 armed forces worldwide and offers a range of 45 products in service and another 15 in development.
The development and manufacturing of defense systems is extremely complex work, involving the management of raw materials, funding, security clearance, regional regulations, and governmental power shifts. Defense projects can take as long as 15 years to complete and involve multiple governments—each subject to political (and budgetary) shifts over the life of a project. So management at MBDA set out to create a consistent, collaborative environment that could unify the company’s regional businesses and develop common processes to succeed in the end goal: building the best missile systems in the world.
“These are extremely complex projects that take place over decades,” says Andrew Brown, head of project management at MBDA, who brought to his current role past experience in the project-intensive oil and gas industry. “We needed a new way to track and manage projects and resources, and [Oracle’s] Primavera solutions provided that solution.”
As the mergers unfolded, it became clear to MBDA executives that the company needed new ways to unify the disparate acquired processes and cultures. Each of the companies from France, Italy, the UK, and eventually Germany had different processes in place to manage areas such as research and development, manufacturing, and talent management. Talent and resource management required particular attention, because each MBDA project requires a massive team of specialists—researchers, engineers, and many others—all of whom need to be utilized to their optimum potential and shared among multiple simultaneous projects.
These are extremely complex projects that take place over decades. We needed a new way to track and manage projects and resources.
MBDA’s management determined that standardizing on established project management best practices would be the most effective way to get the highest performance across all regional business units. To help support those best practices, MBDA implemented Oracle’s Primavera enterprise project portfolio management solutions on a country-by-country basis, starting with the UK in 2003. Alan Bell, project management support services manager at MBDA, says that while a unified project management culture was the ultimate goal, management decided to introduce a new system designed to meet regional needs. France, for example, ran pilot programs with power users to ensure there was enough local, in-language support for new users. But in the UK management chose a big bang approach. “We just turned it on, and people went to work,” says Bell.
Three versions later, MBDA now operates on Primavera P6 Enterprise Project Portfolio Management, which allows managers to assign the best resources for each project and track progress based on skills and availability. With the Primavera solution, project and resource managers can communicate their requirements and decisions throughout a project’s lifecycle. Managers can see where resources are being used across all programs and projects, as well as their forecasted future use. The software gives managers greater visibility into resource demand and capacity, which translates into maximized resource use.
“All the information we use is in Primavera,” says Bell. “We can look at the charts for how long a key resource needs to be on a project and when those resources need to be deployed elsewhere.”
But establishing common project management practices was only one step in MBDA’s cultural transformation. Cross-border collaboration was another major challenge facing the company, especially considering that many MBDA projects involve the defense departments of multiple countries. Project teams may be equally cosmopolitan. So the efficient management of project communication and data produced by multiple regional teams was essential if leaders at MBDA were to achieve the desired economies of scale from the regional business units.
According to Brown, however, fluid collaboration among virtual teams historically has not been the norm in the defense industry. Maintaining secure and auditable access to sensitive information and communication about the national security of multiple nations is of utmost importance. As a result, the passing of sensitive project data via notoriously insecure e-mail systems is strictly prohibited. “How do we encourage people to share ideas, so we can push innovation in an industry that was founded on secrecy?” asks Brown.
Currently, MBDA’s project data is stored in regional databases that comply with local regulatory demands on security and access. But critical project data can then be transported to a secure, cross-regional environment where roles-based access is managed and work is shared. This gives project teams secure web access to critical Primavera P6 Enterprise Project Portfolio Management data and functionality from the Primavera P6 solution, allowing team members to easily log status updates, react to project events, revise documents, and analyze interactive project dashboards.
For Brown, the move away from e-mail made sense not only for security benefits but also for increasing productivity. “E-mail is terrible for projects. If someone goes into Microsoft Outlook, they are lost for an hour,” says Brown. “Now, all the information we use is in Primavera. It’s not just a project management platform—it’s a collaboration platform.”
Yasser Mahmud, vice president of product strategy and industry marketing at Oracle, says the Primavera solution’s single repository enables better and more-secure collaboration in the enterprise.
“Large defense contracts invariably involve a lot of complexity—a geographically dispersed workforce, a lot of regulatory compliance issues, and humongous project scales,” says Mahmud. “Primavera allows you to store everything in a single, protected repository. This enables collaboration, because everyone comes into a single system to perform all tasks, such as sharing documents, checking project status, and evaluating risks.”
When the economic vitality of the early Eurozone era gave way to a global economic crisis starting in 2008, new austerity measures began rippling through Europe as governments struggled to restrain costs in the face of a major recession. Many budget reductions affected defense spending, causing MBDA management to take a fresh look at the company’s project portfolio and balance sheet.
According to the lexicon of project management terms maintained by the Project Management Institute (PMI), earned value is the measure of work performed expressed in terms of the budget authorized for that work. Analyzing earned value can help managers understand the net results achieved for every project dollar spent. Therefore, earned value management (EVM) is an approach to overseeing the strategic direction of a project portfolio based on the real results each project returns.
Ralph Zingle, global director of corporate and government relations at PMI, explains that moving an organization to EVM can deliver real benefits in a situation where budgetary discipline is a high priority. But it’s not a matter of simply flipping a switch. “EVM is not something you just do one year and then you’re done and move on to the next thing,” Zingle says. “It’s really a commitment to a way of managing. It’s got to be supported.”
Recognizing the need to incorporate comprehensive cost management and earned value capabilities into its project portfolio management systems, MBDA management is using data from the Primavera system to deploy EVM practices across the organization. Using the EVM methodology, managers at MBDA can align the project portfolio with the company’s strategic business objectives by accurately measuring both cost and schedule performance and analyzing project performance data.
The result is a much more accurate estimate of project performance based on real existing data. “Using earned value management, we’re able to look out into the next six months and project where we expect to be,” says Brown. “And if we don’t meet those expectations, we’re evolving to the point where stakeholders are comfortable raising their hands and showing accountability.”
Mahmud says this approach puts MBDA at the forefront of project management best practices. “MBDA is an innovator in deploying the earned value management model,” says Mahmud. “The company has been able to take a lot of inputs and visualize them in such a way that it is very easy and very effective for senior managers in their organization to grasp the current and forecasted state of their program.”
The efforts to build a project management culture have paid off for MBDA. As an example, the UK’s Ministry of Defence recently awarded the company a contract to develop a new Royal Navy missile defense system, which will last five years and sustain approximately 500 jobs in MBDA and its supply chain across the UK. But the £483 million contract was funded at the same time the Ministry was asked to reduce spending by 25 percent—so there is significant pressure to meet the established project budget and deadlines.
Brown says this will be possible because the company has succeeded in unifying the culture and processes of the company, and he credits Oracle’s Primavera solution with helping MBDA achieve that goal. “When I look into a conference room and see someone pointing to a Primavera screen, and I realize they’re a customer, I know we’ve done something right,” says Brown.
Project management has come a long way in the past decade, and the right technology can help managers to succeed beyond their original goals, says Zingle.
“Project and program managers need to be miniature CEOs to make good decisions based on financial outcomes and benefits realization,” says Zingle. “What can you do to bring more value? Did the program deliver the intended benefits? Did you, as project manager, accelerate on delivery of those net benefits? Technology as a tool should help a project manager be more effective in delivering project benefits—and doing it on time, within scope, and on budget.”
Monica Mehta is a frequent contributor to Profit.
Defense spending is under extreme pressure as governments make hard decisions about where to allocate their shrinking budgets. To compete and survive in this market, aerospace and defense companies are exploring a range of opportunities to maintain revenue, margin, and market share.
As defense budgets shrink, it is becoming more important for the industry not only to manage individual projects effectively, but also to look across programs and evaluate the portfolio effects. Programs can no longer operate within silos, because resources, schedules, and costs are interconnected. An enterprise capability for evaluating schedule and cost performance can help identify failure modes earlier. It can also serve as a mechanism for sharing leading practices and embedding those practices in the execution model. Companies that are unable to effectively manage large development programs will not be successful in either the commercial or defense market.
The aerospace and defense industry has been through an era of solid performance for the last decade. Circumstances have changed, and a new set of challenges now lies ahead. Those companies that adapt most effectively to the new environment will be the most successful. In several ways, the companies will have to break out of their comfort zone and compete with new capabilities and offerings, and in new markets. Investments made now in new policies, processes, and technology will set the stage for superior performance in the future. —Ralph Carpenter
Ralph Carpenter is aerospace and defense industry lead at Oracle.