The 90s Are Over, Let’s Stop Basing Capital Cost Decisions on Lagging Indicators

Let’s Stop Basing Capital Cost Decisions on Lagging IndicatorsLet’s Stop Basing Capital Cost Decisions on Lagging Indicators. Remember the good old days of emerging digital technology? Accessing information through a dial-up internet connection. Saving data to floppy discs or CDs. Sending emails to have them printed for storage. Mobile connectivity was new, exciting, and… slow compared to what we have today.

In the energy sector, data access limitations influenced the structure of traditional execution workflows for capital projects. It was common – and still is – for project execution models to focus on document-based deliverables over raw data.

The inherent problem with a document-centric approach is that documents take time to produce. Let’s imagine the workflow for a technology evaluation study that:

  • Begins with initial input from multiple departments.
  • Gets reviewed by 2-3 management layers on the project organizational chart.
  • Finally lands on the desk of a senior decision-maker.

This process could easily take two weeks or longer. But what happens during those two weeks? Work doesn’t get paused. The project continues to progress. The information initially collected for the study no longer represents current project conditions. By the time it gets to the decision-maker, the study is based on two-week-old lagging indicators.

A lot can change on a project in that amount of time. Execution workflows built around lagging indicators tend to:

  • Lead to costly and unnecessary errors caused by decisions based on old information.
  • Stymie innovation with rigid and slow processes that limit experimentation.

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Originally posted in: Digital Transformation

Click here to Read an Advanced Chapter from the Data-Centric Revolution by Dave McComb

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