7211AFE Corporate Finance – The Denver International Airport Case Study

Model

The Denver International Airport was a complex project comprising number of stakeholders, technological innovation and public domains. The authorities responsible for the project ended up in blaming each other for the failure. The disastrous failure happened because of the improper cost estimation and the inaccurate prediction of the technological upgradation. Moreover, the lack of time management and unnecessary delays in project development caused severe economic damage. For the clear illustration of the event and project failure, the use of diamond model is appropriate.

Diamond Model

Although, the projects before their initiation are evaluated, scheduled, structured, implemented, controlled and closed, it is significant to identify the authorities involved in the project and suitable management style for succeeding (Murty and Goldar, 2006). The objectives and attributes of all the projects are deviated from one another, which requires different approaches and styles. According to Bowen (2013), the analyzing tool presented by Shenhar and Dvir named Diamond model also referred as NTCP model is significant to implement and evaluate the project. According to Murty and Goldar (2006), the usage of diamond model enables to evaluate the project and identify the possible existing gaps in a complex project and suggest remedial measures to overcome these gaps. Furthermore, it clearly illustrates the static plan that fails to meet the outcomes expected and traditional optical capabilities that result in creating excessive gaps. Therefore, the usage of model for studying the Denver International Airport is significant. The model’s gap identification is divided into four dimensions for the clear elaboration of gaps. The model enables to identify and analyze the risks, uncertainties and requirement involved in the project (Murty and Goldar, 2006).

• Novelty

Novelty is defined as the degree of uniqueness that project or services holds in regards of consumers. Generally, it is related to the marketing aspect of project management as reflected by the level of innovation of the project (Shenhar and Dvir, 2007). The novelty is further divided into three categories for evaluating the uniqueness of project for the consumer. The project of Denver International Airport, was the construction of new airport with fully functioning automated baggage system. The project required the balance between technological innovation and expected outcomes. The complexities of the project were needed to be addressed before the approval of project. The dimensions in observing the novelty of project are;

• Derivative Products: This dimension of novelty elaborates the construction, extension and enhancement of product and services.
• Platform Products: The dimension overlooks the revolutionized form of already existing product in the market. It aims to replace the present products with the innovative and efficient product.
• Breakthrough Products: The dimension illustrates about the newly invented product and services in the market. This dimension elaborates those products and services that are never being in the market prior to this one.
• Technology

The technology is termed to be the major cause of uncertainties in any project. The design, testing, installation, completion and interaction of the project are highly influenced by the technology (Shenhar and Dvir, 2007). It can be simply stated as the amount of innovative technology consumption in completion of a project. The adoption of technological advancements can be to meet the scheduled time line of project completion. The problem arising in those technologies needs a frequent resolving for the continuous development of project. The dimensions of technological measure are;

• Low Tech Projects: The projects that fall in the low-tech category are the projects that do not have a significant demand of technological use, but the technological usage aids in achieving efficiency.
• Medium Tech Projects: The projects of this dimensions are equipped with the technology, but require more advancements to cater the previous flaws and gaps in technology.
• High Tech Project: This dimension of technology involves the project that intentioned to consume all the innovative technological advancement. They aim to develop a project with technology that was not applied in any other project.
• Super Tech Projects: These are the projects that will be prone to high risks and economic losses in case of technological delay. The case of Denver International Airport lies in this category
• Complexity

The complexity is defined as the level of system’s complication in order to achieve the project outcomes as per the scheduled and expected outcomes (Bowen, 2013). According to Shenhar and Dvir (2007), the complexity is directly linked with the scope of the project and usually cause hurdles in maintaining smooth project organization. The greater degree of complexity is measured by the need of enhanced interactions among the parts that require additional procedures and workability in the management of project. In the case of Denver airport, the complexity of the project was not measured correctly. Therefore, the project fails to imply the fully automated baggage system causing economic loss of millions in the project (Christina, Richard and Cate, 2010). The complexity can further be measured according to the intensity in three dimensions.

• Assembly: This dimension constitutes of mainly materials, resources, components and sub systems. This dimension focuses on the particular and single dimensional functions.
• System: This dimension includes the multi-dimensional elements that are performed to achieve a specific need.
• Array: It is termed as a system above systems, that includes wide spread collection of systems that function together for the achievement of common aim.

• Pace

The pace is the element of urgency required by the project for the achievement of success. According to Shenhar and Dvir (2007), majority of the projects require the time management for the critical organizational success. Whereas, Bowen (2013), explains that in scenario of rapidly completing and competitive projects presence in the market scheduled time management is required in order to gain the competitive advantage. In the case of Denver International Airport, the technological advancements were behind the scheduled time. Moreover, the selection of most complicated baggage system and the largest of its kind results in the need of adequate pace. The major segments of pace in which the projects can fall are as follows.

• Regular Projects: In these projects the assurance of organizational success is not linked with the time management. The project can achieve success even without the scheduled time management.
• Competitive Projects: These projects introduce the ultimately up to mark and appropriate ideologies to the market at a fast pace.
• Conceived Projects: The aim of the projects in this category is to establish new business lines.
• Time Critical Projects: The project’s success of this dimension is associated with time management. The failure in following the scheduled time graph will result in project failure.
• Blitz Projects: These projects are with the extremely urgent time scheduled, compulsory to be achieved.

Justification

The diamond model was used for analyzing the failure of Denver International Airport. The airport fails mainly because of the incapable management. The management fails to follow the budget and time schedule. Moreover, they fail to predict the correct estimation and technological advancements required. Shenhar and Dvir in their book “Reinventing project management” explains that, the diamond model provides dimension for the critical analysis of the failures and identify the gaps that causes failures. Acharya and Yorulmazer (2007) measuring the impact of time inconsistency and time management implementation adopt the diamond model and extract the negative results of not following time management in a project. The other dimension of diamond model enables to predict the success of project as used by Chang et al (2009) for predicting the success of mobile industry by using diamond model. The competitiveness of Iranian technological parks with that of other world was evaluated by using diamond model (Naserbakht et al, 2008). Montealegre and Keil (2000) used the diamond model in their study for the critical evaluation of Denver International Airport. Thus, the above-mentioned literature clearly illustrates the significance of diamond model in accessing the case study. The usage of diamond model for the analysis of case study was appropriate because the diamond model provides different dimensions in which the aspects of case study are well suited. The dimension of novelty and technology will enable to evaluate the technological upgradation and decision of installing the most complicated baggage system in the airport. The dimensions of pace and complexity evaluate the improper time management and unsuccessful management style.

Power assisted Project Management

The implementation of power assisted project management in any organization, aids in the establishment of strategic value chain that creates and edge on the competitors of organization especially in the case of high-risk sectors and markets (Chinvio, 2010). According to Freeman (2010), the adaptation of power assisted project management delivers an exceptional value to the organization and its projects. This is because when a product or service is in demand the organization is the only producer that delivers it to the consumers. The elements of on time project deliverance and working under the scheduled budget forecast that the future products of the organization will be sustainable in the market or not. The organization’s new services and products are evaluated prior to the launch on the basis of these elements. If the management of budget is considered, the project of Denver Airport was a complete failure. The assurance of successful project requires an efficient management which is able to identify its aims and objectives for the respective project. The metrics shall be strict across the project crew, stakeholders, suppliers, contractors and clients. Furthermore, the political risk and influence of the stakeholders need a detailed and critical evaluation and analysis before their participation in the project for the appropriate front-end planning.

Dimensions of Power

The background knowledge about the power of stakeholders holds its significance. The complete awareness about the intensity of power of different stakeholders, the sources of their power and the pattern of implementation of power need to be identified. According to Marie (2014), the objectives of the stakeholders might be of long-term and short-term but their interest and inter-dependencies may vary with time. These variations are able to create conflict of interest among stakeholders, ineffectiveness and disputes. Considering the positive change in objectives of stakeholders, sometimes create strength and sustain the projects. The influence and capability of stakeholders’ power is determined by their access to different resources and the benefits project can extract from these resources. As explained by Maria (2014), if the stakeholders have trust issues among them, then the major concern of the organization is gaining their trusts.

Stakeholders are distinguished according to the power and influence. For creating the appropriate distinguishing, the identification and segmenting of internal stakeholders which involve workers, trade unions, management, and investors are required. The identification and segmentation of external stakeholders which involve interest groups, government, environmentalists, financial, activist groups, suppliers and regulators are required to be identified. According to Lander and Landin (2005), the stakeholder’s power and interest are the two dimensions of stakeholder power-inters matrix.