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Microsoft Word - Titanic_Project management_lessons from history_13914.doc n° 13914 Copyright © SDA Bocconi, Milan, Italy No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner. TITANIC: PROJECT MANAGEMENT – LESSONS FROM HISTORY Marco Sampietro SDA Bocconi School of Management A ut ho riz ed fo r us e on ly in th e co ur se M G M T 40 37 P ro je ct M an ag em en t C as e S tu di es a t G eo rg e B ro w n C ol le ge ta ug ht b y M at he w S im io ni fr om 5 /1 1/ 20 23 to 8 /1 8/ 20 23 . U se o ut si de th es e pa ra m et er s is a c op yr ig ht v io la tio n. SDA Bocconi School of Management Titanic: Project management – Lessons from history n° 13914 Copyright © SDA Bocconi, Milano, Italy 2 Marco Sampietro Titanic: Project management – Lessons from history Introduction The White Star Line (WSL) was originally founded in Liverpool in 1845 by John Pilkington and Henry Wilson. The company's initial focus was on the Australian gold mine trade. In the early 1850's if you had sound ships and ran the Australian route, it would almost be difficult to not succeed. Pilkington and Wilson's initial business plan for the White Star Line included leasing and chartering as opposed to purchasing vessels. As business increased and capital was established, they would purchase vessels. In 1857, a 19 year old by the name of Thomas Henry Ismay, struggling to claim his stake in the business world, met up with a retired ship captain named Phillip Nelson. Nelson owned a ship, the Anne Nelson, named after his wife. The two became friends and decided to go into business together as shipbrokers. After five years the partnership broke up and Ismay founded the T.H. Ismay and Company in Liverpool. After a few quick years, deciding it was time to make some outside investments, Thomas Ismay began purchasing shares in the WSL. In 1861, Pilkington decided to retire from WSL and Henry Wilson took on a new associate named John Cunningham, another large shareholder. In an attempt to expand its services, WSL merged with the Black Ball and Eagle Lines, a venture that was financially doomed from the start. In 1867 WSL was facing forced bankruptcy. In addition the WSL fleet as a whole needed replacing. The shipping world at that time was very competitive and clipper ships were becoming obsolete. They simply could not compete with the faster, non-wind dependent steamships. With the WSL on its last leg, thirty year-old Thomas Henry Ismay saw an opportunity for the taking and quickly swooped in and purchased the WSL from the near penniless Henry Wilson. Ismay began selling the old slow clipper ships, utilizing the original practice of leasing and chartering first, then purchasing as capital was accumulated. Under the new WSL ownership, Harland and Wolff of Dublin, one of the most famous and prestigious shipbuilders, received its first vessel construction orders on July 30, 1869. On August 20, 1870, what many believe to be White Star's "Greatest Triumph," the liner Oceanic was launched. Speed was not as much of a concern to Thomas Ismay as comfort was. A transatlantic crossing was often a one way trip in those days, a trip that did not always reach its destination. Passengers were apprehensive of transatlantic ships in the early years. Safety was not a big concern and many vessels had horrendous passenger accommodations. Most of the ships that carried livestock were simply hosed out for the return trip with immigrant traffic. This is where they earned the nickname "cattle boats." Following the building of Teutonic, White Star (and the Teutonic) won the Blue Ribband award for setting a speed record crossing the Atlantic. This became the incentive Ismay needed to really begin expansion of the company. First class accommodations on the new ships were placed amidships (center of the ship) unlike competitive ships that had them located at the stern where engine noise and vibration were bothersome. A grand dining saloon was added, designated passenger walkways on deck called promenades, were featured. These new vessels even had running water and electricity in the passenger cabins. Sir Edward Harland had died in 1895 and thirty-eight year old Joseph Bruce Ismay, having always worked in the family business, succeeded his father's position upon his death in 1899. A new partnership would soon take place. A partnership between Bruce Ismay and the new Harland and Wolff chairman Lord W.J. Pirrie, bringing a whole new management style to the White Star Line. By the early 1900's, the shipping companies were involved in a vicious rate war which was hurting all parties involved. American financier and multi-millionaire John Pierpont (JP) Morgan, saw this as a tremendous opportunity to expand his capital. Morgan purchased all of White Star Line's rival shipping companies and placed them under one controlling trust with fixed shipping prices. He called this trust the International Mercantile Marine, (IMM). Bruce Ismay would remain as White Star Line's managing director and chairman. The British shipping companies considered this conglomeration a definite threat to their business and the formation of IMM inspired the Cunard line to make a quick move. Hence the birth of two of Cunard's greatest achievements, the Lusitania and the Mauritania. These two ships would be the largest and fastest ships the world had ever seen. The Lusitania quickly grabbed the famed Blue Ribband award from WSL's Teutonic. A ut ho riz ed fo r us e on ly in th e co ur se M G M T 40 37 P ro je ct M an ag em en t C as e S tu di es a t G eo rg e B ro w n C ol le ge ta ug ht b y M at he w S im io ni fr om 5 /1 1/ 20 23 to 8 /1 8/ 20 23 . U se o ut si de th es e pa ra m et er s is a c op yr ig ht v io la tio n. SDA Bocconi School of Management Titanic: Project management – Lessons from history n° 13914 Copyright © SDA Bocconi, Milano, Italy 3 Ismay and Pirrie decided that something had to be done about the competition that was currently threatening White Star. Namely, the Cunard Line and the German lines were also beginning to produce monster ships. During an intimate dinner in 1907. J. Bruce Ismay and Lord Pirrie could not stop talking about the Mauretania and the Lusitania. Ismay and Pirrie knew that they could create bigger and better ships so they came up with an idea of building two twin leviathans that would be larger than the new Cunard ships. This new class of liners would be able to move even more passengers and freight. They would feature the last word in luxury rather than focus on speed. A third ship was to later join this special group called the "Olympic Class Liners." The first ship would be named Olympic. The second ship, Titanic and the third, Gigantic. (Later renamed Britannic after the Titanic disaster). The Business Case The estimated cost of the Titanic was 7.5 million $ (now more than 400 million). The contract was cost plus fee. For the Titanic 75% of the revenues would have come from first class passengers. Besides passenger tickets, revenue would also be derived from cargo, and the delivery of mail. There would also be significant cost savings based on a reduced fleet size: from the current six ships to three larger ships. Economies of scale would derive from a reduced workforce, less fuel, and lower maintenance costs. As a result, Titanic (and Olympic too) would be paid for within two years of going into operation. The third ship would be built once the other two were in operation and there was a steady revenue stream. Design and Construction Olympic and Titanic (and later Britannic) shared a design plan and common themes: luxury and bigness. J. Bruce Ismay, White Star chairman, and Lord Pirrie, chairman of shipbuilders Harland and Wolff, estimated that they would be about one-and-a-half times the size of the Cunard Line's largest ships. Titanic was 882.5 feet (268.8 meters) long and 92.5 feet (28.2 meters) wide with a gross weight of more than 40,000 tons. Olympic was almost identical. The astonishing size was sooner used as a marketing tool (see figure 1) Figure 1. Advertisement on The New York Times of the forthcoming WSL vessels. The first two ships had to be designed and built almost in parallel in 4 years (1 design +3 construction). As already introduced luxury was the most important goal. Luxury meant not only using the best materials for the interiors but also providing spacious accommodations and the latest comfort technology. For this reason a U-shaped hull design was selected against the traditional V shape, which would have created a faster ship but would also had less room for the passengers (-20% of capacity). In order to present the ships as more powerful, the architects added a dummy smokestack (the ships would only need three to function). It was later repurposed into a ventilation system. A ut ho riz ed fo r us e on ly in th e co ur se M G M T 40 37 P ro je ct M an ag em en t C as e S tu di es a t G eo rg e B ro w n C ol le ge ta ug ht b y M at he w S im io ni fr om 5 /1 1/ 20 23 to 8 /1 8/ 20 23 . U se o ut si de th es e pa ra m et er s is a c op yr ig ht v io la tio n. SDA Bocconi School of Management Titanic: Project management – Lessons from history n° 13914 Copyright © SDA Bocconi, Milano, Italy 4 The design leveraged the last available technologies: Control Panel. Titanic had an electrical control panel that was 30 to 40 feet long. The panel controlled all of the fans, generators and lighting on the ship. It also controlled the condensers that turned steam back into water, along with the few machines that took salt out of ocean water to make it drinkable. The Titanic also had a master-slave setup for all of the clocks onboard. The central clock was on the bridge, and as the captain adjusted the time on that one clock, all the clocks on the ship would register the change as the ship sailed through different time zones. Elevators. Titanic had four elevators, which was fairly new technology on a ship. Telephones. A few first-class cabins also had telephones, although the phone could not make ship-to- shore calls. Marconigramm. The crowning technical glory on the Titanic was the advanced wireless communication system which was considered the most powerful setup in use at the time. At that time, most ships could transmit messages a distance of 100 to 150 miles during the day however the Titanic's wireless system was capable of transmitting messages for 400 miles during the day and 1,500 miles at night. Double-hull. A double hull is a ship hull design and construction method where the bottom and sides of the ship have two complete layers of watertight hull surface: one outer layer forming the normal hull of the ship, and a second inner hull, typically inboard by a few feet, which forms a redundant barrier to seawater in case the outer hull is damaged and leaks. Multiple watertight compartments. Watertight subdivision limits loss of buoyancy and freeboard in the event of damage, and may protect vital machinery from flooding. A steel ship with no watertight subdivision will sink if water accumulates faster than pumps can remove it. Titanic had 16 watertight compartments (see figure 2). Electric doors. Watertight doors could be dropped automatically or by manual controls. Doors could close off flooded compartments in case of emergency. Water