Our First Newsletter

This is our first newsletter

Thanks for subscribing to The Modern Industrialist 🙂 This is our first newsletter - the starting point of our project.

The TMI newsletter will focus on all industrial businesses. We do however have a burning passion for something we call SEMIS businesses (Strategy → Engineering → Manufacturing → Installation → Service). It’s a complex environment where people, digital, marketing, supply chain, leadership, finance, technology, and operations converge.

Our newsletter aims to share practical, actionable content to help businesses run better. We do this by writing from our experiences directly, non-edited. We’re not very good writers, just very passionate industrial business geeks.

If you feel like you have exciting advice or operational experience to share with the rest of the world, we would like to hear from you. We are happy to have experts share their ideas with TMI. Drop us a line at [email protected] 

EPC vs EPCM [2 min]

Navigating project management, we've all encountered the terms EPC and EPCM at least once. While seemingly cryptic, these acronyms are fundamental to understanding the dynamics of project execution in construction. Let's dive in and define both!

1. EPC: Engineering, Procurement, and Construction

Imagine you're a company looking to set up a new manufacturing plant. You approach a contractor who promises to handle everything - from designing the facility to procuring the necessary materials and finally constructing it. This is the essence of an EPC contract. The EPC contractor is solely responsible for delivering the entire project from start to finish (turnkey project). They sign all contracts, manage all subcontractors, and bear the ultimate financial and juridical risk. Essentially, they promise to hand over a fully functional facility to you, the owner, at the end of the contract.

2. EPCM: Engineering, Procurement, and Construction Management

Now, consider a slightly different scenario. You still want that manufacturing plant, but this time, you wish to have more control over the procurement process and the subcontractors involved. Enter the EPCM contractor. Instead of delivering the entire project, the EPCM contractor provides specialized engineering, procurement, and construction management services. They act as consultants, guiding you through the process. While they help manage the project, you, as the owner, sign the contracts and bear the juridical and financial risks.

The distinction between EPC and EPCM is crucial in determining the risk distribution, control levels, and involvement of the project owner. EPC offers a more hands-off approach for owners, while EPCM allows for greater control and direct engagement, albeit with increased responsibility.

In the corporate realm, where every decision can have cascading effects, understanding the nuances of EPC and EPCM is vital. It's about accurately gauging the organization's appetite for risk, the desired level of control, and the available in-house expertise.

To choose between EPC and EPCM is not just choosing between two contracting models; it’s about making a strategic decision that can shape the success trajectory of your projects. Understanding these concepts is not just beneficial—it's essential.

Back to the basics: Project & Portfolio Management [4 min]

TL;DR 

• Project Management deals with the “How” - Operational.

• Project Portfolio Management deals with the “Why” - Strategic.

• You need to answer the “Why” before you start the “How.”

A quick LinkedIn search for “Project Manager” will show approximately 17.8M profiles - more than 17 million people (about the population of New York) are or have been Project Managers. With such a popular job title, the expectation is that project management is well understood – to deliver or execute a given project on time, on budget, and on scope. In short, to finish everything that was required in the time that was agreed upon using the allocated money.

However, searching for “Project Portfolio Manager” will only bring up 192K profiles. That’s 92 times less! While still popular, we feel that the fundamental difference between Project Management and Project Portfolio Management is not always clear.

Project Management (PM) is often described as using specific knowledge, skills, and tools to deliver a project on time, budget, and scope. Project Management is focused solely on the delivery of the project. The Project Manager is in a delicate balancing act within the famous project management triangle. PM is concerned with the “How” question – how do we execute this?

Despite having a similar name, Project Portfolio Management (PPM) differs fundamentally from Project Management. Initially, you may think this is nothing more than a bunch of projects grouped together. For example, all internal projects run a company. Well…that’s not actually the case. The question answered by PPM is the “WHY” – why are we doing these projects? What are we trying to achieve by doing them? What is the strategic goal of the project?

Here are a couple of examples 

The Sydney Opera House is famous not only for its incredible architecture but also for being a formidable project failure. The project was supposed to take four years and cost 7M AUD. When completed, the project cost 102M AUD over 14 years! That is a staggering cost overrun of 1357%!! From a Project Management perspective, it’s safe to say this was a massive screw-up. They messed up the “How”.

However, the Sydney Opera House was a colossal success from a PPM perspective. The project's strategic goal was to put Sydney on the world map and to create a globally recognizable landmark. With its unique bespoke architecture, the Sydney Opera House became one of the most well-known buildings in the world. The project met its strategic goal.

A failed project does not mean the project’s strategic goals are unmet.

Staying in Sydney, we have a counter-example – the Cross City Tunnel is a 2.1 km tunnel that was supposed to alleviate above-ground traffic in Sydney. The project execution started in January 2003 and finished in July 2005. The project was completed in 30 months (about two and a half years) and two months ahead of schedule. The project budget was 0.8B AUD and ended at 1.12B AUD. While still 40% over budget, this can generally be considered a relative success for highly complex infrastructure projects. From a PM perspective, the Cross City Tunnel was a success. The Project Manager had done a marvelous job.

But did the tunnel work as it was supposed to? No. The Cross City Tunnel has yet to reach its traffic targets. A brilliant engineering masterpiece destined to fail – it never really had a purpose. The Cross City Tunnel is a failure from a Project Portfolio Management perspective. It did not achieve its strategic goal of diverting above-ground traffic underground. It remains relatively empty.

How can I use Project Portfolio Management? 

Let’s say you are running a division of a multinational corporation. Your division is developing, manufacturing, installing, and servicing plastic recycling machines. As part of the overall corporate strategy, you must:

• Increase the efficiency of the manufacturing process

• Reduce energy consumption by 15% to meet carbon emission goals

These two initiatives can be considered Project Portfolios with the following structure.

P.S. There is an “in-between” thing called a Program. A Program is defined as a group of projects which need to be executed together for their strategic impact to be felt. For example, if you want to improve train transportation in country X, you must upgrade all train tracks AND change all the trains with new ones. You won't achieve anything if you have old train tracks with brand-new bullet trains.

Before starting each project, they must be appropriately scrutinized on the “WHY” – why undertake these projects? Every project

• Needs to be prioritized in the function of its impact

• Will need to have a strategy score

• Will need to have a risk score

You will always need to evaluate the alignment of these projects with the strategic corporate goals and, if need be, cancel them. The hardest thing is to pull the plug on a project already under execution. For political reasons, this is rarely done. Still, it’s better than executing a project that will not impact your organization.

The examples above showed how a failed project can meet its strategic objectives. We have also shown that a successful project can fail its strategic goals. For your business to be successful, you need to ensure success in both areas: that you select the best project for execution (to meet strategic goals) and to deliver these projects on time, budget, and scope.

Do you know what tools I can use? 

While there are virtually unlimited Project Management tools (some good, some crappy), you won’t find many Project Portfolio Management tools. We think the most professional tool is Oracle Primavera Portfolio Management. You can even download it for free to test it out. But watch out. It’s not the easiest tool to use. You must ensure you have someone within your organization who can use it properly. Like many of these software tools – crap in, crap out.

The Hidden Science of Your Morning Coffee: A Neuroscientist's Take [2 min]

Ever wondered what that morning cup of coffee is doing to your brain? I recently watched an interview with Andrew Huberman, a renowned neuroscientist and professor at Stanford University. The man has a gift for making complex science relatable, and that video made me rethink coffee, caffeine, and my coffee routine. 

Caffeine is the main psycho-stimulant in our beloved coffee and is the root of the energy we get after drinking it. But why? Caffeine is an adenosine antagonist, meaning it blocks the receptors in your brain that make you feel tired. Sounds like a win, right? But here's the kicker: when the caffeine wears off, the adenosine that's been building up swoops in, causing that dreaded "caffeine crash" many of us experience in the afternoon. 

So, why should we be concerned? Just drink more coffee, right? Not really, because timing is everything. Huberman suggests holding off on the caffeine for the first 90 minutes after we wake up. Why? Our body's natural cortisol levels are already doing the heavy lifting, waking us up naturally. Cortisol, often called the "stress hormone," has a natural rhythm in our bodies. It peaks in the early morning, acting as a natural alarm clock that helps us transition from a sleepy state to a fully awake one. 

By waiting 90 minutes, you allow cortisol to do its job effectively, making you feel awake and alert. Then, when cortisol levels start to dip, coffee comes into play. It fills the gap, maintaining your alertness throughout the day and preventing the caffeine crash that comes from doubling up on cortisol and caffeine. 

So, the next time you reach for that morning brew, pause. Let your body's natural cortisol cycle run its course. Then, savor your coffee, knowing you've optimized your alertness for the day ahead. It's not just about enjoying coffee; it's about enjoying it wisely. 

Would you like to talk more about the topics of this newsletter?

Drop us a line at [email protected], and we’ll gladly help if we can (we won’t ask for any money 🙂)

The Industrialist Team