Towards an investment-centric perspective
Striving to thrive. In the new paradigm introduced in the previous article, the matter of profitability of the future asset was placed at the top of management’s priority. The management of the project, being circumscribed by the constraint diamond (see Figure 1.2 in previous article) becomes investment-centric. This is what is called investment-centric project management (ICPM). The ICPM approach transforms the project organization into a full-fledged institutional structure. The structure is divided into three management functions: the organization, the business and the relationship nexus. The first deals with the application of knowledge, skill, tools and techniques to project activities (aligned with TPM thinking); the second deals with money; and the third one transcends the relationships – personal and functional – that make or break a project.
Anchors of ICPM execution. The anchors in the ICPM context are the pillars beneath the foundation of the delivery strategy. TPM tools and techniques are not anchors, but merely work enablers. The first ICPM anchor is the end of a project. Whereas in TPM the end coincides with the end of commissioning (following construction), in ICPM the end of a project occurs when the asset has been proven profitably performing. Practically, this means weeks or months later than commissioning.
The second anchor is the budget philosophy. TPM projects are managed as spend projects (discussed in the first article), subject to the constraint trifecta (see Figure 1.1). The work is managed always with a view to minimize costs. In the ICPM paradigm, all projects are of the investment type, with the budget being the investment vehicle to realize the asset. Project costs are justified on the basis of maximizing the future investment returns. Short term cost savings are shunned if they run counter to this basis.
The third anchor concerns work sequencing. The traditional approach calls for dividing the scope of work into a series of phases (usually four to six), culminating in the commissioning of the asset. The design philosophy explicitly assumes that each output can be designed individually and linearly, while the design work spans two or more phases. These outputs are then explicitly assumed to accrue perfectly over time to produce the final, integrated outcome. These various assumptions are rarely corroborated by reality, for they ignore the effects of coupled complexity. Any time multiple moving parts are in play (the quintessence of investment projects), complexity will arise. Complexity is in fact an emergent feature of such multi-part systems, and is manifested by the non-linearity of coupled interactions between the components making up the system. The ICPM schema takes it for granted that complexity will arise, rather than fight its ascendency as TPM is wont to do. The ICPM schema seeks to corral that complexity by sequencing the work in such a way that outputs are produced once, at a specific phase of the execution. The nature of the outputs proceeds organically over time. It enables the gradual build-up of the asset from requirements to specifications to individual systems, assembled into installations, networked together into the plant. Proceeding in this way propitiates the pursuit of the maximized future investment returns (which will otherwise be compromised by pursuit of real-time cost savings).
The salient differences between TPM and PPA projects are conveyed by these three anchors. Others will be introduced throughout the text, such as the unit transformation processes (UTP), leadership, direct accountability, getting-to-no mindset, team structures, framework, risks, collection substrate, asset configuration and “A” organizations. Taken together, they amount to a comprehensive and cohesive execution infrastructure.
Migrating from TPM to PPA necessitates a holistic transformation. Tweaking the orthodoxy will not suffice; were it the case, natural selection would long ago have embedded them into the DNA of the practice.
TPM vs PPA perspectives. To illustrate, take an example from the movie industry (a movie is an investment project). Wind back the clock to the 1970’s, a time of revolutionary upheaval in cinema, with Hollywood seeking to re-define itself in contrast to its past. The industry was infused with fresh blood from such immortals as Spielberg, Lucas and Coppola, whose names need only be spoken to turn admiration into inspiration. Back then, as now, the movie “project” was deemed completed when ready for theatrical release. In one specific instance, the project was espoused by a young, mildly successful movie maker bent on trampling the conventions of storytelling. Not surprisingly, filming was plagued with production problems, technical failures, editing misfires, and painful budget and schedule over-runs. When, at long last, the final version was ready for pre-screening, studio executives were less than enthused, to the point where they feared an impending failure of the whole affair. The studio chose to limit the initial release to a mere dozen theaters across the US. By TPM standards, the movie project was a failure: budgets and schedules were busted; many technical processes went off the rails. The studio executives’ lack of faith was so dire that they agreed to sign over the merchandising rights of the film back to its director (in an ultimate effort by the director to get the movie released). Against all odds, the movie made it to the screen. And so it was that, on 25 may 1977, the failed movie project Star Wars Episode IV hit theaters .
Changing the start of the end. Evidently, had the definition of the movie project included the revenue phase, the assessment of its success would have varied ever so slightly from the studio’s original stance. Had the studio executives focused more on the contents and magic of the film’s cinematographic execution, rather than harp on the budget and schedule woes, they might have anticipated the magnitude of the film’s impact and invested more money and more time on the special effects. Surely, they would then have retained the merchandising rights that would eventually make George Lucas wealthy.
Further insights can be gleaned from chapter 1 of Investment-Centric Project Management, available on Amazon.com.