Scope #11 (12/2019)

11th Prohoc Stakeholder Magazine Winter 2019/20 prohoc.fi

TAKING CARE OF THE EXPERTS

TOGETHER WE ARE STRONG AUTOMATION ENGINEERING

Making customers shine by PLC Programming

11th

Contents

04 06 18

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10

04

Making Customers Shine by PLC Programming

15

Designing a Digital Supply Chain

06

Taking Care of the Experts

18

Six Good Reasons to Put Your Phone Down Now

10

Revolutionizing the Business Segment with Flexibility

20

How to Become an Exceptional Capital Project Delivery Organisation?

13

Plant Engineering – Reformed

Scope is a stakeholder magazine giving insight to the daily business and development of Prohoc Oy and its personnel. PUBLISHER: Prohoc Oy EDITOR-IN-CHIEF: Matti Manner ART DIRECTOR: Anssi Koskinen / Staart COVER PHOTO: Mikko Lehtimäki PRINTED BY: Printhaus Oy, Pori, Finland.

Papers and inks used are eco-friendly and produced responsibly.

KEYNOTE

WHY DO WE FALL ON THAT planning fallacy?

“You make a plan, which is usually a best-case

So there’s no need for a “black swan” phenomenon

scenario. Then you assume that the outcome will

to be seen, we cause this typically by ourselves.

follow your plan, even when you should know

At Prohoc we work on large capital projects with

better” ie. the Planning Fallacy ie. the tendency of

several industry leading companies. There is great

people to underestimate task completion times

amount of data, knowledge, processes and experi-

and costs even when they have all the knowledge to

ence available in these companies. Yet we often see

not fall short.

exactly this dangerous behavior. We even fall into these fallacies ourselves, but only internally in our

This is what Daniel Kahneman meant while stating

development projects. When working on a customer

that people tend to fail in planning. We are just too

project, what we never do is take an “inside view”.

optimistic with all our biases. We do this all the time because we use the so called “inside view”

This Scope gives You our first article in a series of

on estimating outcomes, meaning we consider our

articles on this topic. I encourage You to follow this

event and think this time it is going to be different

article series as we’ll not only introduce the critical

than before. We ignore similarities and statistics

points, but later also our findings and practical tips

between our situation and other peoples’ earlier

on how to become world class in preparing your

situations even though this kind of “outside view” is

projects without falling in the early steps. Among

what we should take.

other stories, You’ll also find that at our home office, there are three outstanding ladies making

PwC’s study shows that only 5,4% of capital invest-

sure our team can shine in the world of projects

ment projects met “best in class” predictability

every single day. Enjoy Your read and enjoy Your

in terms of schedule and cost. Don’t know what

well-earned holiday season. Let’s charge up our

You think, but I consider it pretty miserable that

batteries and bring on our best game for 2020!

only every twentieth project would be considered fulfilling all expectations set out in the beginning.

Now consider how the projects met initially set requirements on scope and quality and the number goes closer to zero.

Matti Manner CEO

Sport enthusiast, yachtsman and all-around business engineer Matti is the chief executive officer of Prohoc. After traveling around the globe trying to find world class suppliers he is now navigating Prohoc to become one. • TWITTER: @MattiManner

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PORTRAIT: Jani

Muotio

MAKING CUSTOMERS SHINE BY PLC PROGRAMMING

4

Jani was born in Teuva, in South Ostrobothnia, Finland. He studied in Teuva’s schools and then continued at Suupohja’s vocational institute in Kauhajoki. After a Vocational Qualification in Electric Engineering, it was time for a summer job in Atria and to serve in the army.

After the army, Jani decided to study an Engineer’s Degree in Automation Engineering at Seinäjoki’s University of Applied Sciences (SeAMK). Jani wanted to go abroad during his studies and explore the world. He found his chance at Aschaffenburg University of Applied Sciences in Germany.

His Interest in going abroad didn’t stop after spending an exciting year in Germany, so Jani continued his studies for three months at Shanghai University, College of International Exchange in China.

Programming has always been fun for Jani. Nevertheless, his childhood dream jobs weren’t about engineering.

- I grew up in a farm, so my dream jobs were related to agriculture and forestry. My mother always told us that we must study a proper occupation and after we would turn 18, we could do whatever we wanted.

"It's great I've been able to take on some office duties, but it is also excellent to have the possibility to work overseas every now and then"

Photo: MIKKO LEHTIMÄKI Edit: STAART

Jani Muotio is an Automation Engineer and Prohoc professional who wants to use his programming skills to make clients achieve their goals. He is eager to learn something new every day.

FIRST TIME IN PROHOC AND RETURN

CONSTANT COMMUNICATION AND LEARNING

In 2014, Jani received a call about the possibility to work with Prohoc and soon he was on his way to cable connecting duties to an oil rig in Azerbaidžan. After Azerbaidžan, Jani graduated from SeAMK and left from Prohoc and went to Sipoo, Finland to work as a service technician in commissioning and PLC engineering duties.

Jani got another call from Prohoc 20 months later. He says it was an easy decision to come back to Prohoc.

- My responsibilities include programming with Siemens Step 7 logics but I have also done one project using Schneider’s Unity Pro XL, Jani describes.

Jani is pleased that he has got such a good work community.

He also likes to work with big companies.

- It’s great I’ve been able to take on some office duties, but it is also excellent to have the possibility to work overseas every now and then, Jani tells.

The amount of contact required of PLC engineers towards stakeholders depends on the project. Jani informs that he keeps on his mind that his role is to support customers to success.

- When I studied, we were taught that we must respect customers’ needs. I can make proposals, of course, but it is the customer who decides in the end.

Work inspires him because days are never the same.

Sometimes a certain type of fault is frustrating or solving faults takes longer than it should.

- I think that one can never learn everything about this job. You can never be too good. Programs develop all the time, and in the future, Artificial Intelligence will bring new possibilities to programming, he says.

FUTURE TOURING PLANS MEMORABLE START-UP AND DIVERSE CHALLENGES

One of Jani’s recent overseas projects was over 12 000 kilometers away from home. Jani had been involved in the project for quite some time before he arrived in Port Moresby, Papua New Guinea, in January 2019, where he worked in PLC engineering duties in a power plant.

Jani says that he went to Papua New Guinea with high spirits. The chance to create new software was especially motivating.

- The first machine start-up was the most memorable moment on the site. At the same time, I was feeling a little nervous because I was hoping that my software works as smooth as possible. This time there was a lot of content which had never been used before and new ways of implementing it. Everything went well and the software worked as planned.

Challenges on site weren’t solely based on work this time.

It was mother nature that caused issues.

- The rain made it impossible to access the site one time during the rainy season. It was indeed force majeure situation, Jani laughs.

Jani felt a bit melancholic when he left Papua New Guinea.

- This project was like my baby for over a year, so it is a peculiar emotion now when it is over, Jani ponders.

Nowadays Jani lives in Vaasa. He likes to do sports and help on his family’s farm in his free time.

- It is relaxing to get your hands dirty and do manual labor on the farm. Sometimes I also help in my brothers’ truck company in various duties. These represent a pleasant variation to days in the office, he explains.

In the future, Jani hopes that he can continue working in similar duties. He has also planned to study further in either UAS or university. He has another long-time dream on top of that: - I hope that in the future I have the possibility to own a proper touring motorcycle. It would be fantastic to ride through Siberia and visit different countries, Jani describes.

Jani Muotio AUTOMATION ENGINEER

5

"SITUATION REPORT: THE EXPERT NEEDS TO BE READY TO GO IN 24 HOURS" ON NEXT SPREAD ≥

Photos: MIKKO LEHTIMÄKI Edit: STAART

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TAKING CARE OF THE EXPERTS

7

Significant proportion of Prohoc’s employees work on project sites around the world. The experts are taken care of mostly by a powerful team of three women. The goal of this team is to handle the experts’ HR and administration issues so that they can focus on the actual work at project locations.

CONTINUES ≥

T

he team consists of Senior Project Coordinator Sesilia Alhainen, Administrative Coordinator Päivi Havulehto-Heinonen and Project Coordinator Tanja Skog and together they have broad amount of tasks. Even though each one has their own responsibilities, they work flexibly like a well-oiled machine, complementing one another.

“Our experts don’t have to know who is the person responsible for certain activity.

If I receive an email that belongs to Tanja or Sesilia, I will answer to the sender or send it to the right person and inform the site expert about the process.” Päivi Havulehto-Heinonen explains.

ASSISTING THE EXPERTS WITH ISSUES IRRELEVANT TO THEIR PROJECT TASK

8

Prohoc wants to give the new employee a proper introduction. Prohoc has focused on ensuring that everyone has access to personalized onboarding material. Sesilia Alhainen has been working with Prohoc for more than two years and she is responsible, besides new employee onboarding, for sala-

ries, invoicing, health care issues, visas, and global mobilization.

“We give the new employees time to study the materials by themselves and then go through the material together and discuss the content. Before the duties start on site, we will send the necessary tools and gear, like phones, laptops, and jackets from the Vaasa office.” Sesilia describes the onboarding program.

BEING WITH THE EXPERTS

Wellbeing of the personnel can be a challenging task to maintain because most of them are located thousands of kilometers away from the headquarters. The wellbeing is monitored frequently by surveys sent to the experts. Prohoc supports the team with comprehensive health care services, different campaigns and reacting to any issues arising from the surveys or other communication. The latest addition

to the health care services is the opportunity to use services three months after the fixedterm project is completed.

When the amount of the employers' side bureaucracy is low and assistance with paperwork is available, experts can concentrate on their duties on site. “We help as much as possible for example with visa and travel arrangements and offer accurate and high quality information. I want the person going to the site to have a feeling that we are with them through the whole project assignment, and they should concentrate exclusively on their task without any extra stress.” Tanja Skog says.

GETTING TO KNOW EACH OTHER

Tanja has been with Prohoc since 2015 and she is in contact with the site experts continuously on topics like travelling, equipment and more or less about the ‘everyday-issues’.

Sesilia Alhainen SENIOR PROJECT COORDINATOR

“I give a lot of credit for the experts, they are sophisticated and accommodating people.

They are ready to move quickly no matter when or where the assignment takes place, but at the same time they have the resilience to wait if the schedules are delayed.”

She says that her job is really fascinating because there is so much daily variation. “You might be helping with computer updates but the next minute you are changing airline tickets and agreeing on accommodation, all within short notice.” Tanja tells. It requires flexibility to make all this work. The situation could be that the expert has to be ready on site on the other side of the globe in 24 hours.

“I give a lot of credit for the experts, they are sophisticated and accommodating people.

They are ready to move quickly no matter when or where the assignment takes place, but at the same time they have the resilience to wait if the schedules are delayed.” Tanja describes.

When Päivi Havulehto-Heinonen started in Prohoc over a year ago, she noticed the same thing as Tanja. “All site experts seem so flexible and calm.” Flexibility is also one of the key parts of Päivi’s duties. She has a wide range of tasks from assisting the management to controlling experts timetables.

“If one little area goes unnoticed it can cause a lot of extra work. There are so many details in our duties that minor oblivion can reflect to many areas.” Päivi emphasizes.

MUTUAL RESPECT

Prohoc is an agile organization where an employee is not treated as just a name and a number in the system. The employee is seen as a person and there should always be time to listen everyone individually.

“We can quickly solve problems and as an organization we can handle issues with agility and flexibility, keeping the bureaucracy as low as possible. That is absolutely one of our strengths and a way to outperform competition.” Sesilia explains Prohoc's mentality.

One of the key assets to maintaining good communication with site experts is to be in constant contact with them. There are several tools and channels for communication. “Our

conscious choice is to always make time for a chat, whether on the phone, over the internet or face-to-face.” Päivi informs.

“Many have said that it is great to feel like being a part of a working community, even if the project site is far away from the headquarters. I am especially thankful for the positive and grateful messages from the site experts”. Tanja praises.

Päivi, Tanja and Sesilia shares great mutual respect for each other and they share a common feeling that together they are strong.

“It is nice to come to work every day and be a part of a great team. You can always count on getting help from other team members when needed. We have fun together and we share the same sense of humor and have great chemistry.” Päivi sums up.

Päivi Havulehto-Heinonen ADMINISTRATIVE COORDINATOR

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Tanja Skog PROJECT COORDINATOR

THE wasteWOIMAÂŽ POWER PLANT

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REVOLUTIONIZING THE BUSINESS SEGMENT WITH FLEXIBILITY Waste in its many forms is a major global threat to people and the environment.

Large-scale waste recycling and waste-to-energy solutions can help metropolitan cities to solve their problems, but what about smaller communities? The wasteWOIMAÂŽ waste-to-energy power plant is the most efficient, versatile, flexible and adaptable power plant designed for small-to-medium-scale operations. It offers several benefits and advantages to all stakeholders through increased energy generation, reduced waste-landfilling and cleaner environment.

"Flexibilities can be described as transportability, scalability, constructability and movability respectively."

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T

he wasteWOIMA® power plant’s flexibilities can be divided into three categories: design-based, operational and business model flexibility. Together they describe a unique solution that can help solve the global waste challenges practically anywhere.

It works as a stand-alone system, or as a part of a larger WOIMA Ecosystem designed to recycle each waste fraction as raw material, or as energy in the most efficient manner.

The design-based flexibility originates mostly from the standardized modular structure of the plant. The modules are designed to fit into standard sea container size enabling fast, easy and safe transportation to practically any destination. The plant scales up (and down) in 15 MW intervals ensuring that the right-size power plant is always available without the need to design it to order.

The prefabricated modules can be erected much faster, basically just like connecting Lego© blocks, than building a traditional power plant and with simple tools. And the modular design enables the plant to be erected and dismantled without damaging the modules thus making it possible to relocate the power plant if and when local requirements change. These flexibilities can be described as transportability, scalability, constructability and movability respectively.

The modular structure of the plant also offers continuous benefits in maintainability and upgradeability. Since the plant is not restricted by an enclosing building, there is good access to all maintenance points, which also enables exchanging broken

or worn-out modules completely. Our continuous R&D work improves the productivity and lengthens the lifespan of the plant, while reducing the operating expenditure and easily adjusting to new regulations.

The plant adapts easily to practically any local conditions, whether environmental or regulatory. The design enables fuel flexibility through incineration of several different types of waste fuels with wide calorific value, moisture and toxicity variance, as well as operation in virtually any ambient conditions, as long as sufficient waste fuel feed is available and power demand exists.

This location suitability enables us to serve even the most remote locations. There is also design-based flexibility for customers operating under different design standards, such as EN or ASME. Localization-readiness enables us to source large part of the module and equipment manufacturing, testing and erection locally.

The operational flexibilities support the day-to-day operations and profitability of the plant. It can generate thermal energy (steam, heating or cooling) and electricity, and switch between these flexibly over time representing output flexibility.

The plant’s power output adapts automatically to changes in the ambient conditions, such as temperature and humidity, as well as changes in the customers’ ability to accept the generated power.

This output adaptability ensures continuous maximum efficiency of the plant. The flue gas treatment system utilizes urea, hydrated lime and activated carbon in rendering the flue gases inert.

CONTINUES ≥

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However, there is chemical flexibility in the quality and quantity of the chemicals, and even some substitute chemicals can be utilized. Yet, the plant fulfils even the strictest water, soil and air emission regulations provided it is operated according to prudent industry standards. Emission adaptability is achieved by varying the chemical consumption and filtering materials.

The wasteWOIMA® power plant has high level of automation, but it can also be run manually employing dozens of people, and significantly more at the adjoining waste pre-sorting facility. This CAPEX/OPEX substitution enables the investor to adapt easily to local requirements and/or the relative cost of labour and capital. This base load power plant also supports increasing intermittent power generation, such as solar and wind energy, and the optional battery storage system absorbs the load fluctuations supporting hybrid energy productivity.

The business model flexibilities enable the wasteWOIMA® and WOIMA Ecosystem projects to move to the bankable stage much

operator new business opportunities with different waste streams not necessarily suited for incineration. This business expandability speeds up the propagation of waste-to-value solutions worldwide. The medium-scale power plants offer excellent refinancing potential; geographically distributed power plants mitigate the owner’s portfolio risks. And last but not least, the WOIMA solutions create new job, training and business opportunities both upstream and downstream in the areas of waste logistics and utilization of recycled raw materials and generated energy, which adds a social perspective for the socially conscious investors.

Combined the above-mentioned flexibilities create a unique and transcending business opportunity benefitting all local

THE WASTEWOIMA® POWER PLANT IS THE “HEART AND SOUL” OF THE WOIMA ECOSYSTEM faster than traditional projects. The fast project lead-time, continuously improved standardized design, high-quality module pre-fabrication and short construction time on site de-risk the project almost completely representing risk manageability. WOIMA also has all the tools and processes in place for project development support for project developers; standardized solutions simplify and speed up the project development process.

The medium-scale power plants support the decentralization of waste management and power generation activities close to where the waste is being generated thus offering significant savings through decentralization potential.

On the financing side the benefits are equally noteworthy. The plant generates power and cash flow for all future WOIMA Ecosystem solutions offering the owner/

stake-holders simultaneously. The wasteWOIMA® power plant is the “heart and soul” of the WOIMA Ecosystem that embraces the opportunities created by society’s different waste streams. It ensures that all the waste can be recycled as raw material, transformed into energy or otherwise mitigated. And it does it faster, better and more cost-efficiently than the competition.

Contact WOIMA, if you see yourself as a collaboration partner in saving the planet. Ask more about turning Your waste into wellbeing with WOIMA Circular Economy Solutions.

PLANT ENGINEERING – REFORMED WOIMA has embodied Pioneering as a one of its core values empowering us to be in the leading edge of development. It means that we strive to push the envelope on how Waste-to-Energy solutions and Ecosystems are engineered and delivered sustainably around the world.

The essence of pioneering the whole engineering of our solutions relies on grasping a more innovative way of delivering the design deliverables with less effort in an environment. It is essential because many of needed

experts and professionals are in different locations and companies.

Let us take a moment to consider what is the conventional way of engineering a large plant within the industry today. Usually, plant engineering means that design work is conducted with different tools with resources that are often far apart from the other engineering discipline not only by location but most importantly in terms of knowledge. Design related baseline information and guidelines such as specifications, dimensioning data, calculations, 3D-models, drawings are usually siloed in different systems from which the needed knowledge is

"Each one can see the latest design data whether it is 3D-models or PI-diagrams of the whole plant and adjust their work accordingly so that individual contribution is in line with the team and other disciplines no matter where one resides" merely taken as an excerpt and submitted forward.

When this is the case, most likely in a complex design project, there are questions or clarifications requests which were not part of the initial information. It may be data from other discipline or just to get a better understanding of the systems in conjunction with what is supposed to be designed next.

Photo: MIKKO LEHTIMÄKI

CONTINUES ≥

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Most importantly it requires embarking outside the comfort zone which often is required for truly making a disruptive change for better performance.

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Far greater concern still is, especially when engineering a complete plant, that the whole facility is not integrated as one native 3D-model.

This means that the risk of misalignment especially between interfaces is naturally more considerable let alone adding the lack of unified and centralized database into the equation. You may consider this in terms of partial optimization meaning that despite of the certain tool being superb, let say in mechanical equipment design, the potential of that tool in the bigger picture may never be realized. It is due to the generated friction during transforming native data into other format even resulting a loss of information on the way as well.

We are interested in capitalizing the knowhow of experts and professionals in the field of engineering in a shared hockey ring where players can be close to the action and where no one who is contributing to the design is left out from the change to deliver effectively. Therefore, our intention is to deviate from the conventional approach of designing with different tools. Rather we focus on establishing a common design tool and thus environment for all key engineering professionals and disciplines. Each one can see the latest design data whether it is 3D-models

or PI-diagrams of the whole plant and adjust their work accordingly so that individual contribution is in line with the team and other disciplines no matter where one resides. All will share the same rules provided by the common database guiding the design work naturally. By witnessing the real-time completion of the work around you, it will facilitate the understanding when and where you can deploy your efforts effectively.

This included by the fact that, the 3D-model of the whole plant is completely done in one native environment among each design discipline.

Therefore, we can further safeguard that the work in the workshop and especially at the site can be carried out without extensive need for rework or adjustment because the pipe flanges are at different height compared to what it was supposed to be or the anchoring of the steel structures are misplaced.

This of course does not happen by itself. It requires a clear vision, and flexibility among the collaboration partners to commit to the said benefits as it will require setting of certain ground rules. Most importantly it requires embarking outside the comfort zone which often is required for truly making a disruptive change for better performance.

DESIGNING A DIGITAL SUPPLY CHAIN "Customers require improvements in a shorter time."

The latest organization research has recognized the role of digital organization design as a crucial part of strategic management. In management literature, connectivity may be seen as an existing capability for at least two decades. But when the software started to move into the cloud the design of organizations faced pressure for change. Business ecosystems are here to stay.

Boston Consulting Group (BCG) and Massachusetts Institute of Technology (MIT) together published an excellent article on how successful companies change their business and operation models as digital technologies reshape the way that they do business. The article points out some exciting findings that should be elaborated further from an inter-organizational angle.

One of the findings was that many companies have used the people-process-technology framework to manage and coordinate changes. The second interesting finding was that

"The change should be interacted and managed fast and precisely with the supply chain."

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successful companies started to use digital solutions already at the beginning of the 2000s. Therefore, those companies have a significant advantage to approach the platform economy which cloud technology provides.

Companies are often implementing digital technologies for two purposes – into their products and services and their interactions with employees, customers, suppliers, and other stakeholders. The finding was that both types of digital transformation require a redesign of business and operating models.

The research points out five dimensions where the digital transformation takes place: customer experience, product and service offerings, ecosystems, control and alignment mechanisms, and ways of working. Let’s have a look at these dimensions in inter-organizational angle – especially what it means for the supply chain.

CONTINUES ≥

CUSTOMER EXPERIENCE

Digital companies address the total customer experience.

We have recognized that winning companies in the manufacturing ecosystem should be able to manage the design and engineering changes much more smoothly and rapidly compared with other companies. Customers require improvements in a shorter time. If the company is concentrating only on its internal units, the result is not desirable from a customer’s point of view. The change should be interacted and managed fast and precisely with the supply chain.

Digital companies rely on easy access to customer data. All the data on the customer should be available for the employees who are creating value for the customer. Because a major part of the value is created in the supply chain – in business relations with suppliers – the internally created data is not enough to create the most valuable experience for the customers. The accurate and symmetric data and transparent and on-going interaction need to be available for all persons who are involved in creating the customer experience.

PRODUCT AND SERVICE OFFERINGS

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Today products and services are integrated with different sensors and processors and connected to the cloud through wireless networks. Monitoring and analytics are new values which can be delivered to the end-customer. The machines can more and more communicate with each other and deliver productivity to the customer.

This improvement enables companies to have relevant and real-time data related to their own production and the machines customers are using. The same kind of visibility and availability for the relevant data should be expanded to the information which is shared in the supply chain. To act fast and reach advantage in flexibility, the information that is shared in the supply base should be available and visible anywhere and anytime for the people who are creating value for the end-customer.

ECOSYSTEM

Ecosystems are often recognized and developed towards the customer base. Different kinds of digital communities are built with end-customers. The relevant data is gathered directly from the end-users of the product. It gives the manufacturer a new kind of base to developing the products and services, and new value for the customers.

For some reason, less attention is given for the ecosystem that exists in the supply chain – the companies which create the major value to the end-product.

CHANGING THE WAYS OF WORKING IN THE SUPPLIER ECOSYSTEM SHOULD BE ON THE AGENDA OF ALL MANUFACTURING COMPANIES WHO ARE DELIVERING COMPLEX SYSTEMS FOR THEIR CUSTOMERS.

WAYS OF WORKING

As the article mentions, the ways of working describe how people in the company work together. Today, the clock speed is one of the key factors that companies are trying to tighten.

Digital solutions have brought a lot of improvements to this area, not only internally, but also in the supply chain. Changing the ways of working requires a cultural change besides the digital transformation. Without designing the cultural change in the ways of working, the digital transformation typically fails. But if the cultural change is in place, the results are impressive.

Changing the ways of working in the supplier ecosystem should be on the agenda of all manufacturing companies who are delivering complex systems for their customers. It will improve their revenues, productivity, customer & supplier satisfaction and speed of their business on a global scale.

SUMMARY 17

I believe that the companies who develop their supplier ecosystem with modern digital solutions to operate smoothly and fast will increase customer satisfaction by improved quality, decreased costs and shorter lead-times.

CONTROL AND ALIGNMENT MECHANISM

Salesforce adopted a visionary strategic thinking mechanism called V2MOM (vision, value, methods, obstacles, measures) and it has been implemented in many other organizations as well. This simple concept allows the organization to focus on right targets and actions in all organization levels which is crucial for reaching high-level results.

This same concept could be easily expanded into supply chain management. Think about it, if these values would be defined commonly within the strategic supplier relationships, how much bigger the benefits and impacts could be for the end-customer. The concept is there, only the context needs to be changed from internal units to external relationships.

As a summary, I want to present five dos elaborated from the article to be discussed in your manufacturing company.

1. Redesign your design and engineering change request processes in your supply chain to reach shorter leadtimes. Concentrate on quick responses, accurate data, and transparent interaction.

2. Make sure that the selectively shared information and interaction within the supply chain are available and visible for all persons who are creating value for the customer – also for the suppliers.

3. We live in the era of ecosystem economy – choose the right ecosystem for your company. The best choice is to commit with a vertical ecosystem which is focusing on the challenges that exist particularly in the industry where your company is acting.

4. Implement a simple strategic concept (e.g. V2MOM) to commit your suppliers to establish the highest possible value for your customers.

5. Give attention to cultural change when redesigning your supply chain with new digital technologies.

Jarl Matti Anttila CMO & CO-FOUNDER OF JAKAMO matti.anttila@thejakamo.com

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We are so used to having our phones glued to our hands that we barely ever question it.

However, there are so many reasons to try and detach yourself from the screen that you should really give it a try.

RECHARGE AT NIGHT

1st

The screen’s blue light affects your alertness, especially at night. The light reduces the secretion of melatonin, which is a sleep hormone. Blue light is literally telling your brain to stay awake. Put away your phone, tablet and other digital screens two hours before going to bed – read a book instead to get a good sleep.

PROTECT YOUR NECK

2nd

When you scroll your phone with your head bent forward, you’re targeting a pressure of tens of kilos to your neck. No need to wonder where that neck pain and bad posture come from! So lift up your head, straighten your back and take a deep breath. Your body deserves better.

HEAL THOSE HANDS

3rd

Scrolling distances on your phone is hard on your hands.

Ever feel pain or tension in your fingers? Yup, that’s it. Put the phone away. Your hands have so much more important things to do.

BE EASY ON YOUR EYES

4th

When you’re looking at a screen, you’re usually holding it close to your face. You’re focusing your eyes very close. At worst, this can lead to changes in eyesight. At least it will make your eyes tired and dry. So remember to look further away every half an hour, and try to spend less time looking at screens and more time outside where you can easily focus your eyes on objects further than arm’s length.

STOP WASTING YOUR TIME

5th

Smart phones are time consumers. Social media apps are designed to make you addicted and spend more and more time with them. You are very likely one of the addicts. There are apps that monitor the time you spend on your phone.

Beware – you will be shocked! But becoming aware is the first step towards healing.

PRESERVE YOUR SOCIAL LIFE

6th

Put your hand on your heart. How often do you slip into looking at your phone in the middle of a social situation?

Maybe others are doing it too. But why would you waste a perfect moment to socialize with real people instead? Ditch the phone, focus on the people around you. Look them in the eye and listen what they have to say.

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PROJECT MANAGEMENT IN FOCUS

DO YOU WANT TO BECOME AN EXCEPTIONAL CAPITAL PROJECT DELIVERY ORGANISATION? If yes, please read further.

FIGURE 1

Projects under budget are the exception - PwC NUMBER OF PROJECTS

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According to PwC’s white paper* it is more an exception than a rule (Figure 1) that capital investment projects are delivered within the budget and deadline. According to the white paper only 5,4 % met “best in class” predictability in terms of schedule and cost. This statement is accompanied with McKinsey’s white paper**, stating “capital projects seldom deliver the benefits providing expected value”. Capital Investments project proposals often overestimate benefits and underestimated costs.

Why? – Well, this is a two-folded response – because of delusions or honest mistakes on one hand and deceptions or strategic manipulation of information or processes on the other hand. That is not the whole truth, because the absence of rigorous risk management and absence of diligent requirement management, are equally essential factors for budget overruns. More about that after pondering the following less technical reasons.

The root cause to delusion and deception is often a result of underlying psychological biases or misplaced incentives and/

1-25

N=6 Under Project

26-50

76-100

N=8

N=8 51-75

N=5

N=2 PERCENTAGE OVER BUDGET

101+

N=4

08 07 06 05 04 03 02 01 00

or poor governance. Former can create such cognitive delusions like Planning fallacy, and Anchoring and Adjustment.

These two delusions arise from the ingredients of the so called “inside view” taken on the problem statement of the investment. It is very typical for people, when applying bottom-up decision-making techniques and not having critical mass of information available, to make seemingly accurate estimates and forecasts, eventually finding out that it was not the case.

FALLACIES

Psychologists have defined the Planning fallacy as the tendency of people to underestimate task completion times ad costs even when they have benchmark information of earlier similar tasks that have exceeded time and cost budgets. This leads managers to make delusional and optimistic decisions.

According to McKinsey’s white paper**, executives and entrepreneurs seem to be highly susceptible to this bias, supported by the studies showing tendency toward over-optimism in the information provided for decision-making process. Second psychological bias is the Anchoring, one of the most robust biases of judgment, occurs because the first estimate presented will subconsciously affect the subsequent estimates by distorting the view of the reality. In fact, according to white paper** the typical initial estimate for the most complex and large capital investments is less than half the final cost.

Hence, executives understand that unforeseen costs and delays may arise, so they do generally build a contingency fund sized proportionally to the size of the project. However, these Adjustments are significantly inadequate when comparing to the imminent cost overruns.

PRINCIPAL – AGENT

"Hence, executives understand that unforeseen costs and delays may arise, so they do generally build a contingency fund sized proportionally to the size of the project."

"PROJECT’S COST, SCHEDULE AND QUALITY ARE INHERENTLY DEPENDING ON THE DEFINED SCOPE OF WORK, WHICH IN OTHER HAND IS DEFINITELY DEPENDING ON THE PROJECT REQUIREMENTS." ON NEXT PAGE

Deception or Strategic manipulation of information or processes are often related to the negative consequence side of Principal – Agent relationship, a concept where one person engages another to act on his or her behalf. It is of particular interest here, because the space between them is what allows the possibility of diverging interests. Typical example is for instance Shareholders – CEO (C-level executives) relationship which could be considered as a 1st Tier Principal – Agent relationship. Inhere C-level executives acting as the agents for the shareholders have a duty to propose capital investment initiatives, which generate the best possible value increasing the wealth of the company for the shareholders. In order to perform so and with converging interests, it includes transparent and objective disclosing of the cost, benefits and risks for the project initiated. C-level should have the broadest and the most accurate knowledge of costs and benefits when they provide their board of directors the forecast needed for an informed investment decision.

What could go wrong here? Well, misplaced incentive program encourages to strategic manipulation of information or information gathering process. It is not totally unusual that C-level executives, being Project Champions, earn their full reward when projects succeed but share responsibility for losses and underperformance, latter two becoming imminent long time after the project approval. Their incentive programs encourage understating initial project's risks and costs / schedule while overstating its benefits. Project Champions are also aware that after approval of a landmark project, their stakes are higher on the executives’ market. Well, would you argue with this statement?

Similar Principal – Agent relationships exists as a 2nd Tier relationships in the large capital investment projects.

In such cases multitier relationships are formed between the actors, examples are relationships formed between, Company C-level executives – Consulting Engineers / Analysts or Company C-level executives – Contractors. In here, the agent, for instance consulting engineer or analyst, have incentives to tell the C-level executives the information which pleases them and advances their investment initiatives. Likewise, Contractors are more interested in winning a contract by bidding the lowest possible price, but concurrently ensuring that there is a window to renegotiate the contract price and time afterwards. In large capital investment projects, there are many stakeholders – including accountants, developers, architects, bankers, construction workers, engineers, landowners, public, and lawyers etc – who have widely divergent needs and incentives.

Based on the landscape painted by elements of explained delusions and deceptions, it is important that Investors, Owners and Senior Executives acknowledge that Project Champions, Consultants and Contractors are often overly optimistic when they are seeking funding for their investment initiatives. Therefore, for being successful, it is important

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for the first mentioned to counteract the “inside view” with the “outside-view”. This “outside view” requires rigorous risk management process including probabilistic cost estimating and schedule impact analysis based on information obtained from reference-class projects. A diligently conducted requirements management process along with systematic change control is ensuring that the needs and the expectations of the numerous stakeholders are prioritized and processed into set of requirements eventually being the defining factor for the scope of works at hand.

TABLE 1

Cost and Schedule overruns on some NASA projects PERCENTAGE OF BUDGET SPENT ON REQUIREMENTS NUMBER OF PROJECTS AVERAGE PROJECT COST OVERRUN

<5%

5-10 %

> 10 %

5

7

6

125 %

83 %

30 %

22 PROHOC DELIVERS

Prohoc Oy, the Project Partner for Investors, Owners and Companies of Senior Executives, is fully recognizing this challenge of initiating, planning, executing and controlling capital investment projects. Prohoc’s Project Partner Services is a service initiative which is focusing on services providing full control of investment initiatives / projects with processing project requirements and compliance thereof, estimating cost and time and managing risk management process for providing accurate forecasts used for decision making, at initiation and during planning as well as during execution of the project.

Even though many obvious causes to these behaviours described earlier are related to psychological biases and misplaced incentives, the root causes could be found from absence of means and methods to manage the expectation of the stakeholders, how to integrate them as requirements into project scope and definition of project objectives, and how to provide educated accurate estimates associated with computed level of risk exposure.

PROHOC PROJECT PARTNER CONCEPT

An undeveloped requirements management process applied or non-existent such, is the well-recognized root cause for the poor performance in projects.*** NASA has issued a re-

port where they can demonstrate the value of the investment into requirements management. With simplification, each 1 € invested in requirements management returned 19 € back. Great ROI – Right?

Project’s cost, schedule and quality are inherently depending on the defined scope of work, which in other hand is definitely depending on the project requirements. It is practically impossible to manage the scope and constraints, if the requirements are not set. So if those are not visible, they will not be evidently fulfilled along the project lifecycle. Despite the prudent and diligent estimating effort, it is also an absolute must to acknowledge that there is and will be unknowns in every single project, and the more the complexity is present, the more the unknown factors are imminent. Therefore, “Know your Unknowns” and prepare your team and project for them - Risk management - Allowance, Contingencies/Buffers, and Management Reserves.

FIGURE 2

Four Absolutes of Quality Management 01

Quality means conformance to requirements, not goodness

02

Quality comes from prevention, not detection

03

Quality performance standard is Zero Defects, not Acceptable Quality Levels

04

Quality is measured by the Price of Noncomformance, not by indexes

By Philip B. Crosby

THE QUALITY MEETS REQUIREMENTS

Let’s define a new aspect to all of this. Quality guru Mr. Philip B. Crosby presented the “Four absolutes of quality management” in his book “Quality is still free”. One absolute he claimed is that Quality means conformance to carefully thought-out requirements.

In order to comply with Mr. Crosby’s 1st absolute, there must be a methodology and actions to process the requirements from higher level needs gradually cascading them into detailed level requirements / specifications, which can be and will be fulfilled (verified and validated) with evidence during the project lifecycle phases. The traceability forward and backwards is of essence here. In order to manage such projects, Prohoc Oy is developing a requirements management approach in collaboration with a company providing the digitalized requirements management / collaboration environment.

FIGURE 5

ISO 9001:2015 Clause 8.3.3 The organization shall determine the requirements essential for the specific types of products and services to be designed and developed.

FIGURE 3

Requirements & Risks - Known & Unknowns CUSTOMER NEED

Assumptions - Allowances

functional and performance requirements information derived from previous similar design and developement activities

STATUTORY / REGULATORY

REQUIREMENTS

FUNCTIONAL / PERFORMANCE

CONSTRAINTS COST / SCHEDULE

COMPANY OBJECTIVES

The organization shall consider:

SCOPE

statutory and regulatory requirements standards or codes of practice that the organization has committed to implement potential concequences of failure due to the nature if the products and services

Uncertainties - Risks

TO BE CONTINUED… FIGURE 4

ISO9001:2015 Clause 8.2.3.1 THE ORGANIZATION SHALL... ...ensure that it has the ability to meet the requirements for products and services to be offered to customers. The organization shall conduct a review before committing to supply products and services to customer, to include: requirements specified by the customer, including the requirements for delivery and postdelivery activities requirements not stated by the customer, but necessary for the specified or intended use, when known requirements specified by the organization statutory and regulatory requirements applicable to the products and services contract or order requirements differing from those previously expressed. The organization shall ensure that contract or order requirements differing from those previously defined are resolved The customer`s requirements shall be confirmed by the organization before acceptance, when the customer does not provide a documented statement of their requirements.

Based on the information obtained from referred articles and on my own over 25 years experience from capital investment projects, I assure you that the factors described in this Scope magazine article are real and evident causes to the budget (cost/time) overruns. The technical solution is closer than many of you may think, while we can only affect the psychological biases by becoming aware of them and counteracting on them. Also, ISO9001:2015 is definitely setting expectations on organisations for managing the requirements and for applying a risk-based approach. Prohoc’s Partnership Service concept encourages the Executives, Project Champions, Owners and Contractors to focus on – Knowing your Knowns and Managing your Unknowns i.e. Managing Requirements and Risks. We’ll clarify “how” in subsequent issue of Scope magazine. To be continued…

Sami Myllyviita M.Sc. Eng., PMP®, ABM VP, Project Partner Services sami.myllyviita@prohoc.fi

Hooks, Ivy F., and Kristin A. Farry. 2001. Customer-Centered Products: Creating Successful Products Through Smart Requirements Management. New York: AMACOM

Another, Supplier / Contractor, aspect is provided by Figure 4, in which requirement is set for a Company to ensure its ability to meet requirements for products and services offered to customer. A review is expected, before commitment, to evaluate the ability to meet the requirements, stated explicitly and implicitly, and in case of absence of documented statement of requirements, such requirements shall be confirmed. There is a need for diligent requirements management and digitalized requirement management environment.

ISO9001:2015 (Figure 5) is also stating strongly that a Company shall determine the essential requirements, of which it is important to mention that the evidence of the compliance with, d) statutory and regulatory requirements as well as e) HSE requirements, is imperative. With developed traceable and collaborative approach, Prohoc Oy has aspiration and ability to support Companies in this effort.

* Based in article “Managing capital projects through controls, processes, and procedures” by PwC / ** Based on article “Better forecasting for large capital projects” by McKinsey 2014 / *** Based on

ISO9001:2015 – ORGANISATION SHALL ENSURE THAT IT HAS ABILITY…

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