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Dancing with the big guys

Book review of “Industrial Megaprojects: Concepts, Strategies, and Practices for Succes"

 

This book talks about virtually every major aspect of project strategy and structure, but by far the most highly leveraged is the front-end strategizing, planning, and engineering before anyone puts a hand to welding torch or shovel.

This book, as its title says, is about megaprojects -- one billion dollars and up in today's money. Not only are the stakes bigger in megaprojects but the choices are starker as well. Merrow shows that because of the complexity that goes with such size, the line dividing success and failure is more sharply drawn. Of the 318 megaprojects in his book, about two-thirds experienced more than 25% cost growth over the estimate at project approval, and this generally means that they destroyed shareholder value rather than creating it.


Industrial Megaprojects are a primer on what to do and what not to do as part of end-to-end megaproject management. This book provides the necessary information for you to establish a decision and execution framework that allows you to be in control of your project's outcomes, and not "just hope to be lucky".

It is structured in a way those who sponsor, direct or work on large projects can gain a functional understanding of how best to achieve the most business effective results. It also enables business executives who are genuinely in charge to make better decisions about how the project should be developed, governed, and executed. Most importantly, it lays out ways to overcome the largest challenge in the successful implementation of megaprojects - enabling the business and technical professionals to work together collaboratively as a fully integrated team.

 

First, how does the book describe itself?

Avoid common pitfalls in large-scale projects using these smart strategies Over half of large-scale engineering and construction projects—off-shore oil platforms, chemical plants, metals processing, dams, and similar projects—have miserably poor results. These include billions of dollars in overruns, long delays in design and construction, and poor operability once finally completed.

Industrial Megaprojects give you a clear, nontechnical understanding of why these major projects get into trouble, and how your company can prevent hazardous and costly errors when undertaking such large technical and management challenges.

The book clearly explains the underlying causes of over-budget, delayed, and unsafe megaprojects while examining the effects of poor project management, destructive team behaviors, weak accountability systems, short-term focus, and lack of investment in technical expertise.

The author is the CEO of the leading consulting firm for evaluating billion-dollar projects. Companies worldwide are rethinking their large-scale projects. Industrial Megaprojects are your essential guide for this rethink, offering the tools and principles that are the true foundation of safe, cost-effective, successful mega projects.

Merrow has metrics to assess the quality and completeness of the front end, and he shows that if the front end is done well then there is a very high probability of project success. If the front-end work is mediocre then the odds turn against success, and if is it poor then the best thing is to do the shareholders a favor and walk away before wasting their money on implementation. The book provides rich specifics on how to do the front end well, as well as most other aspects of structuring and managing projects.

Be sure to check out this episode of Minerva PLM TV with Bjørn Fidjeland, where he uncovers how the European Spallation Source structures their data in their construction megaproject.

 

A rather one-sided view

This is a unique and important study of very large projects, quite different from the usual project management text in a variety of ways. It presents several striking lessons that ought to be heeded by everyone who is involved in project decision-making, but probably won't. More about that later, but if you are someone who might be willing to make the effort to break free of what comes "naturally" to gain success then it is a book to read.

This book comes from a single point of view and methodology and tries to fit all mega projects into its concept. I disagree with the concept that I took from the book that it is OK for these large projects to always cost more than budgeted and take larger than expected – even though they have already built-in significant contingency.

The author, Edward W. Merrow, heads a consultancy serving (mostly) the oil and gas, chemical, and mining industries. He is clearly very knowledgeable about management and engineering in these industries, but his academic background is in economics, and he makes very effective use of it in his work and this book. His firm has consulted on more than 13,000 projects, benchmarking their planning, execution, and results - and amassing a huge, detailed, quantitative database. Using classical econometric statistical methods, he has determined with high confidence which factors make a difference in actual results, and by how much. Thus, his recommendations represent not "nice-to-haves" but things that are truly going to make a real difference.

 

Why aren’t your clients making more money?

So if Merrow is so smart, why aren't his clients richer? Why do they persist in doing things that are almost sure to damage their real interests, when he can show them the consequences? It's a question that clearly troubles him. He points to a variety of structures and practices among his clients that get in their way, but this of course only puts the question at one remove. Why can't people learn?

The problem is not "the system" -- it's people and how our minds work. My own research has turned in this direction, drawing on modern discoveries in cognitive neuroscience, behavioral economics, and social psychology to illuminate the underlying mechanisms and formulate approaches that have a better chance of success than continuing to issue exhortations that most of us are constitutionally incapable of heeding. For a preliminary taste look up my article, "Cost Growth in Major Defense Acquisition: Is There a Problem? Is There a Solution?" on the Web.

In terms of structure and writing, the book is serviceable -- clear enough to meet most needs, given some study. Merrow of course must take care not to reveal his customers' trade secrets or his own, but it seems to me that he could have been a bit more explicit about his data and their distributional properties. Despite any limitations, however, this is a must-read book for anyone involved in very large projects, whether in government or industry, regardless of the industry involved.

Unfortunately, the publishers have done a somewhat sloppy job in making the Kindle edition. Many of the graphics are virtually unreadable and no page numbers are given. Given its expense, this seems hard to justify.

Oh, and one more thing! While the author makes it clear that most companies are not taking a strategic approach to the issue of understaffed/nonintegrated owner's teams, I would love to know the names of the few operators who ARE proactively building owner's teams' capabilities.

 

Conclusion and recommendation

Excellent book! It is filled with practical advice and interesting anecdotes - a type of "best practices" planning. Those sort of things that make you say "yeah, I knew that but never put it into words!" I especially liked Chapter 11 wherein good advice is given regarding contract modifications to reduce perceived risk and thereby obtain more competitive responses to proposals.

This is a must-read for all project managers and capital-intensive business executives!

About the author

Johnny Minor Mørup

Johnny has a great passion for web communication and digital journalism. He is an expert in creating content addressing both the eyes and mind of the viewer in a unique and unforgettable way. Johnny has a concrete experience in optimizing journalism and communication, whether via an app, a website, through a newsletter, infographics, Facebook, Instagram, Snapchat, SEO / SEM or Adwords.

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