It's the right combination of people, processes and technology that ensures the success of a project, says Jordan Cram, CEO & Founder, Enstoa.
In the wake of Brexit, the European situation and the demonetisation in India, how do you reconcile to where we are now in terms of the disruptions that were both positive and negative?
We have been in business for nine years; our 10th year anniversary is in July. We always found that economic environments that are increasing or contracting are best for us. I might say it in another way. We tend to thrive in volatile environments where organizations are required to be ready for change. They don't know what the change is yet, but they need to be ready. They need to create agile or nimble organisational structures. If they start projects they need to execute them quickly. Given all these factors, what an organisation today requires are tools and methodologies.
How can you offer competent advice in the wake of this changing realm of taxation in India which is moving to the GST regime coming into force, probably by July 1, 2017?
The most important service that we provide is to create stability, repeatability and scale and just cooperation. It's like we have to get our house in order, and when our house is in order, we can deal with changes from without. We don't anticipate environmental changes or economic shocks, but if the house is on a weak foundation, then these can destabilise even the largest of organisations. So what we do is we help that core be really solid.
So it is a form of hand-holding. How much more specialised does it get?
What we do is we start with an organisation and ask, 'Where are you today, and what capabilities do you have? Are you a good strategic planner or you need to improve that? Are you good at executing projects?' Then we actually rank the organisation. They don't rank themselves, we do. Most importantly, the organisations will answer where they need to be in the future. We need to be world-class strategic planners.
Now, what we do is we create a plan; how we get from today to that target operating model, and that involves a combination of people, processes and technology. There might need to be changes in the organisational structure, you might need to hire some different types of people; you will need to streamline business processes. So it's about people, process and technology; but how we help an organisation get from A to Z is valuable, even more valuable is that we can help them create that future vision of what they want to be and that is actually quite hard to do. It's hard to do without that kind of outside assistance; it's actually hard to look in the mirror.
Do you see Indian companies, in the infrastructure segment, exhibiting international capabilities of conception and execution of projects?
There are two parts to this; the first one is not directly related to your question, but I want to head on to it anyway. First is that you could take like a mature market, let's just say the US healthcare market. It was mature until Obamacare shook everything up. Now everyone is back again to square one, having to reinvent their business models, having to retool, and having to come up with new and different business processes. So you can't really look at one model and say that that you are best in the world in terms of how to do that, because the world is changing. It's constantly like re-base lining. Now, the other thing I was going to say is that the execution of these mega-projects is poor worldwide. You have probably seen those studies; McKinsey has put them out, PwC, Ernst and Young have... around 60 per cent of oil & gas projects bust their budget and 70 per cent are late; overruns in utility projects are around 35 per cent and they are two years late. That's happening everywhere.
So you're saying that Indian infra players have to improve upon those existing now?
I really believe that Indian organisations want to see how others are doing things, but they don't want to copy or emulate. They need to actually establish their own vision of where they aspire to be in a bubble. I also believe then those leaders are going to have a better opportunity to leapfrog as a result. So this is one of those kinds of situations where emulation is not the best of strategies.
Technical skilling is currently one of the emphasis areas of the Indian government. Do you see your abilities to enjoin that process?
We can't do more in terms of the up-scaling requirement. There is a role there, and (there are) educators and government universities. We can however help, we can support people at various skill levels, contribute more to their organisation or to their project. That's another way of saying we can add productivity. I'll give you an example; we would streamline communication from the project manager in the main office all the way down to the worker. Today the workers are working quite independently actually of the chain of command. By the time a worker runs into problems, it might be six weeks too late before the management team is aware that we've run out of a certain commodity. By that time it's costing tens of millions, we would really clasp the time when those issues are communicated.
There have been recent reports pointing out that the CEOs of companies today need to be more hands-on in terms of operations.
I think yes, the leader has to accept this reality that you need to have that strategic headspace, but you have to be a micro-manager. Technology has made that possible. So internally at Enstoa, we have got a communication platform which is like a Facebook for business.
I can keep my posts on what's happening and at the same time I would rely on good old-fashioned management techniques like escalation, because you know a missile is coming in from somewhere. The leader of an infrastructure project doesn't have that access to information. They're blind and by the time they hear or see, it's just simply too late and they are in constant crisis management. They can never get in front of issues. Can organisations do that without technology? No. Can technology on its own do it? No it can't, not without the process and people components.
Tell us about the projects in India you are associated with in 2017?
I can't share the specifics on where we are engaged. What I could do is I could tell you that initially we are focusing on more private than public. That is a strategy to help us get moving quicker. Public work, no matter what, just means a longer time. There are various industries that fall into that. Real estate development is obviously one of them.
The other thing that we are doing is that we have a two-fold strategy in India which is giving us a strong talent base. We set up our office in Bangalore as a worldwide delivery centre that has allowed us to create a permanent and solid base and platform. Next we are in the process of adding on sales and marketing resources.
What fresh tweak is needed to get finance for infrastructure projects?
There will have to be financial engineering because the forces of competition will require this; firstly there is the infrastructure gap. The need is at one level and the ability to deliver the need is much lower than that. Canada, another market that we entered, has massive infrastructure and has investors, it's seeking to be investor friendly. So the capital has places to go. It will have to be financial engineering and policy-led moves that incentivises that capital to flow freely here.
Is infra sentiment disturbed in the wake of changing financial scenarios in India?
It might dampen momentarily, but it would flow as immediately if the models work for organisations, and the risk profiles work. That's maybe an over-simplification because getting the balance right is quite difficult, but it's not a financial imperative anymore. It's like a social imperative. So it's not just about the turns and opportunity. There is going to be a very serious social cost if it doesn't happen. The gap is huge and each month it's like death; it accumulates and it gets bigger and bigger.
You mentioned about not being keen to get into the public space. Why?
I didn't say that we are reluctant to go into public; I just said that the first out of the gate is predominantly private and that's just simply because the wait time is longer in public. It's just that we can't wait 12-18 months for the contract volumes to flow. So we start simultaneously with the expectation that private would just move faster.
So what is the nature of the projects that you are currently involved in the private sector across India?
Our biggest industry worldwide is oil & gas. We have done oil & gas work in a lot of areas like Australia, Saudi Arabia, the US, the UK, etc., and so that is an important sector for us to target here in India. Our largest market in the USA is healthcare. I know just recently the BMC here approved four such projects and a part of that is healthcare, a hospital expansion. We are going to wait and see if that sector is going to develop for us.
If it's more of a subsidised form of healthcare services that the government offers, that might offer limited options for you to get involved in the space. In America, it's a thriving business at least for the private sector...
We are not expecting the same drivers here.
You have commissioned a few power projects in India. How has it worked for Enstoa?
I think it's sort of like the financial engineering conversation we had. If the business models work, the projects will proceed. If you have more confidence in your execution, then you are going to deliver or beat the original cost estimate, and you are going to deliver it on time or ahead of schedule. Then it's going to reduce your risk profile because long delays can mean cost overruns; many projects don't make the cut as a result.
Enstoa has strength in getting clients to ensure costs and timelines are kept in check to make projects visible. But about alternative energy power sources, where do you see the market going in India?
That one would be like who would have predicted 10 years ago that America was going to produce so much oil. I wouldn't have much comment on non-traditional energy channels.
The scale of the project that has been talked about, there needs to be a differentiation. You have to be finicky about every aspect of the business...
There are lot of people who don't want to say 'no'. They don't want to drop boundaries on what they are and what they want. They kind of want to do it all, or at least a lot. So that would make these boundaries kind of mushy, and as a result if you were to kind of just draw out a simple accountability matrix, it would probably be quite hard to do. That would then translate into confusion operationally, and would end up with one of these big joint venture poor stories that we read about in the mega project news that is two years late and everyone's frustrated. They are finishing for the sake of finishing, but at great cost.
A lot of these Metro projects for instance are being put out on EPC. So that would be a beautiful space to be in, irrespective of the fact that it is public sector, what do you feel?
I will just clarify; we will come in both sides, the owners of the projects and the builders. So as far as public work is concerned, we can move quite quickly on the EPC side and the need there is great for the services that we provide. What's important for me now is that we have made a huge strategic move to be here. Enstoa is going to be here and we have been in the works doing the same work in China for the last two years. This is a big market, and we are kind of new. We have to get our name out, you have to hear about us, they need to understand that there is this systems integration specialisation; what is it and why is it important, what's the cost if I don't do it. We have a lot of data and we can pretty accurately calculate that the cost is generally 1 to 2 per cent of the total capital spent. So it's significant, but that word has to get out, and we need to be out there.