In Chapter 1 Projects are defined as temporary endeavors undertaken to create a unique product or service. Recent interest in project management is based on a recognition that many organizational tasks do not fit neatly into business-as-usual. The significant differences between project management and general management are overviewed. The three interrelated objectives of budget, schedule, and specifications are also introduced. Two alternative project life cycles are presented and the importance of understanding this distinction is discussed. Both qualitative (non-numeric) and quantitative (numeric) project selection methods. Are discussed. The chapter concludes with a discussion of the aggregate project plan and an overview of the organization of the remainder of the text. 11/10/2015Ardavan Asef-Vaziri1-1

Why the emphasis on project management?  Many tasks do not fit neatly into business-as- usual.  A project is temporary (specific start and stop), unique (a one-of-a-kind output or deliverable aimed at meeting a specific need of the client).  A non-project (a process) refers to the routine, repetitive work of the organization.  Need to assign responsibility and authority for achievement of organizational goals. 11/10/2015Ardavan Asef-Vaziri1-2

Characteristics of Projects  Main Characteristics  Unique  Specific Deliverable  Specific Due Date  Other Characteristics  Multidisciplinary  Complex  Conflict  Part of Programs 11/10/2015Ardavan Asef-Vaziri1-3

PMI Definition “ A project is a unique temporary endeavor, with a set beginning and end ” PMI defines project management as “ the application of knowledge, skills, tools and techniques to a broad range of activities in order to meet the requirements of a particular project “ Project Management Institute, /10/2015Ardavan Asef-Vaziri1-4

Goals and Trade-offs  The three goals of a project are:  On time,  On budget, and  To specification (i.e., including “quality” and “client satisfaction”).  The project manager meets the goals by making “trade-offs.” For example, he/she can shorten the project duration by using more resources.  An overdetermined project is one that has a fixed budget, fixed delivery time, and fixed specifications. In the case of an overdetermined project, there is no allowance for any such events. 11/10/2015Ardavan Asef-Vaziri1-5

Abilities Needed For Effective Project Management  Conflict Resolution  Creativity and Flexibility  Ability to Adjust to Change  Good Planning  Negotiation  Win-lose negotiation is like a zero-sum game. Anything one side wins is a loss for the other side. In win-win negotiation, the outcome is such that both parties gain something from the interchange.  Win-lose negotiating is dangerous for project managers who will have to deal with the same parties over and over again. The project manager who forces a functional manager to lose will have created a permanent enemy. 11/10/2015Ardavan Asef-Vaziri1-6

Project Life Cycle The main reason one should understand the difference is that resource allocation for the two types is quite different. 11/10/2015Ardavan Asef-Vaziri1-7

Qualitative Selection Methods  The Sacred Cow  A project proposed say by the CEO  The Operating/Competitive Necessity  It is required to continue our operations  We may loose our market share  Comparative Benefits  Q-sort 11/10/2015Ardavan Asef-Vaziri1-8

The Q-Sort Method 11/10/2015Ardavan Asef-Vaziri1-9

Quantitative Selection Methods  Financial Assessment Methods  payback period  discounted cash flow  Scoring Methods  unweighted 0-1 factor method  weighted factor scoring method 11/10/2015Ardavan Asef-Vaziri1-10

Payback Period 11/10/2015Ardavan Asef-Vaziri1-11

Discounted Cash Flow 11/10/2015Ardavan Asef-Vaziri1-12 where I 0 = the initial investment F t = the net cash flow in period t k = the required rate of return or hurdle rate

The Weighted Scoring Model 11/10/2015Ardavan Asef-Vaziri1-13 where S i = the total score of the i th project s ij = the score of the i th project on the j th criterion w j = the weight or importance of the j th criterion

Uncertainties encountered in project management  Time required to complete a project  Availability of key resources  Cost of resources  Timing of solutions to technological problems  Actions taken by competitors Uncertainty cannot be eliminated, but if managed properly, it can be minimized. That is why we need trade-off 11/10/2015Ardavan Asef-Vaziri1-14

Risk Analysis  Estimate probabilities or distributions associated with key parameters  Develop analytic or simulation model  Analyze distribution of outcomes generated by model 11/10/2015Ardavan Asef-Vaziri1-15

Project Portfolio Process (PPP) PPP links projects to the goals and strategy of the organization. In the initiation and planning phases, and throughout the life cycle of the projects. The PPP is also a means for monitoring and controlling the organization's strategic projects. This may mean shutting down projects prior to their completion because their risks or their costs. Or because another project does a better job of supporting the goals. 11/10/2015Ardavan Asef-Vaziri1-16

Steps In The Project Portfolio Process  Establish a Project Council  Identify Project Categories and Criteria  Collect Project Data  Assess Resource Availability  Reduce the Project and Criteria Set  Prioritize the Projects within Categories  Select the Projects to be Funded and Held in Reserve  Implement the Process 11/10/2015Ardavan Asef-Vaziri1-17

Step 1: Establish a Project Council  Establish and articulate strategic direction for projects.  Allocate funds and control the allocation of resources and skills to the projects.  Senior management, project managers of major projects; the head of the Project Management Office, particularly relevant general managers. 11/10/2015Ardavan Asef-Vaziri1-18

Step2: Identify Project Categories and Criteria  Project categories are identified so the mix of projects will contribute to the organization's goals.  Within each category various criteria are established to rank the projects. The criteria are also weighted.  List the goals of each project and relate then to the organization's goals and strategies.  Identify the categories that are important to achieving the organization's goals. 11/10/2015Ardavan Asef-Vaziri1-19

Wheelwright and Clark (1992) position - particularly product /service projects 11/10/2015Ardavan Asef-Vaziri1-20

Wheelwright and Clark (1992) positioning  Derivative projects: With objectives or deliverables that are incrementally different in both product and process from existing offerings. They often replace current offerings or add an extension to them (lower priced version, upscale version).  Platform projects : Major departures from existing offerings in terms of either the product/service itself or the process used to make and deliver it, or both. They become "platforms" for the next generation of organizational offerings, such as a new model of automobile or a new type of insurance plan. 11/10/2015Ardavan Asef-Vaziri1-21

Wheelwright and Clark (1992) positioning  Breakthrough projects: Involve a newer technology than platform projects. It may be a "disruptive" technology that is known to the industry or something proprietary that the organization has been developing over time. Use of fiber optic cables for data transmission, and hybrid gasoline-electric automobiles.  R&D projects: Visionary endeavors, oriented toward using newly developed technologies, or existing technologies in a new manner. They may also be for acquiring new knowledge, or developing new technologies themselves. 11/10/2015Ardavan Asef-Vaziri1-22

Wheelwright and Clark (1992) positioning Graph on page 29 goes here 11/10/2015Ardavan Asef-Vaziri1-23

Wheelwright and Clark (1992) positioning The size  size/resource needs. The shape and shade  internal/ external, long/medium/short term. The numbers  the order, or time frame, in which the projects are to be implemented, separated by category. 11/10/2015Ardavan Asef-Vaziri1-24

Benefits of the Aggregate Project Plan  View the mix of projects within each aspect (shape)  Analyze and adjust the mix of projects within each category or aspect  Assess the resource demands on the organization, indicated by the size, timing, and number of projects  Identify and adjust the gaps in the categories, aspects, sizes, and timing of the projects  Identify potential career paths for developing project managers, such as team members of a derivative project, then team member of a platform project, manager of a derivative project, member of a breakthrough project, and so on Ardavan Asef-Vaziri1-2511/10/2015

26 Analyzing Project Portfolios: Bubble Diagram Expected NPV Prob. of Commercial Success High Zero Low High Bubble diagrams are useful for representing a set of projects and visualizing a project portfolio. Shapes Shading Color Size

Step 3: Collect Project Data  Collect data on timing, expected benefit and costs using existing/past projects and expert opinion.  Use the scoring models to screen out high cost or lower benefit projects ( because the organization's goals have changed)  Screen in any projects mandated by regulations or laws, competitive or operating necessities, projects required for environmental or personnel reasons. 11/10/2015Ardavan Asef-Vaziri1-27

Step 4: Assess Resource Availability  Assess the availability of internal /external resources by type/department/ timing.  Balance aggregate project resource needs over future periods. Needing a normally plentiful resource at the same moment by several projects = catastrophe  Scheduling resource usage as closely as possible to system capacity = catastrophe 11/10/2015Ardavan Asef-Vaziri1-28

Step 5: Reduce the Project and Criteria Set Reduce the number of projects based on: supporting the organization's goals, existence of competence in the organization, market potentials, profitability, potential partners, availability and timing of resources, technological/knowledge fit with the organization, using the organizations strengths, synergy with other projects, other mutually exclusive projects, slipped in desirability since the last evaluation. 11/10/2015Ardavan Asef-Vaziri1-29

Step 6: Prioritize the Projects within Categories  Apply the scores and criterion weights to rank the projects within each category.  Hold some hard-to-measure criteria out for subjective evaluation, such as riskiness, or development of new knowledge.  Subjective evaluations can be translated from verbal to numeric terms easily by the Delphi (Dalkey, 1969), pair- wise compari­sons, or other methods.  Different projects are offering different packages of benefits that are not comparable. For example, R&D projects will not have the expected mone­tary return of derivative projects 11/10/2015Ardavan Asef-Vaziri1-30

Step 7: Select the Projects to be Funded and Held in Reserve  Determine the mix of projects across the various categories (and aspects, if used) and time periods.  Leave percent of the organization's resource capacity free for variability and new opportunities.  Include some speculative projects in each category to allow future options, knowledge improvement, additional experience in new areas.. 11/10/2015Ardavan Asef-Vaziri1-31

Step 8: Implement the Process 11/10/2015Ardavan Asef-Vaziri1-32