1. John Johnson, PMP CSM SPC November 2018
Racing Change
John Johnson, PMP CSM SPC
November 2018

2. Why Do We Do Projects?
Projects exist to benefit the buyer’s organization
• The project goal is not completing scope, but improving the buyer’s future state
• Delivering an outdated or useless software, hardware, or service is not valuable
• Deliverables value change over time with business needs & technology advances
Projects should focus on building capabilities
• Capability – an ability to perform work of a certain quality, capacity, and efficiency
• ROI – the “return on invest” measured as gains in capability normalized by costs
By definition, Projects only benefit organizations if the ROI is positive

3. Defining Project Return on Investment (ROI)
How to evaluate Capability ROI
1. Set Objectives – state value in fungible terms (e.g. money or units) for business operations
2. Baseline Original Performance – Measure initial business process costs and throughputs
3. Measure Performance with New Capability – evaluate new operating throughputs and costs
“New Cost” includes the Amortized Capability Investment (planning, development, O&M) and resources needed to operate the business with new capability. This ensures the topline is net profit, or gains (higher throughputs and lower costs) minus the investment. All values are amortized to normalize economic life and rates of return.

4. What is the Best Approach to Drive up ROI?
Options: Speed, Scale, Efficiency, Quality…most important?
“Speed Wins” - Adrian Cockroft, Netflix Cloud Architect
KEYNOTE: Velocity and Volume (or Speed Wins) by Adrian Cockcroft
But Why…?

5. We Must Race Change The Only Constant is Change… Timing Impacts
Need for capability diminishes over time
Cheaper alternatives become available
Market Returns
Projects are pure cost, until the product is deployed
Faster products deliver returns earlier
Faster products have longer market staying power
First products becomes the standard, so called “First Mover Advantage”

6. Example of Timing Impacts on ROI
Year 2000
Year 2018
In 2018, a car is maybe a luxury
In 2000, a car was essential
Just Going To-From Work (40 Trips):
Drive Car: $520
Take Taxi: $1200
Car ROI: 1.3
Just Going To-From Work (40 Trips):
Drive Car: $520
Ride Share: $400
Car ROI:

7. Example of Market Returns
Amazon wants to build a new Fresh Center
Operational Profit for a Fresh Center
Output: 60,000 orders per day
Average cost per order: $15 (profit: $5)
Average profit per day: $300,000
Average cost per Fresh Center: $100M
Average time to build: 365 days
Cost per day: 274,000 (60% labor, 40% Materials)
Cost per day delay: $164,000
Average Cost of Delay: $300,000 to $464,000 per Day!

8. Successful Despite Change Learn from the Best!
If you could pick one stock in 1972 in the S&P 500, looking for the best return by 2002, which stock would it be?
IBM?
Apple?
Goldman Sachs?
General Electric?
Intel?

9. Power of Priorities - Southwest Airlines….
From 1972 to 2002, Southwest grew 25.99% annually (and Airplane Carrier/Operators average 2% to 5% profits!)
How did Southwest do it? They focused on one thing:
Being the best low-cost airline
All trade-offs focused on this priority:
No First Class, No Meals, No Assigned Seats
Only Profitable Shuttles Between Points.
One Plane Model (Boeing 737)

10. Focusing on ONE thing Works for the Best!
Most companies make money on one or two real products:
Google 70% of revenue is Search Ads
Apple 70% of revenue is from the iPhone
Most contractors receive 70% of revenue from one client
This trend also holds true for your project, work, and life...
- 70% of your projects are a single type of work
- 70% of your time is spent at work
- 70% of your time is spent awake

11. Power of Priorities - Pareto Principle
So what about Pareto? Italian economist from the late 1890s
The Pareto Principle says 80% of the output comes from 20% of producers…
80% of his peas came from 20% of his pods
80% of land in Italy was owned by 20% of the families
We call this the “80/20 Rule,” which is also known as the “Law of the Vital Few”

12. But Pareto Said 80/20, not 70%! … or did he...
4% of items
80%
1 Item
64%
5 Items
16x ROI!
42x ROI!
20% of the items
Apply Iteratively
25 Items
16%
20%
Applying Pareto twice states if 25 items total 100%, just 1 item accounts for 64%!

13. Agile Searches for Solutions in Small Batches!
Test in Buyer’s System
Build
Product (MVP)
Measure
Data
Learn
Ideas

14. Benefits of Batches Small
Greater Value
Less Uncertainty
Quantity
Knowledge Gap
Cost
Influence
Information
Time
Optimal batches depend on:
Available industry technology (e.g. DevOps)
Level of project uncertainty
Benefits to your buyer of a release!
Reducing the Knowledge Gap
Inverse relationship between Info & Influence
Reduce the absolute size of the gap
Testing Early Validates and Increases Information!

15. Agile Project Management Professional Certificate
In Summary, Thank You!
Projects Exist to Benefit the Buyer
Project ROI is Impacted by Change
Speed Wins!
Limiting Scope, Focus on One Thing
Use Small Batches for Speed & Focus
Agile Project Management
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