1. Using project management to control business costs Richard Evans MPUG Puget Sound Chapter Meeting April 21 st 2009

2. 2 Chicago Ann Arbor London Cologne Paris New York Washington, DC Los Angeles Seattle San Francisco Denver Sydney Toronto Brisbane Melbourne Hong Kong Canberra Pcubed has been shaping the most critical programs and project portfolios since before it became a necessity. Pcubed’s customers constitute a quarter of the Fortune 500 Specialists in strategy and execution of large program management and project portfolio management 350 professionals globally, currently shaping and delivering over $40bn of client change portfolios Niche player, providing clients with small teams Investments in experience and tools Pcubed

3. Organizations responding to cost pressures 3

4. Summary 4 2. ‘Lean’ program management to lower the cost and risk of major programs AND of operations 1. Changing investments – portfolio management for projects AND operations Rational response to cost pressures - Less headless chicken behavior - Opportunity for project management skills in operations

5. 5 2. ‘Lean’ program management to lower the cost and risk of major projects and operations programs 1. Changing investments – portfolio management for projects AND operations Rational response to cost pressures - Less headless chicken behavior - Opportunity for project management skills in operations

6.  Reduced project portfolio by $400M in response to capital spending reductions while still protecting strategic initiatives  3 yr capital portfolio optimized on strategic impact & financial return  View of strategic health of capital project pipeline  Transparency of decision making 6 Capital Management – Energy Industry Results Reviewed various methodologies for assessing the strategic value of proposed capital projects, settling on a solution that includes analytic hierarchy processing (AHP). Optimized the 3 year capital project portfolio for Global Refining. Drove for enhanced information on business case & benefits of all capital expenditure. Portfolio Cost $ Strategic Value Move Up -Maximize Value for same budget Move Left –Reduce Costs & Maintain Value Portfolio Challenged to find a rigorous and proven approach for selecting the optimal, billion dollar portfolio of capital expenditure in Global Refining, while still maximizing Return On Capital Employed

7.  Saved $225M through performance optimization  Technology services now contribute to strategic goals  Clearer prioritization and overall operations management “ As a consequence of unsatisfactory results, U.K. Criminal Justice IT decided to overhaul its portfolio and performance management practices, which led to restoring funding confidence within the organization.” ~ Andrea Di Maio, Gartner 7 Benefits Realization - Government Results Utilized benefits realization management approach to cover entire life cycle, from business case submission to actual benefit realization assessment Three distinct, tightly related phases: portfolio prioritization, active benefits management, performance management $3 billion program to join criminal justice (police, courts, jails, etc.) services Late projects, over budget, no business cases, potential to lose funding

8. 8 2. ‘Lean’ program management to lower the cost and risk of major projects and operations programs 1. Changing investments – portfolio management for projects AND operations 8 Rational response to cost pressures - Less headless chicken behavior - Opportunity for project management skills in operations

9. Thinking “Lean” 9 Waste Duplication of Effort Inconsistency Muda…Muri…Mura  Unnecessary motion – people moving more than is required to perform the processing  Waiting – waiting for the next production step  Overproduction – production ahead of demand  Defects – the effort involved in inspecting for and fixing defects  etc Waste Duplication of Effort Inconsistency Muda…Muri…Mura  Unnecessary motion – people moving more than is required to perform the processing  Waiting – waiting for the next production step  Overproduction – production ahead of demand  Defects – the effort involved in inspecting for and fixing defects  etc 1.economical and efficient 2.not using any more resources than are necessary - Encarta Dictionary Lean AVOID

10. Lean Program Management 10

11. 11 Delivering the Olympic Games Olympic Games - London 2012 “People will want to know there is transparency, we are accountable, that costs don’t run out of control and we won’t leave white elephants behind.” David Higgins CEO, Olympic Delivery Authority 2012 38 Programs,1200 projects, 5500 milestones, 1 unmovable deadline  Robust early definition to prevent downstream failure pay now or pay later  Early Confirmation of: Will project deliver? Is Business case valid? Are stakeholders on board? ‘Light’ but effective governance structures that allow best in class suppliers to do it their own way, while giving the needed visibility, insight and control World class issues management and progress tracking

12. Complex Program Challenges  Meeting paralysis, no time for “real work”  ‘Hero’ dependency  Getting to an agreed implementation approach and a robust integrated plan  Access to executive calendars become the default program critical path  Organizational “silos” block progress  Poor confidence in delivery  Lack of an unbiased view of status, especially with suppliers or vendors  Frustration with constant surprises (delays, cost overruns, technical issues, unforeseen changes)  Lack of clear responsibility / accountability results in parallel and wasted effort  Inability to identify critical program work and align effort to it  Inability to control change and prevent unwanted work  Meeting paralysis, no time for “real work”  ‘Hero’ dependency  Getting to an agreed implementation approach and a robust integrated plan  Access to executive calendars become the default program critical path  Organizational “silos” block progress  Poor confidence in delivery  Lack of an unbiased view of status, especially with suppliers or vendors  Frustration with constant surprises (delays, cost overruns, technical issues, unforeseen changes)  Lack of clear responsibility / accountability results in parallel and wasted effort  Inability to identify critical program work and align effort to it  Inability to control change and prevent unwanted work

13. Organizing for lean PM 13 Direction & Decision Making Escalation & Reporting Team 1 Steering Integration External Vendors Business Lines Departments Team 2 Team 3 Integrate cultural and organizational factors to achieve one team Single point source for communications and data Actively get people together to align teams and enable continuous improvement Ensure efficient meetings to manage across geographies, organizations and functions Drive effective collaboration by integrating the work of interdependent stakeholders through implementing team structures Disciplined governance structures that effectively align executive and team behaviors to keep critical work moving Timely, fact-based decisions and inputs of executive help/expertise Specific tracked actions for resolution of key issues & risks Effective change management Quality reports and data to the right level of decision authority Focus resource expertise on critical work

14. Reducing cost and risk with a framework 14 Govern Transformation Operate Manage Services and Suppliers Develop Benefits Establish Program Manage Program Delivery & Benefits Realization Transition Manage Releases Manage Projects Develop Business Case Develop Delivery Plan Develop Blueprint Manage Business Change Build & Embed Transformation Capability Identify Develop Strategy & Vision DefineDeliverClose

15. Lean Operations 15

16.  The Toyota Way consists of 14 principles, not all are applicable to every industry  Select 2 or 3 as a proving ground for cultural change. Key principles include:  Continuous improvement  Building a culture of stopping to fix problems to get work right the first time  Developing leadership that thoroughly understands the Lean philosophy  Developing teams across processes  Development of metrics - five or six at most - of key performance indicators (KPIs) that enable the organization to gauge its progress.  Obstacles include getting leadership to take ownership of problems, especially in a matrix environment. In a culture where the lowest person can stop the entire production line if he or she sees a problem that needs fixing, the classic hierarchy thinking has to be diminished. Executing lean…in strange places 16

17. Summary 17 2. ‘Lean’ program management to lower the cost and risk of major programs AND of operations 1. Changing investments – portfolio management for projects AND operations - Opportunity for project management skills in operations

18. richard.evans@pcubed.com Items to research: The Toyota Way MSP – Managing Successful Programs