[ieee technology - portland, or, usa (2009.08.2-2009.08.6)] picmet '09 - 2009 portland...

PICMET 2009PICMET 2009

Beyond Risk Management

Assessing and Managing Program ChallengesProgram Challenges

Aaron J. Shenhar, Dov Dvir, Joca StefanovicRutgers Business School, Ben Gurion University

Copyright Aaron J. Shenhar, 2009

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PICMET 2009 Proceedings, August 2-6, Portland, Oregon USA © 2009 PICMET

Ab t tAbstractTraditional, well-established risk management techniques are not always working. The evidence is well-known: Two of the most important and much anticipated commercial airplane development programs have recently suffered embarrassing delays in execution and delivery schedules. Airbus and its parent company EADS had to push A380s entry into service by 19 to 24 months. And Boeing has announced that its 787 Dreamliners delivery to customers will be delayed by at least a year. Clearly, these delays have significant consequences for the two companies and for the transportation industry. There is no doubt that both Airbus and Boeing are quite familiar with risk management techniques. So what happened? How could such experienced and well-managed companies fail so painfully in their main lines of business aircraft building?

In this presentation we show that although the traditional techniques of project planning and risk management form the basic and necessary foundation for training project managers, they are insufficient to deal effectively with todays dynamic, risky, and changing projects. Project managers of complex programs must go beyond the classical techniques. We present four myths in the traditional approach to project risk management and contrast them with the realities of modern project management. We suggest that the risk management framework should be expanded to assess, not just what can go wrong, but also how can we get it right and how long


will it take. We will offer practical guidelines on how to make this work by assessing both the risk and the challenge in each project.

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3

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Boeing 787

Airbus A380


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Innovation(F t E d)

Project(Front End)


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Th Ch llThe Challenge

Innovation/Project Activity is Growing

Most Projects Don’t Meet Time and BudgetMost Projects Don t Meet Time and Budget Goals – 50-80%

Limited Commercial Success –Limited Commercial Success –

25 to 60%


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Th O t itThe Opportunity

Importance Weakness Opportunity


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A ll I ti E l?Are all Innovations Equal?

� Types of Innovation:

I l R di l S» Incremental, Radical, System

» In Market, In Technology, gy

» Product, Process, Service

» Architectural, Modular

» Customer Adoption CycleCustomer Adoption Cycle

» Disruptive, Sustaining – Innovator’s Dilemma


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The Customer Adoption CycleThe Customer Adoption Cycle


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The Innovator’s Dilemma

erm

ance

Perf

orod

uct P

Pro


Time

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Basic QuestionBasic Question

How do you manageHow do you manage different types ofdifferent types of

innovation?innovation?

It’s all in the ProjectCopyright Aaron J. Shenhar, 2009

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Risk Managementg

� What is Risk? - Something that can go wrong – program or product

� Risk Management- Prepare action items for risks – “An Insurance Policy”

� Risk Analysis- Effects, Probability, Consequences

� Risk Mitigation- Elimination, Reduction, Transferring, Redundancy


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Risk Mitigation TableRisk Mitigation Table

ProgramRisk or

Name of

WBSNo.

PossibleEvent

(What may

Probabilityof Event

Cost ifHappens

Expected Costof Event

MitigationAction

Cost ofMitigation

YesorNo

Task( yHappen)


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So Why Major Programs Still Fail?So Why Major Programs Still Fail?

� Risk Management is not always working

� Failure is often in assessing the difficulty involved in the new, “innovative” part of the projectproject

� In some projects we need a new framework to analyze and control the innovative part –


y pthe difficulty

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A Diff t L k t Ri kA Different Look at Risk

In addition to the risk involved in,

“What Can Go Wrong?”

We may also look at the risk ofWe may also look at the risk of,

“Not Having Done It Before”Not Having Done It Before


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Ch th Q tiChange the Question

Instead of just asking,

“What Can Go Wrong?”

We should also askWe should also ask,

“How Long Will it Take to Get it Right?”How Long Will it Take to Get it Right?

“Wh t i th Ch ll ?”Copyright Aaron J. Shenhar, 2009

“What is the Challenge?”

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In addition to Risk ManagementIn addition to Risk Management,Let’s Deal with,,

Challenge Managementg g


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Ch ll A l iChallenge Analysis

�Project Challenges May Depend on:Project Challenges May Depend on:»Uncertainty

»Complexity

C i»Constraints

»Environment»Environment

»…


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The Project Diamond as a Tool to Assess Program Challenges

� Novelty – How new is the product to customers and users» Derivative, Platform, Breakthrough, , g

� Technology – How much new technology is used» Low-tech, Medium-tech, High-tech, Super High-tech, , g , p g

� Complexity – How complex is the system and its subsystems» Assembly, System, Arrayy, y , y

� Pace – How Critical is the Time frame» Regular, Fast/Competitive, Time-Critical, Blitzg , / p , ,


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Copyright Aaron J. Shenhar, 2009 The Project Diamond

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The “Rolling Wave” Planning Concept

Master plan – Entire project

Medium detail plans – 4 to 6 Months

Detailed work plans – WeeksDetailed work plans – Weeks


Time

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Cl i l P j t PhClassical Project Phases

Initiation Planning Execution Termination

Revise Plans

Revise Design

Revise Requirements


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Project Management -Th Th PThe Three Processes

Product Requirement Process

Managerial Process

Wh h ti ?

Design Process

When are you shooting?


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E ti Ad ti It ti A hEntire Adaptive Iterative Approach

Freeze Requirements Freeze Design

Requirements Planning CompleteSpecs Design &Build Test

Revise Plans

Revise Design

Revise Requirements

Adaptive Approach Traditional PM


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The Impact of the NTCP Dimensions on Project ManagementProject Management

Technology Later design freezeMore design cyclesMore design cycles

Novelty

ComplexityLess market dataLater requirement freeze

NoveltyComplex organizationFormality

PaceAutonomyTime management


Pace Time management

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Denver International Airport ProjectDenver International Airport Project

TechnologySuper-High TechTech

High-Tech

M di T h

Automatic Bag –Handling System

Array System Assembly

Complexity

NoveltyDerivative Platform Breakthrough

Medium-Tech

Low-Tech

Complexity e at e at o ea t oug

Regular

Fast/ Competitive

Airport Construction p

Time-Critical

Blitz

Project


PaceBlitz

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SegwaySegway


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SegwaySegway


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Technology

S Hi hSuper-High Tech

High-Tech

Medium-Tech

Low-Tech


Complexity

Novelty

Derivative Platform Breakthrough

Regular

Fast/ Competitive

Time-Critical

Blitz

Dr = (Br, HT, Sy, -)Da = (Pl, HT, Sy, -)

Required style

Actual style

Th S P j tPace


The Segway Project

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Challenge Management TechniqueChallenge Management Technique

Dimension Level New Challenge What to Do

Novelty

Technology

Complexity

Pace

O h


Other

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Boeing 787

Airbus A380


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Airbus 380Airbus 380


Novelty 2 -3 Airport fit and regulations

Prove fit and get approvalregulations get approval

Technology 2 Typical development

Complexity 2-3 IntegrationCross Cultures

StandardsCoordination

Pace 2 Typical


Other

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Boeing 787Boeing 787


Novelty 2 Typical

Technology 3 Comp matrl bodyElectronic controls

Extra des cyclesLater freeze

Complexity 2-3 Integration Training contOutsourcing Coordination

Pace 2 Typical

Copyright Aaron J. Shenhar, 2009Other

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Q tif i th Ch ll L lQuantifying the Challenge Level

� Diamond Values Determine the Challenge

� D = (N,T,C,P)

� Ch = Exp [a N+b T+c C+d P]� Ch = Exp [axN+bxT+cxC+dxP]

� Typical Weights (.2, .15, .5, .15)

� Segway: D = (3, 3, 2, 2), Ch = Exp [2.35] = 224

� Apollo D (3 4 3 3) Ch Exp [3 15] 1412� Apollo: D = (3, 4, 3, 3), Ch = Exp [3.15] = 1412

� Walkman: D = (3, 2, 1, 2), Ch = Exp [1.7] = 50


� A 380 = 446, 787 = 501

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Innovation Categories and Project Typesg j yp

Technology

RadicalTechnological Innovation

Technology

Super-High Tech

IncrementalMarket Innovation

IncrementalTechnological Innovation

High-Tech

Medium-Tech

Innovation


C l it

Novelty

Derivative Platform Breakthrough

Low-Tech

Architectural Innovation

Complexity Derivative Platform Breakthrough

Regular

Fast/ Radical

Modular Innovation

Competitive

Time-Critical

RadicalMarket Innovation

Copyright Aaron J. Shenhar, 2009 Pace

Blitz

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The Innovator’s Dilemma and Project Management

e

and Project Management

man

ce Manage by Breakthrough Projects

Perf

orm

Manage by Pl tf

oduc

t P Platform Projects

Pro

Copyright Aaron J. Shenhar, 2009Time

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The Customer Adoption Cycle and Project Managementand Project Management

Novelty Breakthrough Platform Derivative DerivativePlatform

Technology Medium to Medium- Medium- Medium to


gySuper-High-Tech Tech Tech Low-Tech

Goal Strategic Strategic Operational Operational

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REFERENCESREFERENCES

1. Gatignon, H., Tushman, M., Smith, W. and Anderson. P., 2002. “A structural approach to assessing innovation: Construct development gof innovation locus, type, and characteristics.” Management Science, 48 (9): 1103-1122.

2. PMI, PMBOK, 2004. Project Management Body of Knowledge. Project Management Institute.

3 A Sh h d D D i R i ti P j t M t Th3. Aaron Shenhar and Dov Dvir, Reinventing Project Management: The Diamond to Successful Growth and Innovation. Harvard Business School Press, August 2007, (288p).

4. Aaron J. Shenhar, Dov Dvir, Dragan Milosevic, and Hans Thamhain, Linking Project Management with Business Strategy, Project Management Institute 2007 (239p)


Management Institute, 2007, (239p)

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[ieee technology - portland, or, usa (2009.08.2-2009.08.6)] picmet '09 - 2009 portland...

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