international project management day webcast:
TRANSCRIPT
Value-Driven Project Management
By
Harold Kerzner, Ph.D.
© 2009 International Institute for Learning, Inc.
© 2009 International Institute for Learning, Inc.
Percent of Projects Using Project Management
Current use of project management
© 2009 International Institute for Learning, Inc.
The “Traditional” Project
• Time duration of 6-18 months• The assumptions are not expected to change over
the duration of the project• Technology is known and will not change over the
duration of the project• People that start on the project will remain through
to completion• The statement of work is reasonably well-defined
© 2009 International Institute for Learning, Inc.
The “Nontraditional” Project
• Time duration over several years• The assumptions can and will change over the
duration of the project• Technology will change over the duration of the
project• People that approved the project may not be there
at completion• The statement of work is ill-defined and subject to
numerous changes
© 2009 International Institute for Learning, Inc.
MANAGINGTRADITIONAL
PROJECTS
MANAGINGNONTRADITIONAL
PROJECT
Single person sponsorship Governance by committee
Possibly a single stakeholder Multiple stakeholders
Project decision-making Both project and business decision-making
Inflexible project management methodology
Flexible or “fluid” project management methodology
Periodic reporting Real time reporting
Success is defined by the triple constraint
Success is defined by the triple constraint and business value
KPIs are derived from earned value measurement (EVM)
Unique value-driven KPIs can exist on every project
Traditional vs. Nontraditional Projects
© 2009 International Institute for Learning, Inc.
Customer RFP Requirements
• Contractors must have PMP®s• Contractors must have an EPM system, and it may
have to be qualified or approved by the client• Contractors must capture best practices and share
intellectual property with the client• Contractors must identify a reasonable maturity
level in project management
© 2009 International Institute for Learning, Inc.
Customer’sExpectations
Contractor’sExpectations
BusinessSolutions
Long-Term Strategic
Partnerships
“Engagement” Expectations
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Before and After Engagement Project Management
BEFORE ENGAGEMENT PROJECT MANAGEMENT
AFTER ENGAGEMENT PROJECT MANAGEMENT
Continuous competitive bidding Sole-source or single-source contracting (fewer suppliers to deal with)
Focus on near-term deliverable value
Focus on lifetime value of the deliverable
Client must understand the contractor’s project management methodology
Contractor designs a customer-specific project management methodology
© 2009 International Institute for Learning, Inc.
Benefits
Good methodologies allow us to:• Shorten project schedules• Reduce and/or better control costs• Prevent unwanted scope changes• Plan for better execution• Predict results• Improve customer relations during project execution• Adjust the project during execution to fit changing customer
requirements• Provide senior management with better visibility of status• Standardization in execution• Capturing of best practices
© 2009 International Institute for Learning, Inc.
Project Failures
Methodologies can lead to project failures if:• The methodology must be followed exactly even if the
assumptions and environmental input factors have changed• The methodology focuses on linear thinking• The methodology does not allow for out-of-the-box thinking• The methodology does not allow for value-added changes
that are not part of the original requirements• The methodology does not fit the type of project• The methodology uses nonstandard terminology
© 2009 International Institute for Learning, Inc.
Client
Stakeholders
Inputs Tools OutputsCustomer
SatisfactionManagement
Requirements
Business Case
Assumptions
I P E M C
Methodology
• PMBOK® Guide Processes• Unique Tools• Unique KPI• Dashboards
Deliverables
• Best Practices• Lessons Learned• KPI Library• Improvements for Next Project
Feedback
Adaptive Methodology Usage
© 2009 International Institute for Learning, Inc.
Defining Value Metrics (KPI)
PAST VIEW PRESENT VIEW
Metrics are fixed for the duration of the
project
Metrics can change over the duration of
the project
(Metric-Driven ProjectManagement)
© 2009 International Institute for Learning, Inc.
Dashboard Design
Dashboard
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The Changing Definition of Success
• Success is simply the triple constraint• Customer satisfaction must also be considered• There are other (secondary) factors to be
considered• Success must have a business component• The constraints must be prioritized• There are multiple definitions of success (each
customer/stakeholder can have a different definition)
• There are categories of success, and value is now a component of the success criteria
(2004)
(2008)
© 2009 International Institute for Learning, Inc.
Success
• Success is not necessarily achieved by completing the project within the triple constraint. Success is when the planned business value is achieved within the imposed constraints and assumptions.
Value
Triple Constraint
© 2009 International Institute for Learning, Inc.
Models for Value Analyses
• Intellectual Capital Valuation• Intellectual Property Scoring• Balanced Scorecard• Future Value Management™• Intellectual Capital Rating™• Intangible Value Stream Modeling• Inclusive Value Measurement™• Value Measurement Methodology (VMM)
© 2009 International Institute for Learning, Inc.
Measuring Value from Benefits
Expected Benefits or Results
Value Conversion
Profitability Easy
Customer Satisfaction Hard
Goodwill Hard
Penetrate New Markets Easy
Develop New Technology Medium
Technology Transfer Medium
Reputation Hard
Stabilize Work Force Easy
Utilize Unused Capacity Easy
© 2009 International Institute for Learning, Inc.
A Comparison: EVMS, EPM, and VMM
Variable EVMS EPM VMM
Time
Cost
Quality
Scope
Risks
Tangibles
Intangibles
Benefits
Value
Tradeoffs
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Types of Performance Reports
StatusReports
ForecastReports
ProgressReports
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Benefits and Value at Completion
ForecastReports
• Time at Completion• Cost at Completion
Traditional Reporting
Future Reporting• Time at Completion• Cost at Completion• Benefits at Completion• Value at Completion
© 2009 International Institute for Learning, Inc.
The Project Pipeline (Without a PMO)
IDEAS
PROJECT PIPELINE
PROJECT FAILURES
COMPLETEDPROJECTS
© 2009 International Institute for Learning, Inc.
The Project Pipeline (With a PMO)
IDEAS
PROJECT PIPELINE
PROJECT FAILURES
COMPLETEDPROJECTS
PMO
BUSINESS CASE FILTERBENEFITS FILTERVALUE FILTER