Week 2 Erletshaqe

Project Management2. Portfolio Management

Week 2

Project selection and portfolio

management

Project selection and portfolio

management

What are the inputs

that cause the

project process to

begin?

Unit Objectives

Implement IT project planning and

selection techniques

Appreciate the importance of project

portfolio management

Strategic Planning

Identifying IT Projects

Project Proposals

Project Selection Methods

Applying a Selection Model

Project Selection

Project Success

But first

Assignment 1

Assignment 1

Write a project plan

Assignment 1

Write a project plan

Topic: Week 3

http://www.teachers.ash.org.au/researchskills/Dalton.htm

Back to the programme

Strategic

Planning

Strategic Planning

1. What is strategy?

2. How do projects relate to strategy?

Strategy 2Strategy 1 Strategy 3 Strategy 4

Organisation Mission

Money

Customers

Efficiency and Effectiveness

Adaptability

5 Forces analysis

Supplier

power

Customer

power

Threat of

New Entrants

Substitutes

Intensity of

competition

Michael Porters 5 Forces 1980s

business model template

VALUE

PROPOSITION

COST

STRUCTURE

CUSTOMER

RELATIONSHIP

TARGET

CUSTOMER

DISTRIBUTION

CHANNEL

VALUE

CONFIGURATION

CORE

CAPABILITIES

PARTNER

NETWORK

REVENUE

STREAMS

INFRASTRUCTURE CUSTOMEROFFER

FINANCE

Osterwalders Business Model framework 2006http://business-model-design.blogspot.com

Process

efficiencyScorecard

Customer

satisfaction

Financial

Learning and

innovation

Balanced Scorecard

Kaplan & Norton (1994?) HBR

Kaplan & Norton (1998?) HBR

http://www.visual-literacy.org/periodic_table/pix/strategy-bsc-map.png

Strategy Map



Money

Customers


Adaptability

Strategic Management Overview

Involves determining long-term objectives, predicting future trends, and projecting the need for new products and services

Provides the theme and focus of the future direction for the firm

respond to change allocating scarce resources

Requires strong links among mission, goals, objectives, strategy, and implementation

Set (SMART) Goals

Review Mission

Develop Strategies

Implement Strategies through projects

Align Strategies to goals

SWOT Analysis

SWOT = SITUATIONAL ANALYSIS

Where are we now?

ST

W

O

ST

W

O

Positive Negative

ST

W

O

Inte

rnal

Exte

rnal

ST

W

O

Inte

rnal

Exte

rnal

Positive Negative

Set (SMART) Goals

Review Mission

Develop Strategies



http://en.wikipedia.org/wiki/SMART_(project_management)

S Specific

M Measurable

A Achievable

R Relevant

T Time-bound

Letter Major Term Minor Terms

S Specific Significant[3], Stretching[3], Simple

M Measurable Meaningful[3], Motivational[3], Manageable

A AchievableAgreed, Attainable[6], Assignable[2], Appropriate,

Actionable, Action-oriented[3]

R RelevantRealistic[2], Results/Results-focused/Results-oriented[6],

Resourced[7], Rewarding[3]

T Time-bound

Time framed[2], Timed, Time-based, Timeboxed,

Timely[6][5], Timebound, Time-Specific, Timetabled,

Trackable

E[1] Exciting, Evaluated, Ethical

R[1] Recorded, Rewarding, Reviewed[8]

http://en.wikipedia.org/wiki/SMART_(project_management)

Examples of

not smart goals?

Set (SMART) Goals

Review Mission

Develop Strategies




Money

Customers


Adaptability


Set (SMART) Goals

Review Mission

Develop Strategies




Money

Customers


Adaptability

projects

projects

projects

projects


What are the goals of the projects?

Figure 2.1 Strategic Management Process (Gray & Larson, 2006, p25)

projects

projects

projectsprojects

projects

projects

projects

projects

projects projects

projects

projects

projects

projects

projects

projects

projects

PPPMProject

Programme

Portfolio

Management

The O is for

Organisational

OPM3

Programme

OPM3

Portfolio

Projects

ProjectsProgramme

Portfolio

ProjectProgramme

ProjectProjectProjects



One Portfolio or

Several?

Categories

Approaches to

project

portfolio management

One Portfolio or

Several?

Categories

Venture: Projects that

transform the business

Growth: Projects that grow

revenue or market share

Core: Projects that help run

the business

What are the benefits of Project

Portfolio Management?

Benefits of Project

Portfolio

Management

Builds discipline into project selection process

Links project selection to strategic metrics

Prioritizes project proposals across a common set of criteria,

rather than on politics or emotion

Allocates resources to projects that align with strategic

direction

Balances risk across all projects

Problems with

Project Portfolio

Management

Different views from senior management

on what (and how) should be done

Competition (& effective utilisation) for resources

How to

Senior Management Input

provide guidance in selecting criteria that are aligned with the organizations goals

decide how to balance available resources among current projects

The Priority Team Responsibilities

publish the priority of every project ensure selection process is transparent re-assess the organizations goals / priorities evaluate the progress of current projects

Figure 2.8 Sample project portfolio approach

Figure 1.5 Project management compared to project portfolio management(Schwalbe, 2005, p15)

Money

Customers


Adaptability

projects

projects

projects

projects projects

programme

projects

projects

projectsprojects

programme projects



Programme

projects

projects

programme

Short

term

Mid

term

Long

term

projects

projects

projects

projects projects

projects

projects

projects

projectsprojects

projects projects



projects

projects

projects

projects

http://www.betterprojects.net/search?q=strategy

projects

projects

projects

projects projects

projects

projects

projects

projectsprojects

projects projects



projects

projects

projects

projects

Identifying IT

Projects

Identifying IT Projects

Many organizations follow a planning process for selecting IT projects which is

aligned with business strategy

Research shows: Supporting business objectives is the number

one reason for investing in IT projects

Use of IT standards lowers development costs by 41 percent per user (Cosgrove Ware, 2002)

Figure 2.1 Pyramid for the Project Selection Process

Project

Proposals

Most business units

have a strategic

plan

Which SHOULD

align with the

organisations strategic plan

Which SHOULD

align with the

organisations strategic plan

Solicitation of Project Proposals

Within the

organization

Request for

proposal (RFP)

from external

sources

(contractors and

vendors)

When ranking proposals, consider;

Discipline

Accountability

Responsibility

Constraints

Reduced flexibility

Loss of power

Project Initiation forms

Figure 2.4B Risk Analysis

(Gray & Larson, 2006, p39)

Figure 2.4A Major Project Proposal

(Gray & Larson, 2006, p38)

Project

Selection

Methods

Not all project proposals make it

to initiation

Every project idea isnt progressed.

Why?

Time

Money

Focus

Methods for selecting projects include:

- Focusing on broad organizational needs

- Categorizing IT projects

- Financial analysis

- Using a weighted scoring model

- balanced scorecard- Strategy mapping

Focusing on Broad Organizational

Needs

E.g. Non-financial, but important benefits

Three important criteria: need for the project funds available for the project will to make the project succeed

Categorizing IT Projects

Does the project provides a response to:a probleman opportunitya directive

The time and date of expected completion

The overall priority of the project

Financial Analysis

$$$

Net Present

Value

Payback model

Return on

Investment

(there are more)

Net Present

Value

Net Present Value (NPV) Model

Uses managements minimum desired rate-of-return (discount rate) to compute the

present value of all net cash inflows

positive NPV: the project meets the

minimum desired rate of return and is

eligible for further consideration

negative NPV: project is rejected

Net Present Value (NPV) Model contdNPV Calculations

determine estimated costs / benefits for

the life of the project and products it

produces

determine discount rate (ask

organization)

calculate the NPV

some organizations consider the

investment year as year 0, others

consider it year 1

some organizations enter costs as

negative numbers, others do not (ask

organization)

Example: CP829_Lecture_Week2_NPV.xls

Time to

Stopand turn to a

new

presentation

pack

Payback model

Figure 4.1 Charting the Payback Period (Schwalbe, 2006, p129)

Measures the time it will take to recover

the project investment

Shorter paybacks are more desirable

Payback occurs when cumulative

discounted benefits and costs are

greater than zero

Limitations of payback:

ignores the time value of money assumes cash inflows for investment

period only

does not consider profitability

Return on

Investment

Return on Investment (ROI)

Calculated by subtracting project

costs from the benefits and then

dividing by the costs

Formula:

ROI = (total discounted

benefits total discounted costs) /

discounted costs

Higher the ROI, the better. Many

organizations have a set or

minimum rate of return on

investment projects

Example:

CP829_Lecture_Week2_ROI.xls

(total discounted benefits total discounted costs)

discounted costs

Non-financial Analysis

$$$

Weighted scoring

model

Balanced

Scorecard

$$$

Weighted scoring

model

A weighted scoring model is a tool that

provides a systematic process for selecting

projects based on many criteria Steps in identifying a weighted scoring model:

identify criteria for project selection assign weights (%) to criteria add up to (100%) assign scores to each criteria for each project multiply scores by weights to get total scores

The higher the weighted score, the better Example: CP829_Lecture_Week2_WeightedScore.xls

$$$

$$$

Balanced

Scorecard

Balanced Scorecard Robert Kaplan and David Norton developed this

approach to help select and manage projects that

align with business strategy

Methodology that converts an organizations value drivers, such as customer service,

innovation, efficiency, and financial

performance, to a series of defined metrics

See http://www.balancedscorecard.org for more information

$$$

Applying a

selection

model

Applying a Selection Model

Project Classification Deciding how well a strategic or operations project fits the

organizations strategy

Selecting a Model Focus on competitive strategy and broad organizational needs

Perform net present value analysis or other financial projections

Use a weighted scoring model

Implement a balanced scorecard

Address problems, opportunities, and directives

Consider project time frame

Consider project priority

Project

Selection

The Business Case

Impacts

Costs & Benefits

Clearly compares alternatives

Objective

Systematic

The Business Case

Elevator pitches?

Table 3.4 Sample business case

Example business case

Contents of a Business Case

1. Introduction/Background

2. Business Objective

3. Current Situation and Problem/Opportunity

Statement

4. Critical Assumptions and Constraints

5. Analysis of Options and Recommendation

6. Preliminary Project Requirements

7. Budget Estimate and Financial Analysis

8. Schedule Estimate

9. Potential Risks

10.Exhibits

Figure 2.3 The Process for Developing a Business Case(Marchewka, 2003, p34)

Project

Success

By the way,

Things are getting better

Source: CHAOS Report 1995 by the Standish Group

Access it here: http://net.educause.edu/ir/library/pdf/NCP08083B.pdf

Not even

completed

Typically

189% over

budget

OTOBOS

53%Challenge

d

16%Success

31%Critical

Failures

1994

Not even

completed

Still way

over

budget

OTOBOS

51%Challenge

d

34%Success

15%Critical

Failures

2002

Source: CHAOS Report 2002 by the Standish Group

Access it here: http://www.standishgroup.com/quarterly_reports/index.php

53%Challenge

d

16%Success

31%Critical

Failures

1994

51%Challenge

d

34%Success

15%Critical

Failures

2002

$0

$50

$100

$150

$200

$250

1994 2005

Wasted

money as a

share of total

project spend

Billions of

dollars

What happened?

The reasons for the increase in successful projects vary. First, the average cost of a

project has been more than cut in half.

Better tools have been created to monitor

and control progress and better skilled

project managers with better management

processes are being used. The fact that

there are processes is significant in itself. (Standish Group cited in Schwalbe, 2004, p13)

The reasons for the increase in successful projects vary. First, the average cost of a

project has been more than cut in half.

Better tools have been created to monitor

and control progress and better skilled

project managers with better management

processes are being used. The fact that

there are processes is significant in itself. (Standish Group cited in Schwalbe, 2004, p13)

Smaller

projects

Better

tools

Better

training

Better

SelectionPortfolio

Mgt

Strategic

Alignment

More recently

Things you

should

have(if you want to succeed)

1. Executive support

2. User involvement

3. Experienced project

manager

4. Clear business objectives

5. Minimized scope

6. Standard software

infrastructure

7. Firm basic requirements

8. Formal methodology

9. Reliable estimates

10. Other criteria, such as small

milestones, proper

planning, competent staff,

and ownership

incrementalBut, change has been

There is still plenty of

room for improvement.

?What do you

think is still

going wrong?

www.dualibra.com

Title page pic care of jpellqen & CC @ Flickr

http://flickr.com/photos/jpellgen/444946201/

Documents

Week 2 Erletshaqe