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Week01 slides spring_2013

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  • 1. MGT 610 Strategic Project Management© Thomas Lechler 2013 1MGT 610 Strategic Project Management1Session 1The Core Conflict of Classic and ValueProject ManagementClassic Perspective of Project Management
  • 2. MGT 610 Strategic Project Management© Thomas Lechler 2013 2Session 1: Agenda1. Motivation of the course2. Teaching Goals of this Course3. Paradigms and Paradigm Shifts4. TOC Basic Concepts5. Classic PM vs. Value PM6. Classic PM7. Value PM: The Next Generation
  • 3. MGT 610 Strategic Project Management© Thomas Lechler 2013 31. Motivation of the CourseA Wide Use of Projects in all IndustriesThe Problem: Low Project Performance– Many projects overrun - schedule, budget– Many projects achieve disappointingbusiness resultsNo Significant Improvement in Project Success Rates Since 1996!Over 1 mio.Software projectsin US companies
  • 4. MGT 610 Strategic Project Management© Thomas Lechler 2013 41. Motivation of the CourseWhy do projects not achieve the planned performance?The Current Perception - Operational Activity is sufficientButProjects are Undertaken for Business Results– Creating New Products and New Markets– Process Improvement=> To Gain or sustain Competitive Advantage
  • 5. MGT 610 Strategic Project Management© Thomas Lechler 2013 51. Motivation of the CourseThe Need:– A better conceptual Understandingof the nature of projects– An enhanced model to manageprojects – to maximize a project’svalue=> Manage Projects Strategically
  • 6. MGT 610 Strategic Project Management© Thomas Lechler 2013 62. Strategic PM: Course GoalsCreate a new paradigm for project management• Understanding the limitations of Classic ProjectManagement and assess the Value Project ManagementIntroduce innovative frameworks, concepts and tools forProject ManagementDeliverables and Objectives:• Understand the new paradigm and apply it• Develop a project strategy to maximize project value• Choose a set of tools to manage projects strategically• Analyze projects quantitatively and make quantitatively-based strategic decisions
  • 7. MGT 610 Strategic Project Management© Thomas Lechler 2013 72. Strategic PM: Course Pedagogy in thinking   in beliefs. in beliefs   in expectations. in expectations   in attitude. in attitude   in performance. in performance   in status quo.Adapted from John Maxwell’s book, “Thinking For a Change”A change in the status quo requiresa change in thinking
  • 8. MGT 610 Strategic Project Management© Thomas Lechler 20132. Strategic PM: Conceptual Course FrameworkRisk UncertaintyPlanningProjects•Define Robust Baseline•Mitigate Risk•Define Value Proposition•Maximize ValueChangingProjects•Analyze Variation•Avoid Change•Seek value opportunities•Embrace Change8
  • 9. MGT 610 Strategic Project Management© Thomas Lechler 2013 93. Paradigms: Level of ChangeEinstein said, “It is not possible to solve aproblem at the same level of thinking thatcreated the problem.”
  • 10. MGT 610 Strategic Project Management© Thomas Lechler 20133. Paradigms: DefinitionsA Paradigm is a framework of thought, a scheme for understanding andexplaining certain aspects of reality. It is a set of rules how to besuccessful within its boundaries.A Paradigm Shift is a revolutionary new way of thinking about oldproblems – a dramatic, collective change in our perception. When aParadigm shifts, everyone goes back to zero.Paradigm Paralysis:• Swiss watch industry with quartz drive• Mainframe computer makers with PC’s• Tablet computing10
  • 11. MGT 610 Strategic Project Management© Thomas Lechler 20134. TOC: Basic AssumptionsTheory of Constraints (TOC) systemic approach adopted by Goldrattfor management problems to focus on global optima.Assumptions: All systems have at least one constraint; otherwise they would be capable of infinite throughput.A real-world system with more than three constraints is extremelyunlikely, because: Linear programming problems show that the more constraintsthe less stable the solution. Practitioners claim that three constraints is a realistic maximumGoal: Focus on those few areas (constraints) which maximize theoutput.11
  • 12. MGT 610 Strategic Project Management© Thomas Lechler 2013 124. TOC: ImplementationGoal of TOC: How to maximize an organization’s goalachievement, by deciding: What to change? What to change to? How to cause the change?Goldratt’s five focusing steps as basic implementation of TOC: Identify the constraint. Exploit the constraint. Subordinate to the constraint. Elevate the constraint, and Do not let INERTIA prevent you from doing itagain.
  • 13. MGT 610 Strategic Project Management© Thomas Lechler 2013 134. TOC: Problem DefinitionA precise problem description is half way of the solution.A problem exists whenever there is something that prevents or limitsus, from reaching a desired objective.Problems which involve a compromise must satisfy at least tworequirements.Precisely define a problem by defining the requirements that must befulfilled.Whenever a compromise exists, there must be at least one thingthat is shared by the requirements and it is in this sharing that theproblem between the requirements exists.To satisfy the requirements a prerequisite exists and it is here thatthe conflict arisesGoldratt, Theory of Constraints, 1990
  • 14. MGT 610 Strategic Project Management© Thomas Lechler 2013 144. Evaporating Cloud Model: 2 Conflict TypesAPrerequisite(Want)BCRequirement(Need)ObjectiveConflictABCConflictLimited availabilityof DGoldratt, Theory of Constraints, 1990DNot DDD’
  • 15. MGT 610 Strategic Project Management© Thomas Lechler 2013 154. TOC: Evaporating Cloud Model DefinitionThe Evaporating Cloud (Conflict cloud, dilemma cloud,conflict resolution diagram), provides a verbalization of aconflicted situation and is read:• In order to have objective A, we must havenecessary condition B.• In order to have necessary condition B, we musttake action D.• In order to have objective A, we must havenecessary condition C.• In order to have necessary condition C, we musttake action D.• But actions D and D are in conflict.
  • 16. MGT 610 Strategic Project Management© Thomas Lechler 2013 164. TOC: Evaporating Cloud Model – ExampleHappinessPrerequisiteWe must besatisfiedRequirementObjectiveWe must besecureDon’t try newthingsTry newthingsEfrat’s cloud of organizational change processes:Without taking care of peoples’ security:• they will not try new things,• they will not change,• and there will be no improvement.Satisfaction isnecessaryFor contentmentActions areMutuallyexclusiveSecurity isnecessaryFor contentmentI must be able topredict what willhappen in my futureReal satisfaction comesfrom accomplishingthings that at first I didn’tthink I could do
  • 17. MGT 610 Strategic Project Management© Thomas Lechler 2013 174. TOC: Evaporating Cloud Model ProcessThe cloud lets us identify a way to satisfy both needs andthe common objective without a conflict, and with awin/win injection.We construct a cloud out of 5 entities: Define the common objective which should besatisfied. In order to satisfy the common objective it isnecessary to fulfill two needs. In order to satisfy the needs it is necessary to fulfilltwo wants. The two needs or wants could be in conflict witheach other.
  • 18. MGT 610 Strategic Project Management© Thomas Lechler 2013 184. TOC: Evaporating Cloud Model ProcessConflict Clouds should be annotated:• The assumption(s) behind the linkages should beexplicitly stated on the diagram• And then further supported by a paragraphexplanation for each item and link, explaining theunderlying assumptions• Because these assumptions reflect the fundamentalbeliefs of the paradigm represented• It is important to carefully articulate each part of thecloud, because different clouds lead to differentsolutions
  • 19. MGT 610 Strategic Project Management© Thomas Lechler 2013 195. Classic PM vs. Value PM1. Classic PM Focus: Risk Management- Project goals and objectives are defined- Sources of variation and their impact are identified2. Value PM Focus: Uncertainty Management- Differentiate uncertainty from risk- Identify and exploit project value opportunities
  • 20. MGT 610 Strategic Project Management© Thomas Lechler 2013 206. Classic PMPrinciples and Core Conflict of Classic PMClassic PM: Optimization under constraints
  • 21. MGT 610 Strategic Project Management© Thomas Lechler 2013Classic PM: Defining Project Risk & Risk Mgmt.Project Risk (PMBoK, pp 273).. is an uncertain event or condition that, if it occurs, hasan effect on at least one project objective.Management of Risks (PMBoK)Known risks are those that have been identified andanalyzed, making it possible to plan responses for thoserisks. Specific unknown risks cannot be managedproactively, which suggests that the project team shouldcreate a contingency plans. Triple Constraint as the basis of Risk Management21
  • 22. MGT 610 Strategic Project Management© Thomas Lechler 2013Classic PM: Principles of Risk Management• Objectives are determined and baseline defined.• Events that could cause variations from baseline areknown.• Probabilities of events that could cause variations areknown.22
  • 23. MGT 610 Strategic Project Management© Thomas Lechler 2013 23Classic PM: Management ObjectiveProject success can be achieved:• by meeting predefined objectivesFundamental Assumptions:• Triple constraints define success for stakeholders• All stakeholders have compatible perspectives about andcongruent priorities for successPractical Experience:• The value of a project may be nearly independent from meetingtriple constraints• It is often not possible to precisely predefine objectivesConsequence:• Projects are implemented to achieve business value
  • 24. MGT 610 Strategic Project Management© Thomas Lechler 2013Classic PM: Triple ConstraintMeetPredeterminedObjectivesPrerequisiteRequirementObjectiveOnly project risks are addressed to achieve predeterminedobjectives!How is value created and how is uncertainty addressed?Don’t ChangeBaselineChangeBaselineProject RisksManagedBaselineMet24
  • 25. MGT 610 Strategic Project Management© Thomas Lechler 2013 257. Value PMPrinciples and Core Conflict of Value PMValue PM: Maximization under constraintsNeed for a project management paradigm thatexplicitly addresses:• Project uncertainty,• Project value opportunities,• Project value maximization
  • 26. MGT 610 Strategic Project Management© Thomas Lechler 2013 26Value PM: Objective
  • 27. MGT 610 Strategic Project Management© Thomas Lechler 2013 27Value PM: ObjectiveManaging Project ValuePre-project StartProjectStopPost-projectWealthTotal Costof OwnershipLatentLiabilities85% of TCOO willbe determined earlyin project’slifecycle.Gain?Loss?Revenue < TCOORevenue > TCOO
  • 28. MGT 610 Strategic Project Management© Thomas Lechler 2013Value PM: Defining Uncertainty & ManagementProject Uncertainty• Is related to unpredictability of the environment,• inability to predict the impact of environmentalchange,• and the inability to predict the consequence of aresponse choice.• Not defined by PMBoK (4th ed.). Management of Uncertainty differs from Managementof Risk28
  • 29. MGT 610 Strategic Project Management© Thomas Lechler 2013Value PM: Basic AssumptionsUncertainty Friend or Foe?1. Project objectives cannot be precisely predefined.2. Project objectives do not remain stable over theimplementation of a project.3. Project success can be achieved by maximizing projectvalue.4. Project uncertainty can be managed by seeking andexploiting project value opportunities.29
  • 30. MGT 610 Strategic Project Management© Thomas Lechler 2013Value PM: Paradigm Core ConflictMaximizeProjectValuePrerequisiteRequirementObjectiveThe management core problem: Opportunity discovery and exploitation.ExploitOpportunitiesNot ExploitOpportunitiesInitialRequirementsMetStakeholderExpectationsMetPM’sValueMindset30
  • 31. MGT 610 Strategic Project Management© Thomas Lechler 2013Value PM: Uncertainty Focused PM Perspective1. Project uncertainty can be managed by seeking,discovering and exploiting project value opportunitiesduring project implementation.2. The project manager is instrumental in discovering andexploiting project value opportunities.3. The project manager needs to have a project valuemindset (PVM) to discover and exploit opportunities.31
  • 32. MGT 610 Strategic Project Management© Thomas Lechler 2013 32Value PM: New ChallengesProjects are initiated to achieve Value for the company.The role of the Project Manager is changing from the coordinator andimplementer to:• The Leader and Mentor, who is responsible for the best possibleperformance of human resources• The Strategist, who is responsible to coordinate and focus decisionswith a project strategy• The Manager who is responsible for maximizing Project ValueProject Value Management is a Mindset: It is not sufficient to achieve pre-determined project value. It is to maximize project value and to adapt to variation.
  • 33. MGT 610 Strategic Project Management© Thomas Lechler 2013RiskPerspectiveUncertaintyPerspectiveManagementFocusVariation Drivers Value DriversResponsibilities Meet Baseline Maximize ProjectValueProject Definition Statement of Work Stakeholder NeedsProject Planning Baseline Value PropositionProject Execution Avoid Variation Identify OpportunitiesPM’s Role ProjectAdministratorProject Leader33Value PM: New PM Role