Project Management

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Project Management

  1. 1. REPORT ON Business StrategyOperational & Financial Strategies of Adobe B Group-9 Kiran Jacob Rituparna Dutta Ritesh Agarwal Ramanathan K Sunam Pal Punneet K
  2. 2. Operational & Financial Strategies of Adobe Alliance University Table of ContentsChapter-1 ..................................................................................................................7Introduction.............................................................................................................7 1.1 About Adobe:- ................................................................................................7 1.2 History of Adobe:...........................................................................................8 1.3 Products of Adobe: ........................................................................................9 1.3.1 Desktop software: ................................................................................9 1.3.2 Server software:..................................................................................10 1.3.3 Formats ................................................................................................10 1.3.4 Web-hosted services: .........................................................................10 1.3.5 Web design programs: ......................................................................10 1.3.6 Video editing and visual effects: .....................................................10 1.3.7 eLearning software: ...........................................................................10CHAPTER-2...........................................................................................................11PROJECT OPERATIONAL STRATIGIES .....................................................11 2.1 Software Development Lifecycle: ..............................................................11 2.1.1 Planning: .............................................................................................12 2.1.2 Implementation, testing and documenting: ..................................12 2.1.3 Deployment and maintenance .........................................................12 2.2 Software Project Management Plan: .........................................................14 2.2.1 Software Project: ................................................................................14 2.2.2 Project Management Activities: .......................................................15 2.2.3 SPMP Part 1: Introduction ................................................................16 2.2.4 SPMP Part 2: Project Organization:.................................................17 2.4 Software Development Models: ................................................................17 1|Page
  3. 3. Operational & Financial Strategies of Adobe Alliance University 2.4.1 Waterfall model:.................................................................................18 2.4.2 Spiral model:.......................................................................................182.5 Security in IT System: ..................................................................................192.6 ERP System in Projects: ...............................................................................212.7 SOFTWARE REUSABILITY: ......................................................................222.8 Project Control cycle ....................................................................................232.9 Project Monitoring .......................................................................................232.10 Project Metrics, Measurement & Analysis .............................................24 2.10.1 Benefits ..............................................................................................242.11 Project Review ............................................................................................25 2.11.1 Group review ...................................................................................25 2.11.2 One person review...........................................................................25 2.11.3 Peer review .......................................................................................26 2.11.4 Management review ........................................................................26 2.11.5 External review ................................................................................262.12 Program & Portfolio Management .........................................................26 2.12.1 Program Management ....................................................................27 2.12.2 Portfolio Management ....................................................................272.13 PMO .............................................................................................................28 2.13.1 Strategic PMO...................................................................................28 2.13.2 Tactical PMO ....................................................................................292.14 Resource Levelling .....................................................................................292.15 Resource Smoothing ..................................................................................312.16 Crashing a project schedule .....................................................................31 2.16.1 Techniques of crashing ...................................................................32 2.16.2 Key aspects while crashing a project schedule ...............................32 2|Page
  4. 4. Operational & Financial Strategies of Adobe Alliance University 2.16.3 Risks involved in crashing a project schedule ............................33 2.17 Project Compressing ..................................................................................33 2.18 Project Risks ................................................................................................34 2.18.1 Risk Identification.............................................................................34 2.18.2 Risk Prioritization .............................................................................34 2.18.3 Risk response planning....................................................................35 2.18.4 Risk Management Approaches…….……………………………37 2.18.4.1 Risk Avoidance ...................................................................35 2.18.4.1 Risk Reduction ....................................................................36 2.18.4.1 Risk Transfer .......................................................................36 2.18.4.1 Risk Acceptance (Risk retention) ....................................36 2.19 Six Sigma Approach to Project.................................................................39 2.20 Total Quality Management (TQM) .........................................................40 2.20.1 Principles of TQM ............................................................................42 2.20.2 The Cost Of TQM .............................................................................43 2.21 Lean Approach ...........................................................................................44 2.22 RFP ...............................................................................................................46 12.22.1 Components of an RFP .................................................................47 12.22.3 Benefits of RFP ...............................................................................482.23 Project charter ................................................................................................482.24 Process Model ................................................................................................49Chapter-3 ................................................................................................................51Operational Modelling .........................................................................................51 3.1 Project Confidence Level ............................................................................51 3.2 Earned value Analysis................................................................................52 3|Page
  5. 5. Operational & Financial Strategies of Adobe Alliance University 3.2.1 Effort variance ....................................................................................52 3.2.2 Schedule variance ..............................................................................523.3 Earned Value Management System (EVM) .............................................53 3.3.1 Planned Value (PV) ...........................................................................54 3.3.2 Actual Cost (AC) ................................................................................54 3.3.3 Earned Value (EV) .............................................................................54 3.3.4 Cost Variance (CV) ............................................................................54 3.3.5 Schedule Variance (SV) .....................................................................54 3.3.6 Cost Performance Index (CPI)` ........................................................54 3.3.7 Estimate at Completion (EAC) ........................................................54 3.3.8 Estimate to Complete (ETC) .............................................................55 3.3.9 Schedule Performance Index (SPI) ..................................................55 3.3.10 Variance at Completion (VAC)......................................................553.4 Control charts for variables ........................................................................55 3.4.1 X bar Control Chart: ..........................................................................56 3.4.2 R Control Chart: .................................................................................57 3.4.3 Run Chart ............................................................................................57 3.4.4 Capability Study: ...............................................................................58 3.4.5 Control Limit Improvement .............................................................593.5 Customer Lifetime Value ( CLV ) .............................................................593.6 Sensitivity analysis (SA)..............................................................................603.7 Gantt Chart ...................................................................................................603.8 PERT...............................................................................................................633.9 CPM: Critical Path Method ........................................................................653.10 RACI Matrix................................................................................................673.11 Work Breakdown Structure......................................................................69 4|Page
  6. 6. Operational & Financial Strategies of Adobe Alliance UniversityChapter-4 ................................................................................................................72Financial Strategies ..............................................................................................72 4.1 Project Cost estimation................................................................................72 4.1.1 Ballpark Estimate ...............................................................................72 4.1.2 Budget estimate (Top-down estimate) ...........................................73 4.1.3 Definitive estimate (Bottom-up estimate) ......................................73 4.2 Project Capital Budgeting ...........................................................................74 4.2.1 Need for Project cost budgeting ......................................................75 4.3 Project Cost ...................................................................................................76 4.3.1 Basis of Costing ..................................................................................77 4.3.1.1 Costing based on resources.................................................77 4.3.1.2 Costing based on tasks ........................................................78 4.3.1.3 Costing based on usage ......................................................78 4.4 Project Contingency .....................................................................................78 4.5 Project Scheduling .......................................................................................79 4.5 Cost Forecasting ...........................................................................................80Chapter-5 ................................................................................................................81Financial Modelling ............................................................................................81 5.1 Contingency Calculation ............................................................................81 5.2 Net Present Value Method .........................................................................81 5.3 INTERNAL RATE OF RETURN METHOD ............................................83 5.4 PROFITABILITY INDEX ............................................................................84 5.5 Return On Investment .................................................................................85 5.6 Break Even Analysis ....................................................................................86 5|Page
  7. 7. Operational & Financial Strategies of Adobe Alliance University 5.7 Ratio Analysis ...............................................................................................87 5.7.1 Liquidity Ratios: .................................................................................87 5.7.2 Efficiency Ratios: ................................................................................90 5.7.3 Profitability Ratios: ............................................................................92 5.8 Cost Forecasting ...........................................................................................95 5.8.1 Regression analysis............................................................................95 5.8.2 CAGR ...................................................................................................98 5.8.3 Moving Average ............................. Error! Bookmark not defined. 5.8.4 WEIGHTED MOVING AVERAGE .................................................99 5.8.5 EXPONENTIAL SMOOTHING ....................................................100 5.8.6 DOUBLE EXPONENTIAL SMOOTHING...................................100 5.8.7 MULTIPLICATIVE SEASONAL METHOD................................101 5.8.8 CAUSAL FORECASTING METHODS ........................................103 5.8.9 MEASURING FORECAST ERRORS ............................................103Chapter-6 ..............................................................................................................105Learning Outcome..............................................................................................105 6.1 Learning outcome from operational strategies .....................................105 6.2 Learning outcome from financial strategies ..........................................106ANNEXURE ........................................................................................................107 Annexure-1........................................................................................................108 Annexure-2........................................................................................................109REFERENCES .....................................................................................................107 6|Page
  8. 8. Operational & Financial Strategies of Adobe Alliance University Chapter-1 Introduction1.1 About Adobe:-  Adobe Systems Incorporated is an American computer software company founded in 1982 and headquartered in San Jose, California, United States.  The company has historically focused upon the creation of multimedia and creativity software products, with a more-recent foray towards rich Internet application software development.  Adobe was founded in December 1982 by John Warnock and Charles Geschke, who established the company after leaving Xerox PARC in order to develop and sell the PostScript page description language.  The company name Adobe comes from Adobe Creek in Los Altos, California, which ran behind the house of one of the companys founders.  Adobe acquired its former competitor, Macromedia, in December 2005, which added newer software products and platforms such as Coldfusion, Dreamweaver, Flash and Flex to its product portfolio.  As of August 2009, Adobe Systems has 7,564 employees, about 40% of whom work in San Jose. Adobe also has major development operations in Orlando, Seattle, San Francisco, Orem, Minneapolis, Waltham, San Luis Obispo in United States; Ottawa, Canada; Hamburg, Germany; Noida, Bengaluru, India; Bucharest, Romania; Beijing, China. 7|Page
  9. 9. Operational & Financial Strategies of Adobe Alliance University1.2 History of Adobe:  Adobes first products after PostScript were digital fonts, which they released in a proprietary format called Type 1.  Apple subsequently developed a competing standard, TrueType, which provided full scalability and precise control of the pixel pattern created by the fonts outlines, and licensed it to Microsoft. Adobe responded by publishing the Type 1 specification and releasing Adobe Type Manager, software that allowed WYSIWYG scaling of Type 1 fonts on screen, like TrueType, although without the precise pixel-level control. But these moves were too late to stop the rise of TrueType.  Although Type 1 remained the standard in the graphics/publishing market, TrueType became the standard for business and the average Windows user. In 1996, Adobe and Microsoft announced the OpenType font format, and in 2003 Adobe completed converting its Type 1 font library to OpenType.  In the mid-1980s, Adobe entered the consumer software market with Adobe Illustrator, a vector-based drawing program for the Apple Macintosh. Illustrator, which grew from the firms in-house font- development software, helped popularize PostScript-enabled laser printers. Unlike MacDraw, then the standard Macintosh vector drawing program, Illustrator described shapes with more flexible Bézier curves, providing unprecedented accuracy. Font rendering in Illustrator, however, was left to the Macintoshs QuickDraw libraries and would not be superseded by a PostScript-like approach until Adobe released Adobe Type Manager.  In 1989, Adobe introduced what was to become its flagship product, a graphics editing program for the Macintosh called Photoshop. Stable and full-featured, Photoshop 1.0 was ably marketed by Adobe and soon dominated the market. 8|Page
  10. 10. Operational & Financial Strategies of Adobe Alliance University  In 1993, Adobe introduced PDF, the Portable Document Format, and its Adobe Acrobat and Reader software. PDF is now an International Standard: ISO 32000-1:2008. The technology is adopted worldwide as a common medium for electronic documents.  Arguably, one of Adobes few missteps on the Macintosh platform was their failure to develop their own desktop publishing (DTP) program. Instead, Aldus with PageMaker in 1985 and Quark with QuarkXPress in 1987 gained early leads in the DTP market.  Adobe was also slow to address the emerging Windows DTP market. However, Adobe made great strides in that market with the release of InDesign and its bundled Creative Suite offering. In a failure to predict the direction of computing, Adobe released a complete version of Illustrator for Steve Jobs ill-fated NeXT system, but a poorly-produced version for Windows.  Despite these missteps, licensing fees from the PostScript interpreter allowed Adobe to outlast or acquire many of its rivals in the late 1980s and early 1990s.  In December 1991, Adobe released Adobe Premiere, which Adobe rebranded to Adobe Premiere Pro in 2003. In 1994, Adobe acquired Aldus and added Adobe PageMaker and Adobe After Effects to its production line later in the year; it also controls the TIFF file format.  In 1995, Adobe added Adobe FrameMaker, the long-document DTP application, to its production line after Adobe acquired Frame Technology Corp. In 1999, Adobe introduced Adobe In Copy as a direct competitor to QuarkCopyDesk.1.3 Products of Adobe: 1.3.1 Desktop software:  Adobe Photoshop,  Adobe InDesign,  Adobe Illustrator, 9|Page
  11. 11. Operational & Financial Strategies of Adobe Alliance University  Adobe Fireworks, and  Adobe Sound booth. 1.3.2 Server software:  Adobe ColdFusion,  Adobe Content Server and  Adobe Lifecycle Enterprise Suite.1.3.3 Formats  Portable Document Format (PDF),  PDFs predecessor PostScript, Action Script,  Shockwave Flash (SWF) and Flash Video (FLV).1.3.4 Web-hosted services:  Adobe Kuler,  Photoshop Express, and  Acrobat.com.1.3.5 Web design programs:  Adobe Dreamweaver,  Adobe Contribute and  Adobe Flash.1.3.6 Video editing and visual effects:  Adobe Premiere Pro and  Adobe after Effects.1.3.7 eLearning software:  Adobe Captivate. 10 | P a g e
  12. 12. Operational & Financial Strategies of Adobe Alliance University CHAPTER-2 PROJECT OPERATIONAL STRATIGIES2.1 Software Development Lifecycle:  A software development process, also known as a software development life cycle (SDLC), is a structure imposed on the development of a software product.  Similar terms include software life cycle and software process. It is often considered a subset of systems development life cycle.  There are several models for such processes, each describing approaches to a variety of tasks or activities that take place during the process.  Some people consider a lifecycle model a more general term and a software development process a more specific term.  For example, there are many specific software development processes that fit the spiral lifecycle model.  ISO 12207 is an ISO standard for software lifecycle processes. It aims to be the standard that defines all the tasks required for developing and maintaining software. Requirements Analysis Design Implementation System Testing Delivery and Installation 11 | P a g e
  13. 13. Operational & Financial Strategies of Adobe Alliance University2.1.1 Planning:  An important task in creating a software product is extracting the requirements or requirements analysis.  Customers typically have an abstract idea of what they want as an end result, but not what software should do.  Incomplete, ambiguous, or even contradictory requirements are recognized by skilled and experienced software engineers at this point.  Frequently demonstrating live code may help reduce the risk that the requirements are incorrect.  Once the general requirements are gathered from the client, an analysis of the scope of the development should be determined and clearly stated. This is often called a scope document.  Certain functionality may be out of scope of the project as a function of cost or as a result of unclear requirements at the start of development.  If the development is done externally, this document can be considered a legal document so that if there are ever disputes, any ambiguity of what was promised to the client can be clarified.2.1.2 Implementation, testing and documenting:  Implementation is the part of the process where software engineers actually program the code for the project.  Software testing is an integral and important phase of the software development process. This part of the process ensures that defects are recognized as soon as possible.  Documenting the internal design of software for the purpose of future maintenance and enhancement is done throughout development. This may also include the writing of an API, be it external or internal. It is very important to document everything in the project.2.1.3 Deployment and maintenance  Deployment starts after the code is appropriately tested, is approved for release and sold or otherwise distributed into a production environment.  Software Training and Support is important and a lot of developers fail to realize that. It would not matter how much time and planning a development team puts into creating software if nobody in an organization ends up using it. 12 | P a g e
  14. 14. Operational & Financial Strategies of Adobe Alliance University People are often resistant to change and avoid venturing into an unfamiliar area, so as a part of the deployment phase, it is very important to have training classes for new clients of your software. Maintaining and enhancing software to cope with newly discovered. Problems or new requirements can take far more time than the initial development of the software. It may be necessary to add code that does not fit the original design to correct an unforeseen problem or it may be that a customer is requesting more functionality and code can be added to accommodate their requests. If the labour cost of the maintenance phase exceeds 25% of the prior-phases labour cost, then it is likely that the overall quality of at least one prior phase is poor. In that case, management should consider the option of rebuilding the system (or portions) before maintenance cost is out of control. Requirements Analysis D E L A Y Vaporware 13 | P a g e
  15. 15. Operational & Financial Strategies of Adobe Alliance University2.2 Software Project Management Plan:2.2.1 Software Project:  All technical and managerial activities required to deliver the deliverables to the client.  A software project has a specific duration, consumes resources and produces work products.  Management categories to complete a software project:  Tasks, Activities, Functions.  The controlling document for a software project.  Specifies the technical and managerial approaches to develop the software product.  Companion document to requirements analysis document: Changes in either may imply changes in the other document.  SPMP may be part of project agreement. 14 | P a g e
  16. 16. Operational & Financial Strategies of Adobe Alliance University2.2.2 Project Management Activities: Initiation Problem definition statement Initial top- Initial level Design Planning milestones Team Communication infrastructure formation setup Project kickoff 15 | P a g e
  17. 17. Operational & Financial Strategies of Adobe Alliance University Project Steady Status Risk monitoring management Project Project replanning agreement Termina Installation Client Postmortem2.2.3 SPMP Part 1: Introduction1.1 Project Overview:  Executive summary: description of project, product summary1.2 Project Deliverables:  All items to be delivered, including delivery dates and location 16 | P a g e
  18. 18. Operational & Financial Strategies of Adobe Alliance University1.3 Evolution of the SPMP:  Plans for anticipated and unanticipated change1.4 Reference Materials:  Complete list of materials referenced in SPMP1.5 Definitions and Acronyms2.2.4 SPMP Part 2: Project Organization:2.1 Process Model:  Relationships among project elements2.2 Organizational Structure:  Internal management, organization chart2.3 Organizational Interfaces:  Relations with other entities2.4 Project Responsibilities:  Major functions and activities; nature of each; who‘s in charge.2.4 Software Development Models:  Several models exist to streamline the development process.  Each one has its pros and cons, and its up to the development team to adopt the most appropriate one for the project.  Sometimes a combination of the models may be more suitable. 17 | P a g e
  19. 19. Operational & Financial Strategies of Adobe Alliance University2.4.1 Waterfall model:  The waterfall model shows a process, where developers are to follow these phases in order:  Requirements specification (Requirements analysis)  Software Design  Integration  Testing (or Validation)  Deployment (or Installation)  Maintenance  In a strict Waterfall model, after each phase is finished, it proceeds to the next one.  Reviews may occur before moving to the next phase which allows for the possibility of changes (which may involve a formal change control process).  Reviews may also be employed to ensure that the phase is indeed complete; the phase completion criteria are often referred to as a "gate" that the project must pass through to move to the next phase.  Waterfall discourages revisiting and revising any prior phase once its complete. This "inflexibility" in a pure Waterfall model has been a source of criticism by supporters of other more "flexible" models.2.4.2 Spiral model:  The key characteristic of a Spiral model is risk management at regular stages in the development cycle.  In 1988, Barry Boehm published a formal software system development "spiral model", which combines some key aspect of the waterfall model and rapid prototyping methodologies, but provided emphasis in a key area many felt had been neglected by other methodologies: deliberate iterative risk analysis, particularly suited to large-scale complex systems.  The Spiral is visualized as a process passing through some number of iterations, with the four quadrant diagram representative of the following activities: 18 | P a g e
  20. 20. Operational & Financial Strategies of Adobe Alliance University  formulate plans to: identify software targets, selected to implement the program, clarify the project development restrictions;  Risk analysis: an analytical assessment of selected programs, to consider how to identify and eliminate risk;  the implementation of the project: the implementation of software development and verification;  Risk-driven spiral model, emphasizing the conditions of options and constraints in order to support software reuse, software quality can help as a special goal of integration into the product development. However, the spiral model has some restrictive conditions, as follows:  The spiral model emphasizes risk analysis, and thus requires customers to accept this analysis and act on it. This requires both trust in the developer as well as the willingness to spend more to fix the issues, which is the reason why this model is often used for large-scale internal software development.  If the implementation of risk analysis will greatly affect the profits of the project, the spiral model should not be used.  Software developers have to actively look for possible risks, and analyze it accurately for the spiral model to work.The first stage is to formulate a plan to achieve the objectives with theseconstraints, and then strive to find and remove all potential risks throughcareful analysis and, if necessary, by constructing a prototype. If some riskscan not be ruled out, the customer has to decide whether to terminate theproject or to ignore the risks and continue anyway. Finally, the results areevaluated and the design of the next phase begins.2.5 Security in IT System:  Information security means protecting information and information systems from unauthorized access, use, disclosure, disruption, modification, perusal, inspection, recording or destruction. 19 | P a g e
  21. 21. Operational & Financial Strategies of Adobe Alliance University The terms information security, computer security and information assurance are frequently incorrectly used interchangeably. These fields are interrelated often and share the common goals of protecting the confidentiality, integrity and availability of information; however, there are some subtle differences between them. These differences lie primarily in the approach to the subject, the methodologies used, and the areas of concentration. Information security is concerned with the confidentiality, integrity and availability of data regardless of the form the data may take: electronic, print, or other forms. Computer security can focus on ensuring the availability and correct operation of a computer system without concern for the information stored or processed by the computer. Should confidential information about a business customers or finances or new product line fall into the hands of a competitor, such a breach of security could lead to lost business, law suits or even 20 | P a g e
  22. 22. Operational & Financial Strategies of Adobe Alliance University bankruptcy of the business. Protecting confidential information is a business requirement, and in many cases also an ethical and legal requirement.  For the individual, information security has a significant effect on privacy, which is viewed very differently in different cultures.  The field of information security has grown and evolved significantly in recent years. There are many ways of gaining entry into the field as a career. It offers many areas for specialization including: securing network(s) and allied infrastructure, securing applications and databases, security testing, information systems auditing, business continuity planning and digital forensics science, etc.2.6 ERP System in Projects:  ERP‘s best hope for demonstrating value is as a sort of battering RAM for improving the way your company takes a customer order and processes it into an invoice and revenue—otherwise known as the order fulfillment process. That is why ERP is often referred to as back-office software.  It doesn‘t handle the up-front selling process (although most ERP vendors have developed CRM software or acquired pure-play CRM providers that can do this); rather, ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling it.  When a customer service representative enters a customer order into an ERP system, he has all the information necessary to complete the order (the customer‘s credit rating and order history from the finance module, the company‘s inventory levels from the warehouse module and the shipping dock‘s trucking schedule from the logistics module, for example). 21 | P a g e
  23. 23. Operational & Financial Strategies of Adobe Alliance University2.7 SOFTWARE REUSABILITY:There are at least 15 different software artifacts that lend themselves toreusability. Unfortunately, much of the literature on software reuse hasconcentrated only on reusing source code. Following are the 15 artifactsthat are potentially reusable for software projects: 1. Reusable architecture 2. Reusable requirements 3. Reusable source code (zero defects) 4. Reusable designs 5. Reusable HELP information 6. Reusable data 7. Reusable training materials 8. Reusable cost estimates 9. Reusable screens 10.Reusable project plans 11.Reusable test plans 12.Reusable test cases 13.Reusable test scripts 14.Reusable user documents 15.Reusable human interfacesSoftware reuse is a key factor in reducing costs and schedules andimproving quality. If the quality levels of the reusable materials are good,then reusability has one of the highest returns on investment of any knownsoftware technology. The average volume of high-quality reusable materialin typical applications today is less than 25%. What is needed is a step-by-step plan that will raise the volume of high-quality reusable material up tomore than 85% on average, and more than 95% for common applicationstypes. 22 | P a g e
  24. 24. Operational & Financial Strategies of Adobe Alliance University2.8 Project Control cycle2.9 Project MonitoringKey aspects of project monitoring is Visibility of project status. The projectmanagers need to have visibility into the true status of the project. The bestapproach for this is the quantitative measurement of key parameters. Theusage of metrics helps to provide this visibility Interpretation of data andtaking corrective actions This data collection to provide feedback about thecurrent state and any required corrective actions constitute the basicfoundation for project management.Based on the feedback received and analyzed, corrective action needs to betaken. The plan for taking corrective action includes description of theaction, person to whom action has been assigned, planned date for initiatingthe action, target closure date, and actual date of closure of the action item. 23 | P a g e
  25. 25. Operational & Financial Strategies of Adobe Alliance University2.10 Project Metrics, Measurement & AnalysisIn a project, measurements are performed to control the project effectively.Metrics could be used to quantitatively characterize the processes in theproject (Process metrics) or the outcome of the project (productmetrics).Metrics in a project could be related to Quality, Reliability,Productivity, Functionality, etc.The utilization of metrics requires that measurements need to be made forobtaining data. The metrics to be used and the measurements to considerdepend on the project and the organizational goals.Examples of metrics include:  Size of the project  Schedule variance (schedule deviation)  Effort variance (efforts deviation)2.10.1 BenefitsA collaborative project management system facilitated managers to viewmetrics  It also enabled creation of schedules with a view of resources allocated across projects and across the whole organization  It enabled team members, team leaders, and project managers to quickly complete reporting on Earned Value metrics much faster. The automation of earned value analysis helped team leaders and project managers since they needed to spend less time in analyzing the status and performance of the project. This enabled them to have more time available for billable hours in the project.  The project managers were able to know the project status metrics in a real time manner.  Apart from improved productivity, automation in metrics reporting also helped project managers to quickly take decisions leading to reduced project budget and cost overruns. This in turn translated to increased profitability of the projects 24 | P a g e
  26. 26. Operational & Financial Strategies of Adobe Alliance University Let us consider two important aspects in project monitoring namely Effort variance and Schedule variance. 2.11 Project Review2.11.1 Group reviewA formal group review is one of the best methods for identifying defects and isalso called as inspection.2.11.2 One person reviewThese are formal reviews, but the effort and cost involved in review is less since alarge review team is not involved. 25 | P a g e
  27. 27. Operational & Financial Strategies of Adobe Alliance University2.11.3 Peer reviewPeer review for a project is done by peer professionals (e.g., senior projectmanagers) to give feedback and advice to the project. They could provide advicebased on their experience in other projects2.11.4 Management reviewThese types of reviews involve the senior management. These reviews do notinvolve review of specific work-products. The objective of these reviews is toreview the status of the project and to see if any help is required to be provided bythe management. These reviews could happen at various levels such as project,program, unit/department, and organizational levels.2.11.5 External reviewExternal reviews involve conduct of review by an external organization. Auditsare one type of reviews. In the case of audits, external auditors review the projectto assess the conformance to the standards that are expected to be followed. Theauditor could have a look at the planning documents, work products, processesfollowed, etc. and identify non-conformances to the standards2.12 Program & Portfolio Management 26 | P a g e
  28. 28. Operational & Financial Strategies of Adobe Alliance University2.12.1 Program Management  A Program is a group of related projects managed in a coordinated manner.  A Program manager leads a team of Project managers / project leaders who are responsible for the individual projects within the program.  As an example, if there are 5 small projects getting executed within the same domain and for a specific customer, it could be grouped as a Program.  The grouping of similar projects as a program could help in considering the customer requirements from an overall perspective, greater customer focus, improved sharing of resources among projects, etc.2.12.2 Portfolio Management  Let us consider an organization working on several projects and there are an additional 20 projects in the pipeline which need to be taken up.  If the funding that is available will support only a few additional projects, how does the organization decide which of the 20 projects are to be executed subsequently?.  This is the concept of portfolio management. In Portfolio management, the focus is at a more aggregate level.  Portfolio management of projects helps in determining the right mix of projects and the right level of investment to be made in each of them for the achievement of organizational objectives. Portfolio decisions such as whether it is required to fund a new project or continue to finance an existing one are based on information provided at the project level. 27 | P a g e
  29. 29. Operational & Financial Strategies of Adobe Alliance University2.13 PMO  PMO (Project Management Office)  Provides support for managing a multi-project environment  Focus areas of PMO ▪ Coordination and Communication on the entire set of programs and projects in the organization ▪ Function as a center of knowledge and provide training, leadership, mentoring, best practices, methodologies and standards for project governance, etc. ▪ Provide support to project managers in the execution of the project ▪ Provide monitoring and coordination for on-time delivery of projects and within budget ▪ Facilitate in measuring the returns in comparison with the risk ▪ Facilitate optimized resource allocation ▪ Reporting on schedules, cost, risks, resources, quality, and scope across all the projects ▪ Provide necessary information for executive decision-making ▪ Provide help in prioritizing and balancing project initiativesRoles of PMO2.13.1 Strategic PMO The PMO works towards supporting prioritization of projects, management of project performance, and realization of benefits. A 28 | P a g e
  30. 30. Operational & Financial Strategies of Adobe Alliance University Strategic PMO helps to take strategic decisions on important projects and to help in planning for investments in the overall project portfolio.2.13.2 Tactical PMO The PMO provides support to projects in various areas of execution and provides information needed for decision making at the operational level.Responsibility of PMO  Plan, Coordinate, Supervise, and monitor the various projects in an organization  Link the projects of the organization and business strategy  Function as an operational center and provide support to the projects  Serve as an enabler in the delivery of projects  Monitor the outcome of projects and communicate the status to the senior management  Advise and support project managers  Facilitate enhanced communication and coordination across projects2.14 Resource Leveling  Resource leveling  Match resource requirements of the project with the availability of resources  Optimize resource allocation for projects or activities  During the process of estimating resources for performing activities, the type and number of resources required for each activity are identified. 29 | P a g e
  31. 31. Operational & Financial Strategies of Adobe Alliance University The total number of resources required for performing an activity at a specific point of time is called as ‗Resource intensity‘. Resource leveling techniques are used to match the resource requirements of the project with the availability of resources. Resource leveling is an important aspect, especially when there is a requirement to assign resources to multiple activities or multiple projects that need to be executed in parallel This is required to optimize the allocation of resources for projects or activities When there are problems in the availability of resources and hiring of external resources is not feasible within the project budget, the following options could be considered: Allocation of the resources to activities having higher priority and staggering the dates of other activities (this helps to reduce the resource intensity) Utilization of different, underutilized types of resources for some activities (however, in some cases this may not be possible) In the scenario relating to requirement of 20 designers as discussed earlier, let us consider a situation in which only 15 designers are available in a particular week. Assuming that Activity ‗B‘ is most critical, five designers could be allocated to this activity to ensure that there is no impact in its duration and sequencing. The remaining 10 designers who are currently available could be allocated based on the importance of the remaining three activities, resource requirements for succeeding activities, etc. 30 | P a g e
  32. 32. Operational & Financial Strategies of Adobe Alliance University2.5 Resource Smoothing In a project-based structure, proper utilization of resources is required to maintain a balance between the demand for resources and its availability. This could be achieved through resource smoothing. Resource smoothing is a type of resource leveling. The focus is to maintain the most efficient utilization of the pool of types of resources across the project. This is done by smoothing out the peaks (highs) and valleys (lows) in the resource intensity. It helps to make the demand for resource types to be more level across time durations by working within the float of individual activities. Example A project has 9 units of a specific resource available at any point of time. The resources could be utilized such that 4 resources are used in one week, 9 in the other, 3 in the next, and so on for completion of an activity in the project. In this case, there is a series of peaks and lows in the resource deployment. We could consider ―smoothing‖ such that 7 resources are utilized across various weeks for completion of the activity. However, it is required to consider which particular resource(s) should be given a priority in the ―resource smoothing‖ process.2.16 Crashing a project schedule Any activity would require a specific duration (days or weeks or months) for its completion. In other words, this is the normal time required for the activity to be completed. The time required for completing the activity could be reduced but this would increase the cost. This concept of getting an activity completed quickly using alternate ways which would cost more money is called as ‗Crashing‘ 31 | P a g e
  33. 33. Operational & Financial Strategies of Adobe Alliance University2.16.1 Techniques of crashing Increasing number of resources This is a common method deployed for project schedule crashing. It involves adding more resources to the project to achieve reduction in the time taken to perform the individual activities in the project. However, the issues in increasing the number of resources include:  Learning curve for the new resources (which consumes time)  Competency level of the new resources  Existing resources need to spend time to guide the new resources Fast tracking This involves performing tasks in an overlapping manner instead of sequentially executing them as planned initially. Fast tracking could also involve reduction of lag time between tasks, scope reduction to eliminate less important tasks, etc.2.16.2 Key aspects to be considered while crashing a project schedule  Attaining maximum reduction in schedule time at minimum cost  Crashing only the critical activities  Crashing from the least expensive to the most expensive tasks  Crashing an activity only until it reaches maximum reduction in time  Crashing an activity until it causes another path also to become critical  Crashing the schedule until it becomes more expensive than not crashing it (i.e. leaving the schedule as it is) 32 | P a g e
  34. 34. Operational & Financial Strategies of Adobe Alliance University2.16.3 Risks involved in crashing a project schedule  Budget-related risk: Since more resources have been added to the project, the project will be beyond the budget  Coordination-related risk: Increasing the number of resources could result in increase of communication-related challenges  People-related risk: Existing people could get de-motivated since the tasks assigned to them initially are being assigned to the new resources2.17 Project Compressing Compressing a project schedule involves conducting project activities in parallel. Similar to crashing, compression also cannot be applied to all activities of a project. Coordination could become an issue when a project schedule is compressed. However, compression of a project schedule is better than crashing it since the risk involved is less.  As an example, let us consider a scenario from the construction industry.  Let us assume that it takes 20 days for the process of purchasing bricks to be completed. The purchase of bricks could be done while the foundation activity is in progress. This would reduce the waiting time for bricks to be made available. This would help in compressing the overall construction schedule. However, it is not possible to compress the project schedule by planning to lay the roofing when the construction of walls is in progress. 33 | P a g e
  35. 35. Operational & Financial Strategies of Adobe Alliance University2.18 Project Risks Risks could impact the schedule, cost, or the project‘s outcome. Early identification of risks facilitates in handling them better. All identified risks need to be managed adequately .Monitoring closed risks reduces the probability of its recurrence. Risks need to be communicated to stakeholders in a project so that they could also help in managing the risksSteps in Risk Management2.18.1 Risk Identification  To list possible risks in a project2.18.2 Risk Prioritization  Analysis of potential impact of a risk if it actually occurs.  Provides information to help focus on important risks. 34 | P a g e
  36. 36. Operational & Financial Strategies of Adobe Alliance University  Risk exposure is used to prioritize risks ▪ Risk Exposure (RE) = Probability of occurrence of risk x Loss due to risk2.18.3 Risk response planning  Identification of actions (mitigation steps) required for minimizing the consequences of the risks  Incorporation of the mitigation steps into the project schedule  Risk monitoring and tracking  Monitoring and tracking risk perception for the project  Tracking progress of risk mitigation steps2.18.4 Risk Management Approaches2.18.4.1 Risk Avoidance  Not performing an activity to avoid risks  Avoiding all risks, we would also avoid all opportunities for achievement.  Further, if we avoid doing the activity itself considering that it has risks involved, we may not be able to do any activity in our day- to-day life.  As an example, it is not possible to avoid traveling by flight because there are risks such as the possibility of occurrence of a crash, mid-air collisions, bird-hits, etc.  An example for risk avoidance could be avoiding setting up an industry in an earthquake prone area to avoid the risk of damage due to occurrence of an earthquake 35 | P a g e
  37. 37. Operational & Financial Strategies of Adobe Alliance University  In the Metro project discussed, risk avoidance could be adopted by shifting the position of the line for the metro away from underground water pipelines so that damage during digging could be avoided.2.18.4.1 Risk Reduction  Adopting mechanisms or methods to reduce potential loss associated with a particular risk.  Though the risk cannot be totally avoided, it helps to minimize the impact / consequences of the risk.  Example  The availability of fire alarms and fire safety equipment in a building is an example of risk reduction. These cannot prevent or avoid a fire from happening, but could help in reducing the loss if a fire breaks out  The Metro project example  The risk of road traffic being disrupted during construction of the metro could be reduced by planning and setting up an alternate road for vehicle movement.2.18.4.1 Risk Transfer  Transferring the impact / consequence of a risk to another entity Once the risk is transferred, the transferor of the risk need not worry about the consequences of the risk since these will be addressed by the transferee2.18.4.1 Risk Acceptance (Risk retention)  Accepting the risk that has been identified  This is also known as Risk Retention. It involves simply accepting the risk that has been identified. 36 | P a g e
  38. 38. Operational & Financial Strategies of Adobe Alliance University  The risk is accepted without adopting any methods to prevent or minimize the probability of occurrence of the risk or the associated loss if it occurs.  A risk acceptance approach is usually used in any of the following cases:  Risks that do not result in a great extent of loss if they occur  Risks that are very difficult to prevent from occurring  Risks that would be more costly to manage than to accept and allow them to occur2.18.5 Best Practice Risk Management Framework for Risk Management can be benchmarked in terms of: » Policies » Methodologies » Resources2.18.6 Categories of variation » Within-piece variation » One portion of surface is rougher than another portion. » A piece-to-piece variation » Variation among pieces produced at the same time. » Time-to-time variation » Service given early would be different from that given later in the day. 37 | P a g e
  39. 39. Operational & Financial Strategies of Adobe Alliance University2.18.7 Source of variation » Equipment » Tool wear, machine vibration, … » Material » Raw material quality » Environment » Temperature, pressure, humidity » Operator » Operator performs- physical & emotional2.18.8 Control Chart Viewpoint Control charts are powerful aids to understanding the performance of a process over time. Variation due to  Common or chance causes  Assignable causesControl chart may be used to discover ―assignable causes‖ 38 | P a g e
  40. 40. Operational & Financial Strategies of Adobe Alliance University 2.19 Six Sigma Approach to Project Business Definition A break through strategy to significantly improve customer satisfaction and shareholder value by reducing variability in every aspect of business. Technical Definition A statistical term signifying 3.4 defects per million opportunities.• Degree of variation;• Level of performance in terms of defects;• Statistical measurement of process capability;• Benchmark for comparison;• Process improvement methodology;• It is a Goal;• Strategy for change;• A commitment to customers to achieve an acceptable level of performance 39 | P a g e
  41. 41. Operational & Financial Strategies of Adobe Alliance University2.20 Total Quality Management (TQM)Total Quality Management (TQM) is an approach that seeks to improvequality and performance which will meet or exceed customer expectations.This can be achieved by integrating all quality-related functions andprocesses throughout the company. TQM looks at the overall qualitymeasures used by a company including managing quality design anddevelopment, quality control and maintenance, quality improvement, andquality assurance. TQM takes into account all quality measures taken at alllevels and involving all company employees.At its core, Total Quality Management (TQM) is a management approachto long-term success through customer satisfaction.In a TQM effort, all members of an organization participate in improvingprocesses, products, services and the culture in which they work. 40 | P a g e
  42. 42. Operational & Financial Strategies of Adobe Alliance UniversityThe methods for implementing this approach come from the teachings ofsuch quality leaders as Philip B. Crosby, W. Edwards Deming, Armand V.Feigenbaum, Kaoru Ishikawa and Joseph M. Juran.A core concept in implementing TQM is Deming‘s 14 points, a set ofmanagement practices to help companies increase their quality andproductivity: 1. Create constancy of purpose for improving products and services. 2. Adopt the new philosophy. 3. Cease dependence on inspection to achieve quality. 4. End the practice of awarding business on price alone; instead, minimize total cost by working with a single supplier. 5. Improve constantly and forever every process for planning, production and service. 6. Institute training on the job. 7. Adopt and institute leadership. 8. Drive out fear. 9. Break down barriers between staff areas. 10.Eliminate slogans, exhortations and targets for the workforce. 11.Eliminate numerical quotas for the workforce and numerical goals for management. 41 | P a g e
  43. 43. Operational & Financial Strategies of Adobe Alliance University 12.Remove barriers that rob people of pride of workmanship, and eliminate the annual rating or merit system. 13.Institute a vigorous program of education and self-improvement for everyone. 14.Put everybody in the company to work accomplishing the transformation.The term ―Total Quality Management‖ has lost favor in the United Statesin recent years: ―Quality management‖ is commonly substituted. ―TotalQuality Management,‖ however, is still used extensively in Europe.2.20.1 Principles of TQMTQM can be defined as the management of initiatives and procedures thatare aimed at achieving the delivery of quality products and services. Anumber of key principles can be identified in defining TQM, including: Executive Management – Top management should act as the main driver for TQM and create an environment that ensures its success.  training – Employees should receive regular training on the methods and concepts of quality.  Customer Focus – Improvements in quality should improve customer satisfaction.  Decision Making – Quality decisions should be made based on measurements.  Methodology and Tools – Use of appropriate methodology and tools ensures that non-conformances are identified, measured and responded to consistently.  Continuous Improvement – Companies should continuously work towards improving manufacturing and quality procedures. Company Culture – The culture of the company should aim at developing employees ability to work together to improve quality. Employee Involvement – Employees should be encouraged to be pro- active in identifying and addressing quality related problems. 42 | P a g e
  44. 44. Operational & Financial Strategies of Adobe Alliance University2.20.2 The Cost Of TQMMany companies believe that the costs of the introduction of TQM are fargreater than the benefits it will produce. However research across anumber of industries has costs involved in doing nothing, i.e. the directand indirect costs of quality problems, are far greater than the costs ofimplementing TQM.The American quality expert, Phil Crosby, wrote that many companieschose to pay for the poor quality in what he referred to as the ―Price ofNonconformance‖. The costs are identified in the Prevention, Appraisal,Failure (PAF) Model.Prevention costs are associated with the design, implementation andmaintenance of the TQM system. They are planned and incurred beforeactual operation, and can include: Product Requirements – The setting specifications for incoming materials, processes, finished products/services. Quality Planning – Creation of plans for quality, reliability, operational, production and inspections. Quality Assurance – The creation and maintenance of the quality system. Training – The development, preparation and maintenance of processes.Appraisal costs are associated with the vendors and customers evaluationof purchased materials and services to ensure they are within specification.They can include: Verification – Inspection of incoming material against agreed upon specifications. Quality Audits – Check that the quality system is functioning correctly. Vendor Evaluation – Assessment and approval of vendors.Failure costs can be split into those resulting from internal and externalfailure. Internal failure costs occur when results fail to reach quality 43 | P a g e
  45. 45. Operational & Financial Strategies of Adobe Alliance Universitystandards and are detected before they are shipped to the customer. Thesecan include: Waste – Unnecessary work or holding stocks as a result of errors, poor organization or communication. Scrap – Defective product or material that cannot be repaired, used or sold. Rework – Correction of defective material or errors. Failure Analysis – This is required to establish the causes of internal product failure.External failure costs occur when the products or services fail to reachquality standards, but are not detected until after the customer receives theitem. These can include: Repairs – Servicing of returned products or at the customer site. Warranty Claims – Items are replaced or services re-performed under warranty. Complaints – All work and costs associated with dealing with customer‘s complaints. Returns – Transportation, investigation and handling of returned items.2.21 Lean ApproachLean manufacturing, lean enterprise, or lean production, often simply,"Lean," is a production practice that considers the expenditure of resourcesfor any goal other than the creation of value for the end customer to bewasteful, and thus a target for elimination. Working from the perspectiveof the customer who consumes a product or service, "value" is defined asany action or process that a customer would be willing to pay for.Essentially, lean is centered on preserving value with less work. Leanmanufacturing is a management philosophy derived mostly fromthe Toyota Production System (TPS) (hence the term Toyotism is alsoprevalent) and identified as "Lean" only in the 1990s. TPS is renowned forits focus on reduction of the original Toyota seven wastes to improve 44 | P a g e
  46. 46. Operational & Financial Strategies of Adobe Alliance Universityoverall customer value, but there are varying perspectives on how this isbest achieved. The steady growth of Toyota, from a small company to theworlds largest automaker, has focused attention on how it has achievedthis.Lean manufacturing is a variation on the theme of efficiency based onoptimizing flow; it is a present-day instance of the recurring theme inhuman history toward increasing efficiency, decreasing waste, and usingempirical methods to decide what matters, rather than uncriticallyaccepting pre-existing ideas. As such, it is a chapter in the larger narrativethat also includes such ideas as the folk wisdom of thrift, time and motionstudy, Taylorism, the Efficiency Movement, and Fordism. Leanmanufacturing is often seen as a more refined version of earlier efficiencyefforts, building upon the work of earlier leaders such as Taylor or Ford,and learning from their mistakes. 45 | P a g e
  47. 47. Operational & Financial Strategies of Adobe Alliance UniversityLean for Production and ServicesA popular misconception is that lean is suited only for manufacturing. Nottrue. Lean applies in every business and every process. It is not a tactic or acost reduction program, but a way of thinking and acting for an entireorganization.Businesses in all industries and services, including healthcare andgovernments, are using lean principles as the way they think and do. Manyorganizations choose not to use the word lean, but to label what they do astheir own system, such as the Toyota Production System or the DanaherBusiness System. Why? To drive home the point that lean is not a programor short term cost reduction program, but the way the company operates.The word transformation or lean transformation is often used tocharacterize a company moving from an old way of thinking to leanthinking. It requires a complete transformation on how a companyconducts business. This takes a long-term perspective and perseverance.The term "lean" was coined to describe Toyotas business during the late1980s by a research team headed by Jim Womack, Ph.D., at MITsInternational Motor Vehicle Program.2.22 RFP A request for proposal (RFP) is an early stage ina procurement process, issuing an invitation for suppliers, often througha bidding process, to submit a proposal on a specific commodity or service.The RFP process brings structure to the procurement decision and allowsthe risks and benefits to be identified clearly upfront. A request forproposal (RFP) is a document that an organization posts to elicit bids frompotential vendors for a product or service. The RFP may dictate to varying degrees the exact structure andformat of the suppliers response. Effective RFPs typically reflect thestrategy and short/long-term business objectives, providing detailedinsight upon which suppliers will be able to offer a matching perspective. 46 | P a g e
  48. 48. Operational & Financial Strategies of Adobe Alliance University For example, a new business or a business moving from a paper-based system to a computer-based system might request proposals for allthe hardware, software, and user training required to establish andintegrate the new system into the organization. Another business mightdraft an RFP for a custom-written computer application they wantedto outsource. The quality of an RFP is very important to successful projectmanagement because it clearly delineates the deliverable RFQ) issometimes posted when the requirements are very clear-cut - for example,in the purchase of hardware.2.22.1 Components of an RFP 1) Background information about the company, business problem, and the computing environment. It may also include results of any needs assessment performed. 2) Schedule of important dates such as when the supplier‘s RFP response is due, when the decision is expected, when the actual purchase is expected, and when implementation is expected. 3) Contact names and sources for answering questions for the RFP. 4) Instructions for formatting the response to the RFP. Some RFPs include an explicit description of what the supplier should and should not include in their response. 5) Specific requirements being sought. 6) Technical requirements for the system, such as specifications for an operating system or a network environment. 7) List of documents required as attachments, such as sample reports and standard contract language. 8) Additional requirements for the selection process, such as supplier presentations, supplier demonstrations, or on-site installation and testing. 47 | P a g e
  49. 49. Operational & Financial Strategies of Adobe Alliance University2.22.3 Benefits of RFP  Informs suppliers that your company is looking to procure and encourages them to make their best effort.  Requires the company to specify what it proposes to purchase. If the requirements analysis has been prepared properly, it can be incorporated quite easily into the Request document.  Alerts suppliers that the selection process is competitive.  Allows for wide distribution and response.  Ensures that suppliers respond factually to the identified requirements.  By following a structured evaluation and selection procedure an organization can demonstrate impartiality - a crucial factor in public sector procurements2.23 Project charter In project management, a project charter or project definition is astatement of the scope, objectives and participants in a project. It provides apreliminary delineation of roles and responsibilities, outlines the projectobjectives, identifies the main stakeholders, and defines the authority of theproject manager. It serves as a reference of authority for the future of theproject. The terms of reference are usually a part of the project charter. The project charter is usually a short document that refers to moredetailed documents such as a new offering request or a request forproposal. In Initiative for Policy Dialogue (IPD), this document is known asthe project charter. In customer relationship management (CRM), it isknown as the project definition report. Both IPD and CRM require thisdocument as part of the project management process. 48 | P a g e
  50. 50. Operational & Financial Strategies of Adobe Alliance University The project charter establishes the authority assigned to the projectmanager, especially in a matrix management environment. It is consideredindustry best practice. The purpose of the project charter is to document:  Reasons for undertaking the project  Objectives and constraints of the project  Directions concerning the solution  Identities of the main stakeholdersThe main uses of the project charter are :  To initiate the project  To authorize the project - using a comparable format, projects can be ranked and authorized by Return on investment  Serves as the primary sales document for the project – ranking stakeholders have a 1-2 page summary to distribute, present, and keep handy for fending off other project or operations runs at project resources.  As a focus point throughout the project - for example: project as people walk in to team meetings and use in change control meetings to ensure tight scope management.2.24 Process Model The term process model is used in various contexts. For example,in business process modeling the enterprise process model is often referredto as the business process model. Process models are core concepts in thediscipline of process engineering. Process models are processes of the same nature that are classifiedtogether into a model. Thus, a process model is a description of a process atthe type level. Since the process model is at the type level, a process is aninstantiation of it. The same process model is used repeatedly for thedevelopment of many applications and thus, has many instantiations. Onepossible use of a process model is to prescribe how thingsmust/should/could be done in contrast to the process itself which is really 49 | P a g e
  51. 51. Operational & Financial Strategies of Adobe Alliance Universitywhat happens. A process model is roughly an anticipation of what theprocess will look like. What the process shall be will be determined duringactual system development. The goals of a process model are to be:Descriptive  Track what actually happens during a process.  Take the point of view of an external observer who looks at the way a process has been performed and determines the improvements that must be made to make it perform more effectively or efficiently.Prescriptive  Define the desired processes and how they should/could/might be performed.  Establish rules, guidelines, and behavior patterns which, if followed, would lead to the desired process performance. They can range from strict enforcement to flexible guidance.Explanatory  Provide explanations about the rationale of processes.  Explore and evaluate the several possible courses of action based on rational arguments.  Establish an explicit link between processes and the requirements that the model needs to fulfill.  Pre-defines points at which data can be extracted for reporting purposes. 50 | P a g e
  52. 52. Operational & Financial Strategies of Adobe Alliance University Chapter-3 Operational Modeling3.1 Project Confidence Level • 34.13% of data lie between  and 1 above the mean (). • 34.13% between  and 1 below the mean. • Approximately two-thirds (68.28 %) within 1 of the mean. • 13.59% of the data lie between one and two standard deviations • Finally, almost all of the data (99.74%) are within 3 of the mean. • Based on our knowledge of the normal curve, a control chart exhibits a state of control when: 51 | P a g e
  53. 53. Operational & Financial Strategies of Adobe Alliance University ♥ Two thirds of all points are near the center value. ♥ The points appear to float back and forth across the centerline. ♥ The points are balanced on both sides of the centerline. ♥ No points beyond the control limits. ♥ No patterns or trends.3.2 Earned value Analysis3.2.1 Effort varianceThe project is likely to be completed within the budget or The project islikely to cost 25% more than what was projected earlier‖, etc.Effort variance (in percentage) is computed using the following formula: = (Actual effort –Planned effort) /Planned effort x 100Let us consider a project that is estimated to require an effort of 1200 person-days(e.g. 4 persons working for 300 days, or 6 people working for 200 days, etc.).If it is now re-estimated based on current scenario in the project that it wouldrequired 1500 person-days of effort, let us compute the effort variance: Effort variance = (1500 - 1200)/1200 x 100 = 25% In other words, this project has consumed require 25% more effort than estimated3.2.2 Schedule varianceSince projects are driven by schedules, deadlines, and milestones it is oneof the key metrics. Usually, calendar time is used to measure the deviation(variance) in schedule. 52 | P a g e
  54. 54. Operational & Financial Strategies of Adobe Alliance UniversitySchedule variance (in percentage) for an activity or for a project iscomputed using the following formula:Schedule variance = (Actual duration –Planned duration) Planned duration /x 100Let us consider that a project has been initially expected to be completed in 300days. If it is now re-estimated that it would take 400 days to complete, the schedulevariance is computed as follows: Schedule variance = (400 –300) / 300 x 100 = 33.33% In other words, the project would take 33.33% more time than initially estimated3.3 Earned Value Management System (EVM)A collection of management practices. A structured method forestablishing a Performance Measurement BaselineA structured method to measure and analyze performanceThe Earned Value Analysis (EVA) technique is widely used in assessing theperformance of a project.EVAConsiders three key aspects, namely  Planned Value (How much should we have done at point X?)  Actual Cost (Amount actually spent till date)  Earned Value (How much has actually been accomplished as on date; i.e. how much value has been realized)Terminology Description Formula 53 | P a g e
  55. 55. Operational & Financial Strategies of Adobe Alliance University3.3.1 Planned Value (PV)IndicateswhattheprojectshouldbeworthatthispointoftimeintheSchedule.ItisalsocalledasBCWS(BudgetedCostofWorkScheduled).3.3.2 Actual Cost (AC)It is the actual amount of money spent so far. It is also referred as ACWP(Actual Cost of Work Performed).3.3.3 Earned Value (EV)It is the actual work completed till date and the authorized budget for it. Itis also known as BCWP (Budgeted Cost of Work Performed).3.3.4 Cost Variance (CV)It is the difference between the Earned value and Actual cost. A negativevalue indicates that there is a cost overrun in the project CV = EV –AC3.3.5 Schedule Variance (SV)It is the difference between Earned Value and the Planned Value. Anegative value indicates that there is Schedule overrun in the project SV = EV –PV3.3.6 Cost Performance Index (CPI)`Cost Performance Index (CPI) is the ratio of Earned Value to the Actualcost. If CPI is less than 1, it indicates that the project is beyond the budget.Similarly, if CPI is greater than 1, it denotes that the project is within thebudget CPI = EV / AC3.3.7 Estimate at Completion (EAC)This indicates the estimated total cost (forecast) of the project atcompletion. It is a ratio of Budget at Completion to the Cost PerformanceIndex 54 | P a g e
  56. 56. Operational & Financial Strategies of Adobe Alliance University EAC = BAC / CPI3.3.8 Estimate to Complete (ETC)This is the difference between the Estimate at Completion and the ActualCost ETC = EAC –AC3.3.9 Schedule Performance Index (SPI)Schedule Performance Index (CPI) is the ratio of Earned Value to thePlanned Value. If SPI is less than 1, it indicates that the project is beyondschedule. Similarly, if SPI is greater than 1, it denotes that the project iswithin the schedule SPI = EV / PV3.3.10 Variance at Completion (VAC)Variance at Completion is the difference between Budget at Completionand the Estimate at Completion. A negative VAC indicates that it is not afavorable scenario VAC = BAC –EAC3.4 Control charts for variables X-bar chart • In this chart the sample means are plotted in order to control the mean value of a variable (e.g., size of piston rings, strength of materials, etc.). R chart • In this chart, the sample ranges are plotted in order to control the variability of a variable. 55 | P a g e
  57. 57. Operational & Financial Strategies of Adobe Alliance University S chart • In this chart, the sample standard deviations are plotted in order to control the variability of a variable. S2 chart • In this chart, the sample variances are plotted in order to control the variability of a variable. Centerline • shows where the process average is centered or the central tendency of the data Upper control limit (UCL) and Lower control limit (LCL) • describes the process spreadThe Control Chart Method3.4.1 X bar Control Chart: UCL = XDmean + A2 x Rmean LCL = XDmean - A2 x Rmean CL = XDmean 5.10 UCL 5.08 5.06 5.04 X bar 5.02 5.00 CL 4.98 4.96 LCL 4.94 0 1 2 3 4 5 6 7 8 9 10 11 Subgroup 56 | P a g e
  58. 58. Operational & Financial Strategies of Adobe Alliance University3.4.2 R Control Chart:UCL = D4 x RmeanLCL = D3 x RmeanCL = Rmean 0.25 UCL 0.20Range 0.15 CL 0.10 0.05 LCL 0.00 0 1 2 3 4 5 6 7 8 9 10 11 Subgroup3.4.3 Run Chart 6.70 6.65 6.60 Mean, X-bar 6.55 6.50 6.45 6.40 6.35 6.30 0 5 10 15 20 25 Subgroup number 57 | P a g e
  59. 59. Operational & Financial Strategies of Adobe Alliance University3.4.4 Capability Study:PCR = (USL - LSL)/(6s); where s = Rmean /d2 UCL  X  3 LCL  X  3   standard deviation 58 | P a g e
  60. 60. Operational & Financial Strategies of Adobe Alliance University3.4.5 Control Limit ImprovementIn certain cases, control limits are revised because: 1. out-of-control points were included in the calculation of the control limits. 2. the process is in-control but the within subgroup variation significantly improves.3.5 Customer Lifetime Value ( CLV )In marketing, customer lifetime value (CLV), lifetime customer value (LCV),or lifetime value (LTV) is the net present value of the cash flows attributed tothe relationship with a customer CLV = ∑ ] power kCLV: Customer Lifetime Value 59 | P a g e
  61. 61. Operational & Financial Strategies of Adobe Alliance UniversityPC : Profit Contributiond : Discount Raten : Number of yearsk : Time unit3.6 Sensitivity analysis (SA)Sensitivity analysis (SA) is the study of how the variation (uncertainty) in theoutput of a mathematical model can be apportioned, qualitatively orquantitatively, to different sources of variation in the input of the model I(X) O ( X, Y) I(Y)If f ( x ) is altered, than to what degree O ( X,Y ) would change.3.7 Gantt ChartA Gantt chart is a type of bar chart that illustrates a project schedule. Ganttcharts illustrate the start and finish dates of the terminal elements andsummary elements of a project. Terminal elements and summary elementscomprise the work breakdown structure of the project. Some Gantt chartsalso show the dependency (i.e., precedence network) relationships betweenactivities. 60 | P a g e
  62. 62. Operational & Financial Strategies of Adobe Alliance University A Gantt chart is a graphical representation of the duration of tasksagainst the progression of time. A Gantt chart is a useful tool for planningand scheduling projects. A Gantt chart is helpful when monitoring a projects progress. AGantt chart is a type of bar chart that illustrates a project schedule. Ganttcharts illustrate the start and finish dates of the terminal elements andsummary elements of a project. Terminal elements and summary elements comprise the workbreakdown structure of the project. Some Gantt charts also show thedependency relationships between activities.Gantt charts only represent part of the triple constraints (cost, time andscope) of projects, because they focus primarily on schedule management.Moreover, Gantt charts do not represent the size of a project or the relativesize of work elements, therefore the magnitude of a behind-schedulecondition is easily miscommunicated. If two projects are the same numberof days behind schedule, the larger project has a larger impact on resourceutilization, yet the Gantt does not represent this difference.Example In the following example there are seven tasks, labeled A through G.Some tasks can be done concurrently (A and B) while others cannot bedone until their predecessor task is complete (C cannot begin until A iscomplete). Additionally, each task has three time estimates: the optimistictime estimate (O), the most likely or normal time estimate (M), and thepessimistic time estimate (P). The expected time (TE) is computed using theformula (O + 4M + P) ÷ 6. 61 | P a g e
  63. 63. Operational & Financial Strategies of Adobe Alliance University Time estimatesActivity Predecessor Expected time Opt. (O) Normal (M) Pess. (P)A — 2 4 6 4.00B — 3 5 9 5.33C A 4 5 7 5.17D A 4 6 10 6.33E B, C 4 5 7 5.17F D 3 4 8 4.50G E 3 5 8 5.17Once this step is complete, one can draw a Gantt chart or a networkdiagram. 62 | P a g e
  64. 64. Operational & Financial Strategies of Adobe Alliance UniversityAdvantages of using Gantt charts  It provides a clear view of the sequence of tasks  The progress of a project is easily visible since we know where we are and where we should be since a specific time duration is allocated for each task  It enables us to clearly understand dependencies existing between tasks  It helps us during the planning and execution of a project  It facilitates monitoring the project and ensuring that it is on track3.8 PERT A PERT chart is a graphic representation of a project‘s schedule,showing the sequence of tasks, which tasks can be performedsimultaneously, and the critical path of tasks that must be completed ontime in order for the project to meet its completion deadline. The chart canbe constructed with a variety of attributes, such as earliest and latest startdates for each task, earliest and latest finish dates for each task, and slacktime between tasks. PERT is a method to analyze the involved tasks in completing a givenproject, especially the time needed to complete each task, and identifyingthe minimum time needed to complete the total project. PERT was developed primarily to simplify the planning andscheduling of large and complex projects. It was developed for the U.S.Navy Special Projects Office in 1957 to support the U.S. Navys Polarisnuclear submarine project. It was able to incorporate uncertainty bymaking it possible to schedule a project while not knowing precisely thedetails and durations of all the activities. 63 | P a g e

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