Adaptive management as part of project decision and risk analysis; active and passive project management; agile project management and adaptive management; role of quantitative methods in adaptive project management.

1. Adaptive Management
Intaver Institute Inc.
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2. Power of Adaptation
Will Polar Bears Be Extinct Because of
Global Warming?
Hopefully not, as
they are capable of
adapting to
changing conditions

3. Adaptive Management
Adaptive management is a structured and systematic
process for continually improving decisions,
management policies, and practices by learning from the
outcomes of previous decisions.
Proposed by ecologists
C.S. Holling and Carl J.
Walters as a framework
for managing ecological
problems
Adaptive management of fish
stocks

4. Agile Project Management
We are uncovering better ways of developing software
by doing it and helping others do it. Through this work we
have come to value:
Individuals and interactions over processes and tools
Working software over comprehensive documentation
Customer collaboration over contract negotiation
Responding to change over following a plan
From the Agile Manifesto:

5. Main Principles of Adaptive Management
• Iterative decision-
making: make
choices based on
learning from the
outcomes of previous
decisions
• Strategic flexibility:
avoid irreversible
decisions
• Continuous
quantitative
analysis: multi-model
analysis and
hypothesis testing
• Measurement of
actual performance
Organizational Principles Quantitative Methods

6. PMBOK® Guide About Adaptive Management
The PMBOK® Guide (Project Management Institute,
2004) does not explicitly use the term adaptive
management.
However, you will find important information related to
adaptive management in two process groups: project
execution and project monitoring and controlling.
• Monitor and control project work
• Integrated change control
• Quality Control
• Risk Monitoring and Control
The project monitoring and controlling process group includes the
following project management processes:

7. Most Living Organisms Are Able to Adapt
Except one
creature
This creature is
the project
manager
Why? - Human psychology

8. Tendency to Be Consistent
People tend to resist any
inconsistencies for
themselves and others
The ability to change
direction based on external
input is an important skill for
project managers.
A police interrogation
technique is based on
an attempt to find
inconsistency in the
statements.

9. Sunk Cost Effect
X-33’s composite liquid hydrogen
fuel tank failed during testing in
November 1999.
Lockheed Martin proposed to
complete the development of the
X-33 by replacing its two
composite liquid hydrogen tanks
with aluminum tanks. But NASA
concluded that the benefits of
testing the X-33 in flight did not
justify the cost.
X-33 investment: $912 million
NASA overcame the sunk cost
effect: a cost incurred in the past
that affects present or future
decisions. Sunk costs should
be ignored.
Good example
Bad example
Concord project

10. “Guilt of Indecisiveness”
Organizations expect managers to
make decisions, even if managers do
not have enough reliable information
required to make these decisions.
Decisiveness is a clear plan that:
outlines when, where, and how to
collect missing information, and
when and how to make decisions.

11. Active vs. Passive Adaptive Management
Project
Strategy
Project
E xecution
Project
Monitoring and
Control
Project
E valuation and
Review
Project
Planning and
Scheduling
Reevaluation if Strategy Failed
Adaptive Learning
Iteration
Planning and
Scheduling
Iteration
Strategy E xecution
Iteration
Review
E valuation and
Iteration
Monitoring and
Control
Iteration
Strategy
Iteration Hypothesis
Generation
Modeling
Modeling
Modeling
E xecution
E xecution
Iteration
Monitoring and
Control
Iteration
E valuation and
Review
Adaptive Learning
Hypothesis testing
Traditional Approach
Passive Adaptive Management
Active Adaptive Management
PMBOK@ Guide
Agile Approach

12. Should she kill her cow?
1
2
3
$2/lb
$3/lb
$5/lb
Or how people make irreversible decisions
Three
irreversible
decisions

13. Avoiding Irreversible Decisions
• Rule # 1: Always consider alternatives
• Rule #2: Try to postpone the most important
decisions for as long as possible, so as to
be able to collect new information
• Rule #3: Try to minimize the cost of
decision reversals

14. Continuous Quantitative Analysis
• Use multiple models (project schedules) to
plan and analyze the project
• Always perform project performance
measurement; use reality checks at each
project milestone
• Perform quantitative risk analysis to
generate actual forecasts at each project
milestone

15. Role of Project Metrics
Hypothesis testing
Adaptive Learning
Review
Evaluation and
Iteration
Control
Monitoring and
Iteration
Execution
Execution
Modeling
Modeling
Modeling
Generation
HypothesisIteration
Strategy
Project Metrics are
used as part of active
learning and
hypothesis testing

16. Quantitative Analysis: Practical Example
Project schedule
What will happen with this
schedule if certain risks
occur?

17. Risk Breakdown Structure
Identify risks with
probabilities and
impacts

18. Track Actual Project Performance
Some tasks are
100% complete
Other tasks are
partially
complete or
incomplete
What will happen if the project schedule is based on
information about actual performance?

19. Adjust Your Forecast Based on Actual Data
Original (baseline) project
duration
Project is partially
done (actual data)
Forecast: Low,
Most likely, and
High estimates

20. Analyze and Forecast Costs With Risks and
Uncertainties
Cost forecast
(with risks)
Original cost estimate
Actual cash
flow
Monte Carlo cost risk analysis provides insight into validity of current cost estimates

21. Quantitative Analysis of Iterative
Development Process
Risk
20%
Risk
20%
Risk
20%
Risk
60%
Scenario 1
Scenario 2
Monte Carlo risk analysis can be performed in Agile projects

22. Why You Should Mitigate Risk
As Soon As Possible
When a risk occurs can drastically affect your project outcomes

23. Is Your Company Ready for Adaptive
Management?
The Role of the Business Environment
A small test will help determine the
“adaptive management maturity” in
your organization.

24. Question 1
• Dismiss the idea on the spot – 0 pts
• Promise, but never actually perform a review – 1 pts
• Conduct a detailed and serious review immediately – 4 pts
A young engineer comes to the senior manager with a
proposal to save $10 million on a $50 million project.
According to his plan, the project will be completed on
time, but 20% of the work will need to be redone.
How would the manager respond?

25. Question 2
• The failure occurred because of weather, contractors, bad
materials, Lord Voldemort, aliens, etc. – 0 pts
• Due to unpredictable and unexpected circumstances our
team had some issues - 1 pts
• We screwed up badly, but we know how to fix it - 4 pts
A project manager and his team fail badly on a project.
The project manager must explain what happened to
senior management. Senior management does not
understand the scope of the project. How would the
project manager explain the situation?

26. Question 3
When did your organization or team last have a
meaningful project review or evaluation?
• During the last ice age or earlier – 0 pts
• When something exploded, someone killed, etc. - 1 pts
• When we completed our last project - 4 pts

27. Question 4
Do you use an iterative project development process in
your organization?
• What is an iterative project development process? – 0 pts
• For some projects, if necessary - 1 pts
• This is how we manage complex projects - 4 pts

28. Adaptive Management “Maturity
Assessment”
• 0 – 8 – Your projects will benefit from adaptive
management practices as soon as they are
established in your organization
• 8 – 12 – Your organizational culture supports
adaptive management, but there is opportunity for
improvement
• 12 – 16 – You probably don’t need to be at this
presentation: your organization already has good
adaptive management processes.

29. Recommendations
1. Whenever possible, do not define a detailed project plan
upfront, instead use an iterative project management
approach.
2. Always identify multiple project alternatives or
hypotheses; model these alternatives; and if it is deemed
beneficial, start implementing a few alternatives at the
same time.
3. Use quantitative risk analysis at each phase and
iteration of the project.

30. Recommendations
4. Integrate original assumptions and new learnings
when planning next project iterations.
5. Try to minimize the cost of decision reversals; minimize
risk by keeping the option to change project direction
available.
6. Ensure that adaptive management is implemented
within a creative business environment, which is
characterized by a collaborative structure for stakeholder
participation and learning.

31. Additional Resources
31
Project Think:
Why Good
Managers Make
Poor Project
Choices
Project Decisions:
The Art and Science
Introduction to
Project Risk
Management and
Decision Analysis
Project Risk
Analysis Made
Ridiculously Simple

32. Questions?