The document discusses adaptive management and how it can be applied to projects. It defines adaptive management as a structured process for continually improving decisions through learning from previous outcomes. It lists the main principles as iterative decision making, strategic flexibility, continuous quantitative analysis using multiple models and hypothesis testing, and measuring actual performance. It provides examples of how quantitative analysis and risk management can be integrated into an adaptive project management approach.

1. Adaptive Management Intaver Institute Inc. 303, 6707, Elbow Drive S.W, Calgary, AB, Canada Tel: +1(403)692-2252 Fax: +1(403)459-4533 www.intaver.com

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 and Passive 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 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 Your Cost With Risks and Uncertainties Cost forecast (with risks) Original cost estimate Actual cash flow

21. Quantitative Analysis of Iterative Development Process

22. Why You Should Mitigate Risk As Soon As Possible

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. Test 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. Test 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. Test 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. Test 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. Future Reading Lev Virine and Michael Trumper Project Decisions: The Art and Science Management Concepts, Vienna, VA, 2007

32. Questions?