Article - Project Portfolio Model - Rail Transport Engineering Company

 

The next company to be discussed in our ongoing project portfolio management series is a rail transport engineering company that has encountered several challenges in the past several years. The organization has been reporting heavy losses from its operations for the past decade with no sign of potential improvement.

The analysis of the company's operations has shown that one of the main reasons for the poor performance of the company was the large number of products produced by the organization as a result of various customization requests from their customers.

This in its turn led  to a very large number of concurrent projects with a lion's share of them being customization rather than new product development ventures. As a result the quality of the project products has also declined leading to major delays in the product delivery to the customers.

Strategy

As a result of the above-mentioned events the executives of the company came up with the following strategy:

  • Implement rigorous project portfolio management system in order to (a) prioritize projects and (b) cut low-priority ventures
  • Create platform products in order decrease the degree of customization and to eliminate complexity
  • Increase sales and margins per product category
  • Expand the markets to China, Africa, South America
  • Improve customer care
  • Improve product quality

The Scoring Model

The scoring model developed as a result of the project portfolio management initiative has consisted of the six variables (see also Table 1):

  • Market attractiveness
  • Fit to existing supply chain
  • Product and competitive advantage
  • Technical feasibility
  • Time to break even
  • NPV

Table 1

Rail-Scoring.JPG

Interestingly enough the company management decided not to include the strategic fit as one of the variables in the model, arguing that the combination of the variables selected would address all of their strategic initiatives in a more efficient way.

Article - How to Negotiate on Projects: Inventing Options for Mutual Gain

 

One of the prevailing superstitions in project management is the "fixed pie" assumption. In other words, both sides assume that the project results, speaking mathematically, are binary - either the team delivers the project on time or it doesn't; either the project is on budget or over, etc. Fortunately, negotiations are typically not like NBA Finals when team A meets team B in a seven-game series where the winner gets the Larry O'Brien Championship Trophy and the loser goes home empty-handed.

In my experience, situations on most projects are similar to the fable involving two kids quarrelling over the ownership of an orange. Finally, their father enters the room and, operating under the fixed pie assumption, cuts the orange in two equal halves distributing the fruit between the brother and the sister. Interestingly enough, the brother eats the orange and throws away the peel. The sister uses the peel from her half as an ingredient in pastry while disposing of the fruit.

The situations between customers and project teams are often similar to the fable described previously: the underlying interests, constraints and risk tolerances of both parties are rarely identical. The proverbial pie usually looks quite different to each party. Hence, a good project manager can increase the size of the pie by looking for things that are of low cost to him and his team and high value to the customers (and vice versa).

Consider the following interaction between an experienced construction project manager and a customer:

Customer: “I would like to add another clause to our contract. If the work on the new mall is not finished by the deadline in the contract, I want your company to pay a penalty of $5,000,000”

PM: “Hmm, we have already signed the contract without the late penalty clause; I am not sure how our management would react to that …”

Customer: “I am sorry, but I have been instructed by my boss not to proceed ahead without this modification to the contract”

PM: “And may I ask you why you guys feel the need to add this clause?”

Article - Mistakes Analysis: How Not to Handle Project Negotiations

 

As a part of my project and portfolio management consulting practice I frequently get involved in advising various companies on how to run their real-life projects. In my previous article "How Not to Handle Project Negotiations" I shared a discussion that took place between three project stakeholders and invited the readers to find the mistakes that happened in that conversation. Today I am providing my proverbial two cents on the situation at hand ...

Sheila: You know about the problems we had with the release 4.0 of this product. You guys were late by 3 months, went almost 50% over budget and delivered way less features that we expected. Besides even the stuff you did deliver had serious quality issues.

Aha! So the previous similar project has been a failure on all three fronts: late, over budget and delivered less scope than expected. I wonder if optimistic estimation had anything to do with that?

Dan: Yes, and because of all these problems we lost two of our customers and several others warned us not to contact them until we have e-Merchant 5.0 ready with all the necessary features …

And these failures are beginning to have a strategic impact on the company's well-being ...

John: Yes, I understand your concerns and that is why we decided to invest a bit more time in scope definition in order to be able to better estimate project size, risks and duration.

Sounds like a very smart move to me. After all it is impossible to come up with any meaningful estimates until one knows the scope of work.

Dan: How much time are you planning to spend on requirements gathering?

John: We estimated that we would need about four weeks to elicit and document all the requirements and another week to for the team to conduct document inspections and generate estimates.

Again, sounds very reasonable.

Quiz - How Not to Handle Project Negotiations

 

As a part of my project and portfolio management consulting practice I frequently get involved in advising various companies on how to run their real-life projects. Several years ago I was requested by a CEO of one organization to sit in a meeting where several stakeholders were supposed to discuss various aspects of the new "do-or-die" project. The ensuing conversation was so hilarious, that I excused myself from the room as soon as I could and recorded the entire exchange before it escaped my mind.

So, my challenge to you: how many estimation/negotiation handling mistakes were you able to spot in the following conversation?

John the project manager at the ABC Software Inc. a producer of e-Commerce software was preparing for a meeting with Dan, a VP of Sales and one of the original founders of the company and Sheila, a Senior Product Director. They were supposed to discuss the next major release of the company’s e-Merchant product.

Sheila: You know about the problems we had with the release 4.0 of this product. You guys were late by 3 months, went almost 50% over budget and delivered way less features that we expected. Besides even the stuff you did deliver had serious quality issues.

Dan: Yes, and because of all these problems we lost two of our customers and several others warned us not to contact them until we have e-Merchant 5.0 ready with all the necessary features …

John: Yes, I understand your concerns and that is why we decided to invest a bit more time in scope definition in order to be able to better estimate project size, risks and duration.

Dan: How much time are you planning to spend on requirements gathering?

Article - Top 5 Strategies to Protect Your Project from an Evil Vendor

 

Several posts ago I published an article titled "Top 6 Ways Your Vendor Can Screw You On Your Next Project". Today I wanted to follow up on this topic with a list of strategies geared to help a company deal with the tricks and ploys of irresponsible vendors. All of these methodologies have proven themselves in my project management consulting practice, especially on the troubled project recovery assignments.

Strategy #1: Pay More Attention to Your RFP

Spend more time and effort writing your Request For Proposal. The more complicated the project is, the more precise and detailed should your request for proposal be. In which of the cases below do you think the contractor would have less "wiggle room"?

Article - Top 7 Dumb Things Executives Say About Project and Portfolio Management

 

Throughout my consulting and training engagement I frequently came across outrageous statements made by various company executives about both project management and project portfolio management. Today I want to provide you with a collections of all these pearls of wisdom and provide my (at times not very politically correct) answers to them.  

So, without further ado, here we go with top seven dumb statements from executives:

Dumb Thing #1: "I am not sure why we are failing with our projects! After all we have MS Project installed on every desktop in the office"

Having MS Project or any other project management software installed on your computers won't do jacksh*t for you if you don't have proper skills, methodologies and processes implemented at your company. It is like picking up a random person off the street, giving him a Stradivari violin and expecting him to perform at Niccolo Paganini's level of without any training or guidance. Or how about buying a random guy a pair of most expensive soccer boots and the and the most advanced ball and expecting the person to instantaneously become the next Lionel Messi ?

Dumb Thing #2: We have a lot of receptionists sitting around doing nothing. Why don't we put them through a 2-day project management course and we can assign our (multimillion) projects to them? By the way, any chance you can cut the length of your workshop to one day?

No, I can't! And you need to realize that a project manager capable of running a multimillion dollar project is an accomplished professional with years of training, education and progressive experience. Putting a receptionist through a 2-day PM course may open her eyes to discover the exciting world of project management, but will most definitely not prepare her to run complex multimillion dollar projects.

Article - The Best Example To Explain Optimism Bias Phenomenon

 

As a part of my project management course I frequently have to talk about the estimation-related phenomenon known as "optimism bias". Succinctly stated optimism bias is described as follows:

We as the species of homo sapiens tend to overestimate our abilities required to perform a specific task and underestimate the complexity of the task in question

Usually when one provides his audience with a complicated and slightly boring definition, he has to follow up with a clear, simple and hopefully entertaining example. Throughout my consulting and teaching career I tried using a number of case studies including pretty much every megaproject on this list. However each and every example used has been met with mixed feelings. Sometimes people never heard about the Denver Airport Baggage Handling system and sometimes they failed to see the connection between optimism bias and the overall project failure.

I kinda gave up on finding the best illustration for this phenomenon, until one of my friends told me the following story:

His son has just started going to the kindergarten and he and his wife agreed that he would pick them up from the bus station located not too far from their home. They have also agreed that his wife would give him a call once she was ready to leave the office (kindergarten was located nearby). So at one point of time he receives a call from his significant other stating that he should pick them up at the bus stop in 15 minutes. Being a responsible person he exits his home right away and arrives at the bus station with 5 minutes to spare.

Five, ten, fifteen, thirty minutes go by. No sign of his wife and kid. Finally forty minutes after the expected deadline (sorry for the project management nerd talk) his family exits from the bus ... The following conversation ensues:

H: Where have you been? I have been waiting here for more than half an hour! And more importantly, why did you tell me it would take you 15 minutes to get here?

Case Study - Project Portfolio Model - R&D Department of a Product Company

Introduction

In my professional engagements I very frequently get to develop project portfolio management models together with the executives from various companies. Today I wanted to share yet another very interesting case study with my readers: the company we are going to examine is a very successful bearings manufacturer. As a matter of fact for a number of years they have focused all of their research and development efforts solely on the bearings production.

However, under a considerable pressure from their sales team, the executives of the company has at one point of time decided to review their strategy. The sales department has been for several years insisting that when they talk to their customers, they keep asking questions about other bearing-related products such as sealants, lubricants and electronic components which the company has not been producing at the time.

Strategy

As a result of the above-mentioned events the company management came up with the new strategy for the R&D department that consisted of the following  initiatives:

  • Develop new (i.e. lubricants, sealants and electronic components) product families
  • Develop attractive products (i.e. something that is really demanded by our customers)
  • Increase revenues and profitability by developing new product families
  • Increase market share in the new markets

The Scoring Model

The scoring model developed by the executives included the following variables (see Table 1):

  • Strategic fit
  • Possible synergies
  • Financial value
    • Payback
  • Technical complexity (skills in-house)
  • Market attractiveness
  • Competition and IP

Table 1

Article - Top 6 Ways Your Vendor Can Screw You On Your Next Project

Introduction

In my project and portfolio management practice I frequently come across the following question:

"We are embarking on a very large project and a very significant portion of the scope will be outsourced to our vendor. Do you have any tips on what challenges we might experience? What tricks would they be hiding up their sleeves? We heard some horror stories from our colleagues about their past projects and just want to be better prepared ..."

So, without further ado, here are some of tricks that vendors use to inflate the project scope, generate additional income and hold their clients hostage.

Trick #1: They Will Say "Yes" to Everything and Then Surprise You Later

You may prepare the best, most detailed RFP outlining the high-level requirements of the system your company is trying to build. During numerous meetings with the vendor you will be asking them if their platform has capability X, functionality Y or performance parameter Z. And guess what? You will always hear, "Absolutely! As a matter of fact, our organization is a market leader in these domains!"

But once your project moves into the execution stage you will slowly start discovering that capability X, functionality Y or performance parameter Z in the their system are either non-existent or weak

Usually when I mention the first trick used by the vendors, someone in the audience says something to the effect of,

"But we will have an ironclad contract prepared by our procurement and legal teams! They will surely be forced to deliver whatever they promised!"

To answer this question let us examine the remaining tricks the vendors will most likely throw at their unsuspecting customers.

Trick #2: They Will Deploy Time-Bombs in the Requirements Documents in the Form of Ambiguous Wording

Words like "fast", "seamless", "efficient", "state-of-art", "adequate" and "user-friendly", to name a few, are freely used by "normal" people in their personal and professional lives without knowing the dangers these terms carry in the project management world.

News - Travelling to Bandar Seri Begawan, Brunei

Hi all,

Just wanted to let you know that I will be in Bandar Seri Begawan, Brunei with my Project and Portfolio Management Masterclass between 22-Sep and 27-Sep. Drop me a line if you are in the neighbourhood :)

And my special thanks to all those who responded to my previous posting for making this a sold-out event!

Cheers,

Jamal Moustafaev, MBA, PMP

President & CEO

THINKTANK Consulting, Inc

About the Author

Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East.  Read Jamal’s Blog @ www.thinktankconsulting.ca