Managing High-Technology Programs and Projects

John Wiley & Sons

Chapter One

1.1 IMPORTANCE OF EFFECTIVE PROJECT MANAGEMENT

Programs and projects are of great importance to all industrial, governmental, and other human organizations. They are the means by which companies, especially when delivering complex, advanced technology products or systems to their customers, earn a major share of their profit. Projects are also the means by which new products are conceived, developed, and brought to market. New or improved capital facilities and new information systems are acquired through projects. Broad scope management projects, such as restructuring or reorganizing, major cost reduction efforts, plant or office relocation, and the like, are vital to continued profitable operation and growth.

In governmental units from city to county, state, regional, and federal levels, projects are vehicles for growth and improvement. School systems, universities, hospital systems, and other institutional forms of organizations create and improve their services, products, and facilities through programs and projects. In all these various organizations-governmental, institutional, and industrial-there is a growing recognition that although many projects apparently exist within the organization they are often poorly understood and frequently not properly managed. The purpose of this book is to assist in thecorrection of this situation by presenting a concise, comprehensive, and practical understanding of the concepts, processes, methods, and tools of modern, professional project management and how these are successfully applied and continually improved in high-technology environments.

Projects Exist in All Organizations

A project is a complex effort to produce certain specified, unique results at a particular time and within an established budget for the resources that it will expend or consume. A program, as discussed in this book, is a group of two or more related projects. More detailed and definitive definitions of projects and programs are given in Chapter 2.

The concept of a project is not new. Projects exist in all human organizations. They come in many sizes and with widely varying degrees of complexity and risk and produce an infinite variety of end results. The principles and practices of modern project management apply to all these projects across the entire spectrum of human enterprise.

The Rapid Spread of Modern Project Management

In recent years application of project management principles and practices has spread rapidly to an increasingly broad range of human enterprise around the world. The numbers of project management books, magazines, e-zines, other Internet Web sites, seminars, conventions, and professional and popular magazine articles continue to grow. Membership in professional associations in the field also continues to grow at an impressive rate. The Project Management Institute (PMI(r), pmi.org) has grown worldwide from 8,500 members in 1990 to over 100,000 in 2003, with chapters in 39 countries and members residing in 80 additional countries. The International Project Management Association (IPMA, ipma.ch) is an international network of 28 national project management societies. Other professional associations of interest include the Association of Project Management (APM, apm.org.uk) (a member of IPMA), the Product Development Management Association (PDMA, pdma.org), and the Association for the Advancement of Cost Engineering (AACE, aaci.org). The referenced Web sites of each of these organizations provide many links to other project management related organizations, forums, magazines, educators and trainers, and software and consulting service providers.

The Diversity and Categorization of Projects

The great diversity in the areas of application is illustrated by the 24 specific interest groups (SIGs) within the Project Management Institute (Table 1.1). Each of these groups brings together executives and project management practitioners who have related interests. Additionally there are several other PMI(r) specific interest groups that deal with particular aspects of project management across all of these areas of application. The PMI(r) College of Performance Measurement is devoted to the military/ aerospace area of application. The project management approach also has been found to be effective in reengineering and restructuring existing organizations and bureaucratic processes.

In spite of the diversity of the end products or results created by projects in these many areas, the project management approach is remarkably similar in each. A project is not the end result itself, be it a new product, facility, process plant, information system, reengineered process, new organization structure, document, or any other tangible result. Rather, a project is the process of creating a new end result. The same principles of project management are applicable to projects in all areas of application, although there are significant variations in emphasis and in the detailed planning and execution of projects within each application area and within various world cultures.

The globalization of trade, manufacturing, energy, space endeavors, information technology, services industries, and other areas of human activity is a powerful driver to develop and apply common approaches to the planning and execution of projects across industrial sector and international boundaries. International joint venture projects involving such deliverables as pipelines, process plants, space vehicles and platforms, aircraft, automobiles, and new information technology platforms and applications, to name just a few examples, require that all contributors to such projects-who are frequently located on different continents and operate in widely different cultures-use common or at least similar management systems. The collaboration (co-labor) needed to complete these projects successfully can only be achieved efficiently if all parties understand what the others are doing and how they are doing it, and if the plans and schedules for interrelated projects or programs are integrated and use commonly understood management methods and terminology.

Effective Project Management Is Important to All Organizations

All projects must be well conceived and then well managed during their planning and execution to achieve the desired results on schedule and within the specified cost (in money or other critical resources).

Failures in project selection, risk analysis, and conceptual planning have caused:

The expenditure of scarce resources (money, skills, facilities, and time) on efforts that are doomed to failure.

The organization to be exposed to unacceptable financial, technological, and competitive risks.

Failures in project planning and execution have caused:

Expected profit on commercial contracts to become losses through excessive costs, delays, and penalties.

New products to be introduced late with significant detrimental impact on established business plan objectives and market penetration opportunities.

New product development projects to be completed too late to benefit the related product line or otherwise fail to produce the results expected.

Capital facilities to be delayed, causing missed objectives in product lines that depend on the facilities.

Information systems projects to exceed their planned cost and schedule, with negative impacts on administration and general costs and operating efficiencies. The "Chaos Study" (pm2go .com/default.asp), conducted by The Standish Group, concluded that only about one software development project in six met quality, schedule, and cost objectives. Nearly half of the projects studied were terminated before completion.

Failure on one significant project can eradicate the profit of a dozen well-managed projects. Too frequently the monitoring and evaluation of high-exposure projects is ineffective, and the failures are not identified until it is too late to avoid undesirable results. It is important, therefore, that every organization holding responsibility for projects also has the capability to manage the projects effectively.

Project-Driven and Project-Dependent Organizations

Two broad classes of organizations can be identified: First, those project-driven organizations whose primary business is projects. Examples of this class include architect/engineer/constructor, general contractor, and specialty contractor firms; software development firms who sell their products or services on a contract basis; telecommunications systems suppliers; consultants and other professional services firms; and other organizations that bid for work on a project-by-project basis. Growth strategies in such organizations are ref lected in the type, size, location, and nature of the projects selected for bidding, as well as the choices made in how the required resources will be provided (in-house or outsourced) to carry out the projects, if and when a contract is awarded or the project is otherwise approved for execution.

The second class of organizations-those that are project-dependent for growth-includes all others that provide goods and services as their mainstream business. Projects within these organizations are primarily internally sponsored and funded. Examples include manufacturing (consumer products, pharmaceuticals, engineered products, etc.), banking, transportation, communications, governmental agencies, computer hardware and software developers and suppliers, universities and other institutions, among others. These organizations depend on projects to support their primary lines of business, but projects are not their principle offering to the marketplace. Many of these sponsors of internally funded projects are important buyers of projects from project-driven organizations.

1.2 PROJECTS: VEHICLES FOR STRATEGIC GROWTH

Strategically managing the growth of a company, agency, institution, or other human enterprise requires:

A vision of the future of the organization at the top level. Consensus and commitment within the power structure of the organization on the mission and future direction of the organization. Documentation of the key objectives and strategies to fulfill the mission. Planning and execution of specific projects to carry out the stated strategies and reach the desired objectives.

Objectives are descriptions of where we want to go. Strategies are statements of how we are going to get there. Strategies are carried out and objectives are reached, when major growth steps are involved, through execution of projects and multiproject programs within the organization's project portfolios. Projects translate strategies into actions and objectives into realities.

Most organizations of any size have a strategic planning or growth management process in place, with at least annual efforts to develop their longer term plans, objectives, and strategies. It is important to recognize that objectives and strategies exist in a hierarchy-and not just at one level-in large organizations. A useful way to describe this hierarchy is to define three levels:

1. Policy. 2. Strategic. 3. Operational.

Figure 1.1 shows how the strategies become objectives at the next lower level in the hierarchy, until at the operational level projects are identified to achieve the operational objectives. Unless the higher level objectives and strategies are translated into actions through projects, the plans will simply sit unachieved on the shelf.

Sources of Growth

Two basic sources of organizational growth can be identified. These are:

Growth by accretion: Slow, steady, layered growth of the basic products, services, markets, and people.

Stepwise growth: Discrete steps-small, medium, and large-that go beyond growth by accretion.

Growth by accretion is relatively slow and most often observed in mature industries. Sales volume slowly builds, for example, perhaps as a result of the existing salesforce getting better at their jobs individually, selling the production capacity that exists within the factory, possibly assisted by more effective marketing and advertising. At some point, when the factory capacity is limiting sales (and second and third shifts have already been added) further growth is dependent on a major or stepwise change: building a new factory, or expanding the old one.

Stepwise growth occurs when the organization goes beyond growth by accretion and initiates discrete actions to expand or improve: new products or services, new markets, new processes or production facilities, new information systems, new organizational patterns, new people. These growth steps are projects.

The Spectrum of Growth Projects

Table 1.2 shows a few representative examples of growth projects across the spectrum of different project magnitudes and serving different growth strategies. Larger and more risky projects require more formalized project management practices.

Programs and Projects Are the Vehicles for Growth

Stepwise growth involves a wide range of actions from low-risk baby steps to bet-the-company giant strides. It is not possible to draw a sharp line between growth by accretion and baby steps to expand, such as hiring an additional salesperson, or taking on a new distributor in a new state for an existing product line. But when the steps become significant in size, they clearly are recognizable as projects.

Major growth steps in any organization require projects for their realization-new facilities, systems, products, services, processes, technology, and/or markets. Acquisition of these by internal or joint ventures, acquiring or merging with another organization, licensing of technology or markets, or other methods always results in a project of some complexity. More organizations are now recognizing these facts, and more are approaching the management of these growth steps using proven project management principles and practices.

1.3 STRATEGIC PROJECT PORTFOLIO MANAGEMENT

Projects are major investments for most organizations. Investments must be managed on a portfolio basis. The characteristics and process of project portfolio management that have evolved over the past decade are described next.

Integrated Project Portfolio Management

Rather than attempt to manage individual projects as if they were standalone endeavors, executives have learned that every project is interrelated, primarily through the use of common resources but often in other ways and often with other projects in the organization.

Continues...

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