Value Reversion

So I'm just finishing up a course on cost and value management in projects, and I got to thinking about value creation. More specifically, what types of value do projects create for an organization? My initial thought was that myriad types of value can be created - increased productivity, reduced loss, enhanced brand awareness, improved quality, increased sales, etc. The outcome of a project designed to achieve any of the preceding objectives is an increase in value for the firm.

However, we all know that goals and objectives have to be measurable to be meaningful. And pretty much anything that can be measured can be quantified. Improving quality may be the project objective, but quality has to be defined in real terms, not just as an abstract concept. For example, if quality means less waste, then the performance indicators for your project are the amounts of waste produced. As waste is reduced, value is created.

So if you can quantify the value, won't it always be possible to convert it back into monetary terms? If you're measuring the amount of waste, it's good business to know what that waste is costing you - I mean, that's really the business case for undertaking the project in the first place. The same holds true for any project objective. Viewed in these terms, value always reverts to money. And if you can't revert value back to dollars, I'd venture to say that you either aren't measuring performance correctly, or that the project really isn't creating any value.

The Project Lifecycle and Project Strategy

For a project strategy course I'm taking, we read an interesting case study concerning the traditional project lifecycle graphic (some form of Initiation/Planning/Execution/Termination). Authored by Daniel R. Heiser and Bin Jiang, The Eye Diagram is an expanded model that not only shows the amount of effort and/or budget required for each stage, but also looks at the project as part of a larger system, and highlights the changing set of requirements that each stage creates. Here's a few thoughts on where the traditional model falls short, and some of the benefits that an Eye Diagram-type approach offers the PM.

As I mentioned, the traditional project lifecycle model shows the amount of effort required for each phase, and how those phases overlap. This type of illustration, along with other charts such as percentage of work completed and cumulative budget spent graphs, tend to show the project lifecycle as a function of time or resources. However, these charts are really more of a project performance measure, or a simple planning tool, than they are a strategic model for project management. Two key things are absent from these traditional models – first, the environment that the project is being conducted in isn’t taken into account; and second, the changing perspective that PM’s must have to effectively manage each stage of a project is ignored. Each of these factors is critical to implementing a successful project strategy, and effectively managing the project through each stage of the lifecycle. For this post, I’m going to concentrate on the first issue and how it relates to project strategy.

Relying strictly on the types of charts mentioned above can cause the vacuum effect – where the PM ignores the project supra-system (i.e. the organization, the competitive market, the economy). Because the traditional graphics focus on time, resources and costs, they lock PM’s into a world that considers only project constraints and internal forces. It can fool inexperienced project managers into thinking that operational concerns and time/cost/schedule trade-offs are the keys to success, when in reality they are only supporting elements and performance measures. In fact, no project operates in a vacuum, and the real keys to success aren’t even identified in these models.

To be successful, a project needs to have a strategy that is aligned with the overarching corporate strategy. This strategy also needs to have certain elements to it, such as a business need or an opportunity that is driving the project, and a focus on environmental factors as well as internal ones. It needs to be “client-centric”, with a focus on delivering a satisfactory product to the client, but still must balance the requirements of all stakeholders to maximize value. The strategy also needs to be fluid – that is, it must be regularly evaluated and updated as the project situation changes.

If you go back to the traditional lifecycle, you’ll see that none of these topics are illustrated or dealt with. As I pointed out before, the traditional lifecycle is focused on constraints and performance measurement. A project manager needs to go beyond this model, identify external forces, and focus on the flow of each stage in relation to those forces. The Eye Diagram is one useful tool to do just that, and it also helps the PM focus their efforts as they move through each stage of the lifecycle.

Ultimately, for value realization and stakeholder satisfaction, PM’s require a methodology to help them create and execute the strategic plan; something that does more than simply account for resource usage or percentage of project completed. It should identify and account for the strategic issues that will affect eventual project success. Things such as the external environment, the parent organization and even critical success factors should be identified and illustrated, right from the start. As the project progresses through the lifecycle, the focus of the PM’s strategic efforts needs to shift, so they can better understand what factors will impact decisions and therefore require the most attention.

The First Post - Why Project Management?

The significance of project management, the associated methodologies, and related disciplines in operations management, has become increasingly apparent to me throughout my professional experience. As a technology consultant, and while pursuing my Bachelor’s degree, I began to notice certain similarities among projects that we performed for clients. Meetings at different organizations covered the same topics; the steps and deliverables were virtually unchanged; and the same problems and questions were always presented. It wasn’t, however, until I completed a course in Project Management that I could formally identify the similarities, articulate why these trends were so prevalent and determine how to control them so we didn’t continue to reinvent the wheel.

Later, I accepted leadership of a task force created by a volunteer organization to market and manage an online community activity register. As the team met, certain steps of a sequence emerged (much as the standard project lifecycle model that I was still becoming acquainted with suggested) – before we could accomplish anything, a plan had to be developed; and before developing a plan, we had to identify our objectives. The progression repeated itself when I worked on a committee who was arranging an event to highlight economic development in our community. This event also taught me a lesson in gathering inputs from volunteer and donated resources, and then structuring them to meet critical requirements while prioritizing secondary considerations - another practical application of my undergraduate coursework.

Eventually, the idea of a standard progression and workflow models became obvious outside of specific projects. If a project could be managed more effectively using these methods, why couldn’t the same be true for operations? My time at a regional chemical manufacturer provided a holistic view of the processes required to operate a business, and the interdependencies that made them a system. Ideas such as continuous improvement and process design took the concepts of project management and shifted them to ongoing operations. It was also at this company that I learned the perils of neglecting to manage both projects and operations: lowered morale, decreased productivity, financial loss, inefficient systems and high employee turnover were just a few of the resulting symptoms.

The culmination of my experience, education and realizations was that techniques to plan, create, execute and improve products and processes are vitally important to business – both for their inherent ability to increase efficiency and optimize productivity, and for the sustainable competitive advantage that operational excellence provides. So that's the "why." Look to this blog for information and thoughts about project management.