Strategic Project Management Transformation · Strategic Project Management Transformation Marc...
Transcript of Strategic Project Management Transformation · Strategic Project Management Transformation Marc...
Copyright ©2017 Resch Group
Strategic Project Management Transformation
Marc Resch, PMP, LSSBB, ITIL
www.reschgroup.com
201-803-4653
Copyright ©2017 Resch Group
Learning Objectives
• Understand modern business challenges, trends and opportunities
• Embrace project alignment with corporate strategy
• Appreciate and embrace the business case to drive value from your projects
• Understand the value-driven project lifecycle
• Learn to implement benefit realization to achieve value from your projects
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The views and opinions expressed in this presentation are those of Resch Group and do not necessary reflect official policies or positions of any organization in attendance at this event
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Let’s jump right in…What do these well-known companies have in common?
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Public companies currently have a 1-in-3 chance of being delisted in the next 5 years, which is 6 times the
rate that companies experienced 40 years ago
Source: PMI Though Leadership Series 2016 –Connecting business strategy and project management
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Stage 1Blinded
Stage 2Inaction
Stage 3Faulty Action
Stage 4Crisis
Stage 5Dissolution
Decline begins Dissolution
Successful Organizational PerformanceAppropriate Organizational Response
Declining Organizational Performance
This is where youcome in with projects
Good Information
Successful Organizational Performance
No Choices
You Bet!
Can corporate decline be prevented?
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But these fundamentals of business are always changing…
1880
2010
1950
1950s: Critical Path Method (CPM)
1900
1910
19201910s: Gantt Chart
1958: Program Evaluation and Review Technique (PERT)
1960
1970
1980
1990
1940
1930
2000
1890 Industrial Revolution• Technological Developments
• Expanding Trade & Markets
• Growing Populations
1969 Project Management Institute (PMI) launched
1975: PROMPTII
1989: PRINCE method
1996: PRINCE2
method
1992: Critical Chain by E.M. Goldratt
1909: Frederick Taylor’s
Scientific Management
1954: Peter Drucker’s The Practice of Management
“Management By Objectives”
mid 1980s: Six Sigma
Deming’s Quality, Productivity and Competitive Position (1982),
Out of the Crisis (1986)
“TQM”
1913: Ford revolutionizes the assembly line
1936: Keynes’ The General Theory of Employment,
Interest and Money
1929: The Great Crash, Oct. 24-29
1930s: Introduction of statistical methods
Early 1990s: COBIT
1890s: Development of
Assembly Line
…or are they???
Agile
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Scrum
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You, the project professional, are on the front lines to deliver business value
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Executive Committee
Steering Committee
Project Sponsor
Project Manager
Management
Team
Core
Team
Extended
Team
Others
(as needed)
Executive
Level
Business / Project
Level
Project
Team
Manage and communicate UP, not just down, to drive value
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…Lean, Scrum, Gantt
PMBOK, Six Sigma,
Agile, Prince2,
Waterfall, TQM, PMP...
What about
ROI?Don’t bother me
with buzz words!
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Projects are investments and we expect returnson our investments
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• Considers client situation
– Married? Children? Age?
• Considers many factors
– P/E ratio, profit, ROE, revenue
• Considers company situation– Mission, objectives, competition
• Considers many factors– Revenue, Compliance
– Cost savings, time savings
– Productivity improvements
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Compliance: The cost of doing business
Truth in Lending Act
• Subpart A: General Information
• Subpart B: Open-end credit lines
• Subpart C: Closed-end credit
• Subpart D: Oral disclosure rules
• Subpart E: Mortgage transactions
Operational Requirements
• Provide accurate & timely disclosures & re-disclosures to customers
• Ensure APRs & fees are within tolerance
• Ensure advertising & solicitation are within policy
• Ensure customers know their right to rescind
• Ensure documents are retained per guidelines
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• Compared to 2015, more projects are failing and creating significant monetary loss (12% increase in losses)
• Fewer projects are designed to achieve corporate strategy (an average of 48% of projects, down from 54% in 2015)
• % of companies reporting high benefits realization maturity is at 17% -- static for the past three years
Key Findings
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Project alignment to the strategic intent is paramount to success
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Strategic Plans
Projects Implemented to Achieve the Objectives
Strategic
Objectives
Quantifiable Goals
to Achieve the Mission
Strategic objectives must align directly to the mission and
translate the mission into quantifiable business goals
The Business Plan must accurately and realistically
articulates the strategic objectives
Project team members should understand and embrace
the contents of the Business Plan
Everything begins with the mission – it sets the overall
vision and strategic direction
All project team members must internalize the mission
and recite it verbatim
Strategic plans are the projects that are identified,
prioritized and implemented in order to achieve the
strategic objectives
Projects must strategically align to the objectives and
mission to steer the company in the right direction
Projects must be prioritized strategically
Mission
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• To organize the world‘s information and make it universally accessible and useful
• To bring inspiration and innovation to every athlete in the world
• To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time
• To provide effective means for the prevention of cruelty to animals throughout the United States
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What about these?
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• Grow retail stores by 10%
• Increase sales by 12%
• Maintain the current cost structure
• Achieve compliance with all federal environmental mandates
• Reduce network security breaches by 75%
• Have zero injuries in the workplace
• Increase customer retention by 3%
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Strategic objectives
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This is serious stuff!
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Only 48% of projects are aligned to the corporate strategy
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80% of the business output is produced by 20% of the project input
Think Pareto
Concentrate on “vital few” rather than “trivial many”
20% of Project Portfolio 80% of Business Output
80% of Project Portfolio 20% of Business Output
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Project management is evolving, evolve with it
• From a part-time effort to a solid career path
• Considered a necessity for long term success and even survival for companies
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You don’t make spending decisions, investment decisions, hiring decisions, or whether-you’re-
going-to-look-for-a-job decisions when you don’t know what’s going to happen
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The business case, like the North Star, must guide and direct project teams
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You can be executing a project flawlessly, but if it’s the wrong one, what’s the point?
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• Why is the project investment needed in the first place?
• What will happen if the effort is not undertaken (‘do nothing’)?
• How much money, people and time will be needed to deliver the solution?
• How much financial value (or loss) will be generated?
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The business case answers strategic questions
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The business case forecasts cash flows for your project investment
Cash
FlowTime
Accelerate Gains
Increase Gains
Reduce Costs
$
Cash Outflows
Cash Inflows
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ROI Measurements
• NPV
• ROI
• IRR
• Payback Period
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The business case is a living document that gets updated for accuracy
Concept Initiate Plan Execute
Phase-end Review Phase-end Review Phase-end Review
Business Case
Accuracy +/-30%
Business Case
Accuracy +/-15%
Business Case
Accuracy +/-5%
CloseValue
Attainment
Project efforts focused to achieve or exceed
business case forecasted benefits
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Critical Phase-End Review Deliverable
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Key decisions are made based upon the results
Concept Initiate Plan
Phase-end Review Phase-end Review Phase-end Review
NPV = 34.5MM
ROI = 45%
IRR = 17%
Payback = 1.5 yrs
NPV = 28.5MM
ROI = 28%
IRR = 12%
Payback = 2.4 yrs
NPV = 12.4MM
ROI = 12%
IRR = 7%
Payback = 3.6 yrs
Decision made to terminate project
because project benefits not worth
the project effort or risk
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Let’s discuss strategic decision making
Establish milestones based on business priorities
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Bottom line…
We can’t fake this stuff any longer if we are to be strategic project professionals
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Net Present Value (NPV)
NPV calculates the amount of money, in today’s dollars, that a project is expected to make or lose for a company
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$
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Let’s see why NPV is so important
• Companies will know the amount of money that is expected to be generated and returned to the company’s cash reserves
• That money can then be used to:
– Pay shareholders
– Reduce debt
– Re-invest in other projects
– Re-invest in other business initiatives
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Internal Rate of Return
• The yearly rate at which an organization expects to recover its investment in a project
• Expressed as a percentage
• If the IRR is greater than the rate of financing the project, then a surplus will remain after all of the finance costs are paid
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Payback Period
• The period of time required for a project’s financial benefits to ‘repay’ the sum of the project investment costs
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Return on Investment (ROI)
• Compares the overall project benefits to costs
• Expressed as a percentage and is based on financial returns over a pre-determined time period
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The proper classification of project benefits is paramount to accurate ROI results
The confusion continues
• Hard benefits
• Soft benefits
• Tangibles
• Intangibles
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Let’s redefine project benefits so they make business sense to everyone
ROI Contributing Benefits
Benefits that can be quantified and expressed monetarily and contribute directly to a project’s return on investment (ROI)
Value Enabling Benefits
Benefits that enable the achievement of business value, but cannot be expressed monetarily for inclusion in a project’s ROI analysis
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Here are some examples
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• Items produced
• Staff reduction
• Items sold
• Equipment downtime
• Reduction in defects
• Compliance
• Customer satisfaction
• Community / Investor image
• Employee knowledge base
• Employee morale
ROI Contributing Benefits Value Enabling Benefits
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BusinessObjectives
Business objectives outrank all others
We measure everything except what counts
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Business Value Attainment
Ensuring that your forecasted value becomes a reality
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Despite the proven value of benefits management, a staggering 83 percent of organizations lack maturity
with benefits realization
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Source: PMI Pulse 2016
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Think about a project you’ve completed a year or two ago…
…did your benefit forecasts become a reality?
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We all know about project lifecycles
Initiate Plan Execute Close
Envision Define Design Develop Deploy
ProjectPrep Blueprint Realization Final Prep
Go Live &Support
Mobilization Design Build TestRequire-ments Deploy
Concept Feasibility Design ImplementDevelop-ment Close
Concept Plan Implement Close
BUT, businessvalue usually occurs sometime AFTERproject closeout!
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Project Lifecycles
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In most cases business as usual resumes upon closeout, wiping out valiant project efforts
Concept Initiate Plan Execute CloseSteady State
Operations
Project Lifecycle Business as Usual
New ProductProcess ChangeNew TechnologyCustomer RequirementRegulatory RequirementProduct EnhancementOrganization Change
Business Requirements
Control
Analysis
The handoff between project teams and operations is where
most businesses fall short
Project closeout activities, including project sign-off, seem to take place as a matter of course even if most,
if not all, of the project benefits haven’t been achieved
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A value-centric lifecycle addresses these shortcomings and focuses on value
Concept Initiate Plan Execute
Value-centric Project Lifecycle
Control
CloseValueAttainment
Enhanced
Steady State
Operations
It’s no longer business as usual, but enhanced steady state
operations
Project value metrics are monitored, tweaked and
optimized
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It’s an extension of the Business Case
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BenefitsRealization
Plan
Business Case
Specifies how to measure,manage, achieve and sustain
the forecasted business benefits
Forecasts business benefits
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Benefits Realization Plan: Executive SummaryProject Sierra: Value Management Plan Executive Summary
Business Quantitative Benefit DescriptionBenefit
OwnerBaseline
Target
DateDependencies
ROI Contributing Benefits
Increase package deliveries by 5%
New package sorter will enable
faster and more reliable
placement onto vehicles
Steve R.
25,000
deliveries per
month
Q3, 2017
Training department must
develop and deliver hands-on
training of the new sorter
Reduce vehicle maintenance costs
by 10%
Vendor negotiations resulted in
improved pricing and more
vendor involvement
Ashish J.$2.3MM per
month
Year end
2017
Vendor management team
needs to finalize the contracts
Reduce maintenance FTE
headcount by 5%
Due to more vendor involvement
in maintenance activities, a
reduction in staffing levels is
required to eliminate duplicate
work efforts
William S.
125
maintenance
FTEs
Q2, 2017Receive executive and HR
authorization
Value Enabling Benefits
Increase customer satisfaction
index (CS() rating to 3.5 out of 5
Customers will receive packages
quicker as a result of faster
sorting
Alfonso R.Current CSI is
2.8 out of 5
Year end
2017
Marketing team must develop
new and improved online
customer satisfaction surveys
Improved driver morale to a level
of 4 out of 5
Vehicles will operate more
smoothly and with less
malfunctions due to vendor
maintenance expertise
Ashish J.
Current
employee
morale at a
level of 3.5 out
of 5
Year end
2017
Union leaders must approve
and authorize the survey
forms
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Companies with mature Benefits Realization practices are:
– 1.6 times more likely to realize project objectives
– 3 times more likely to meet or exceed their target ROI realization
Source: PMI Pulse 2016