Previously taught at McGill University, University of Alberta, and UNC at Charlotte Research: Competitive location, dynamic pricing, supply chain management, production-distribution systems On with the course introduction…

3 11/29/100 Project Management A project is a one-time endeavor undertaken to create a unique product or service. Project management is the discipline of organizing and managing resources to complete a project within defined scope, time, and cost constraints. 1

4 AK/ADMS 3353 Project Management
Course web page:

5 AK/ADMS 3533 Project Management
Chapter 1: Modern Project Management

6 Road Map

7 What Is a Project? Project Defined
A complex, nonroutine, one-time effort limited by time, budget, resources, and performance specifications designed to meet customer needs. Major Characteristics of a Project Has an established objective. Has a defined life span with a beginning and an end. Typically requires across-the-organizational participation. Involves doing something never been done before. Has specific time, cost, and performance requirements.

8 Comparison of Routine Work with Projects
Writing a term paper Setting up a sales kiosk for a professional accounting meeting Developing a supply-chain information system Designing an iPod that is approximately 2 X 4 inches, interfaces with PC, and stores 10,000 songs Wire-tag projects for GE and Wal-Mart Routine, Repetitive Work Taking class notes Daily entering sales receipts into the accounting ledger Responding to a purchasing request Routine manufacture of an Apple iPod Attaching tags on a manufactured product TABLE 1.1

9 Programs versus Projects
Program Defined A series of coordinated, related, multiple projects that continue over an extended time and are intended to achieve a goal. A higher-level group of projects targeted at a common goal. Example: Project: completion of a required course in project management. Program: completion of all courses required for a business major.

10 Project Life Cycle FIGURE 1.1

11 The Challenge of Project Management
The Project Manager Manages temporary, non-repetitive activities and frequently acts independently of the formal organization. Marshals resources for the project Provides direction, coordination, and integration to the project team Manages a diverse set of project stakeholders Dependent upon others for technical answers Is responsible for performance and success of the project Must induce the right people at the right time to address the right issues and make the right decisions.

12 The Importance of Project Management
Factors Leading to the Increased Use of Project Management: Compression of the product life cycle Global competition Knowledge explosion Corporate downsizing/business-process-re-engineering Increased customer focus

13 Growth in PMP Certification

14 Integrated Project Management Systems
Problems Resulting from the Use of Piecemeal Project Management Systems: Do not tie together the overall strategies of the firm. Fail to prioritize selection of projects by their importance of their contribution to the firm. Are not integrated throughout the project life cycle. Do not match project planning and controls with organizational culture to make appropriate adjustments in support of project endeavors.

15 Integrated Management of Projects

16 The Technical and Sociocultural Dimensions of the Project Management Process

17 Organization Strategy and Project Selection
Chapter 2

18 Road Map

19 Why Project Managers Need to Understand the Strategic Management Process
Changes in the Organization’s Mission and Strategy Project managers must respond to changes with appropriate decisions about future projects and adjustments to current projects. Project managers who understand their organization’s strategy can become effective advocates of projects aligned with the firm’s mission.

20 The Strategic Management Process: An Overview
Provides the theme and focus of the future direction for the firm. Responding to changes in the external environment—environmental scanning Allocating scarce resources of the firm to improve its competitive position—internal responses to new action programs Requires strong links among mission, goals, objectives, strategy, and implementation.

21 Strategic Management Process (cont’d)
Four of Activities of the Strategic Management Process Review and define the organizational mission. Set long-range goals and objectives. Analyze and formulate strategies to reach objectives. Implement strategies through projects.

22 Project Portfolio Management Problems
The Implementation Gap The lack of understanding and consensus on strategy among top management and middle-level (functional) managers who independently implement the strategy. Organization Politics Project selection is based on the persuasiveness and power of people advocating the projects. Resource Conflicts and Multitasking The multiproject environment creates interdependency relationships of shared resources which results in the starting, stopping, and restarting projects.

23 Benefits of Project Portfolio Management
Builds discipline into project selection process. Links project selection to strategic metrics. Prioritizes project proposals across a common set of criteria, rather than on politics or emotion. Allocates resources to projects that align with strategic direction. Balances risk across all projects. Justifies killing projects that do not support organization strategy. Improves communication and supports agreement on project goals. EXHIBIT 2.2

24 Portfolio of Projects by Type

25 A Portfolio Management System
Selection Criteria Financial: payback, net present value (NPV), internal rate of return (IRR) Non-financial: projects of strategic importance to the firm. Multi-Weighted Scoring Models Use several weighted selection criteria to evaluate project proposals.

26 Financial Models The Payback Model
Measures the time it will take to recover the project investment. Shorter paybacks are more desirable. Emphasizes cash flows, a key factor in business. Limitations of payback: Ignores the time value of money. Assumes cash inflows for the investment period (and not beyond). Does not consider profitability.

27 Financial Models (cont’d)
The Net Present Value (NPV) Model Uses management’s minimum desired rate-of-return (discount rate) to compute the present value of all net cash inflows. Positive NPV: the project meets the minimum desired rate of return and is eligible for further consideration. Negative NPV: project is rejected.

28 Net Present Value (NPV) and Internal Rate of Return (IRR): Example Comparing Two Projects

29 Non-financial Criteria
To capture larger market share To make it difficult for competitors to enter the market To develop core technology that will be used in next-generation products To reduce dependency on unreliable suppliers To prevent government intervention and regulation

30 Checklist Selection Model
Strategy alignment: What specific organization does this project align with? Driver: What business problem does the project solve? Success metrics: How will we measure success? Sponsorship: Who is the project sponsor? Risk: What is the impact of not doing this project? Risk: What is the project risk to our organization? Benefits: What is the value of the project to this organization? Organization culture: Is our organization culture right for this type of project? Approach: Will we build or buy? Training/resources: Will staff training be required? Finance: What is estimated cost of the project? Portfolio: How does the project interact with current projects?

31 Project Screening Matrix

32 Applying a Selection Model
Project Classification Deciding how well a strategic or operations project fits the organization’s strategy. Selecting a Model Applying a weighted scoring model to bring projects to closer with the organization’s strategic goals. Reduces the number of wasteful projects Helps identify proper goals for projects Helps everyone involved understand how and why a project is selected

33 Project Proposals Sources and Solicitation of Project Proposals
Within the organization Request for proposal (RFP) from external sources (contractors and vendors) Ranking Proposals and Selection of Projects Prioritizing requires discipline, accountability, responsibility, constraints, reduced flexibility, and loss of power Managing the Portfolio Senior management input The priority team (project office) responsibilities

34 Managing the Portfolio
Senior Management Input Provide guidance in selecting criteria that are aligned with the organization’s goals Decide how to balance available resources among current projects The Priority Team Responsibilities Publish the priority of every project Ensure that the project selection process is open and free of power politics Reassess the organization’s goals and priorities Evaluate the progress of current projects

35 Project Portfolio Matrix

36 Project Portfolio Matrix Dimensions
Bread-and-Butter Projects Involve evolutionary improvements to current products and services. Pearls Represent revolutionary commercial advances using proven technical advances. Oysters Involve technological breakthroughs with high commercial payoffs. White Elephants Projects that at one time showed promise but are no longer viable.

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