International Project Management Day Webcast:

Value-Driven Project Management

By

Harold Kerzner, Ph.D.

© 2009 International Institute for Learning, Inc.

© 2009 International Institute for Learning, Inc.

Percent of Projects Using Project Management

Current use of project management

© 2009 International Institute for Learning, Inc.

The “Traditional” Project

• Time duration of 6-18 months• The assumptions are not expected to change over

the duration of the project• Technology is known and will not change over the

duration of the project• People that start on the project will remain through

to completion• The statement of work is reasonably well-defined

© 2009 International Institute for Learning, Inc.

The “Nontraditional” Project

• Time duration over several years• The assumptions can and will change over the

duration of the project• Technology will change over the duration of the

project• People that approved the project may not be there

at completion• The statement of work is ill-defined and subject to

numerous changes

© 2009 International Institute for Learning, Inc.

MANAGINGTRADITIONAL

PROJECTS

MANAGINGNONTRADITIONAL

PROJECT

Single person sponsorship Governance by committee

Possibly a single stakeholder Multiple stakeholders

Project decision-making Both project and business decision-making

Inflexible project management methodology

Flexible or “fluid” project management methodology

Periodic reporting Real time reporting

Success is defined by the triple constraint

Success is defined by the triple constraint and business value

KPIs are derived from earned value measurement (EVM)

Unique value-driven KPIs can exist on every project

Traditional vs. Nontraditional Projects

© 2009 International Institute for Learning, Inc.

Customer RFP Requirements

• Contractors must have PMP®s• Contractors must have an EPM system, and it may

have to be qualified or approved by the client• Contractors must capture best practices and share

intellectual property with the client• Contractors must identify a reasonable maturity

level in project management

© 2009 International Institute for Learning, Inc.

Customer’sExpectations

Contractor’sExpectations

BusinessSolutions

Long-Term Strategic

Partnerships

“Engagement” Expectations

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Before and After Engagement Project Management

BEFORE ENGAGEMENT PROJECT MANAGEMENT

AFTER ENGAGEMENT PROJECT MANAGEMENT

Continuous competitive bidding Sole-source or single-source contracting (fewer suppliers to deal with)

Focus on near-term deliverable value

Focus on lifetime value of the deliverable

Client must understand the contractor’s project management methodology

Contractor designs a customer-specific project management methodology

© 2009 International Institute for Learning, Inc.

Benefits

Good methodologies allow us to:• Shorten project schedules• Reduce and/or better control costs• Prevent unwanted scope changes• Plan for better execution• Predict results• Improve customer relations during project execution• Adjust the project during execution to fit changing customer

requirements• Provide senior management with better visibility of status• Standardization in execution• Capturing of best practices

© 2009 International Institute for Learning, Inc.

Project Failures

Methodologies can lead to project failures if:• The methodology must be followed exactly even if the

assumptions and environmental input factors have changed• The methodology focuses on linear thinking• The methodology does not allow for out-of-the-box thinking• The methodology does not allow for value-added changes

that are not part of the original requirements• The methodology does not fit the type of project• The methodology uses nonstandard terminology

© 2009 International Institute for Learning, Inc.

Client

Stakeholders

Inputs Tools OutputsCustomer

SatisfactionManagement

Requirements

Business Case

Assumptions

I P E M C

Methodology

• PMBOK® Guide Processes• Unique Tools• Unique KPI• Dashboards

Deliverables

• Best Practices• Lessons Learned• KPI Library• Improvements for Next Project

Feedback

Adaptive Methodology Usage

© 2009 International Institute for Learning, Inc.

Defining Value Metrics (KPI)

PAST VIEW PRESENT VIEW

Metrics are fixed for the duration of the

project

Metrics can change over the duration of

the project

(Metric-Driven ProjectManagement)

© 2009 International Institute for Learning, Inc.

Dashboard Design

Dashboard

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The Changing Definition of Success

• Success is simply the triple constraint• Customer satisfaction must also be considered• There are other (secondary) factors to be

considered• Success must have a business component• The constraints must be prioritized• There are multiple definitions of success (each

customer/stakeholder can have a different definition)

• There are categories of success, and value is now a component of the success criteria

(2004)

(2008)

© 2009 International Institute for Learning, Inc.

Success

• Success is not necessarily achieved by completing the project within the triple constraint. Success is when the planned business value is achieved within the imposed constraints and assumptions.

Value

Triple Constraint

© 2009 International Institute for Learning, Inc.

Models for Value Analyses

• Intellectual Capital Valuation• Intellectual Property Scoring• Balanced Scorecard• Future Value Management™• Intellectual Capital Rating™• Intangible Value Stream Modeling• Inclusive Value Measurement™• Value Measurement Methodology (VMM)

© 2009 International Institute for Learning, Inc.

Measuring Value from Benefits

Expected Benefits or Results

Value Conversion

Profitability Easy

Customer Satisfaction Hard

Goodwill Hard

Penetrate New Markets Easy

Develop New Technology Medium

Technology Transfer Medium

Reputation Hard

Stabilize Work Force Easy

Utilize Unused Capacity Easy

© 2009 International Institute for Learning, Inc.

A Comparison: EVMS, EPM, and VMM

Variable EVMS EPM VMM

Time

Cost

Quality

Scope

Risks

Tangibles

Intangibles

Benefits

Value

Tradeoffs

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Types of Performance Reports

StatusReports

ForecastReports

ProgressReports

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Benefits and Value at Completion

ForecastReports

• Time at Completion• Cost at Completion

Traditional Reporting

Future Reporting• Time at Completion• Cost at Completion• Benefits at Completion• Value at Completion

© 2009 International Institute for Learning, Inc.

The Project Pipeline (Without a PMO)

IDEAS

PROJECT PIPELINE

PROJECT FAILURES

COMPLETEDPROJECTS

© 2009 International Institute for Learning, Inc.

The Project Pipeline (With a PMO)

IDEAS

PROJECT PIPELINE

PROJECT FAILURES

COMPLETEDPROJECTS

PMO

BUSINESS CASE FILTERBENEFITS FILTERVALUE FILTER