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

[email protected]

http://www.reschgroup.com/

mailto:[email protected]


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


Let’s jump right in…What do these well-known companies have in common?

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Copyright ©2017 Resch Group 4

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


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?


Let’s get back to the basics…what are the fundamentals of business?

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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


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


…Lean, Scrum, Gantt

PMBOK, Six Sigma,

Agile, Prince2,

Waterfall, TQM, PMP...

What about

ROI?Don’t bother me

with buzz words!


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


But! The cost of doing business

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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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Let’s see where we’re falling short strategically

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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


Let’s see how we can get back on track strategically

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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


• 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?


What about your strategic objectives?


• 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


Now, what about your projects?


This is serious stuff!

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Only 48% of projects are aligned to the corporate strategy


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


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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The Business Case

The North Star of Project Investments


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


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


Let’s discuss


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


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


NPV

IRR

ROI

Payback

The ROI Umbrella


Wait until you hear this story…


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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$


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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Project Benefit Metrics

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Key inputs into our cash flow models


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


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


Think about a project you’ve completed a year or two ago…

…did your benefit forecasts become a reality?


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


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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Benefits Realization Plans


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


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.

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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

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