Archive for the ‘Tools’ Category

Images as action instruments in complex projects (Taxén & Lilliesköld, 2008)

Montag, Oktober 20th, 2008

Images as action instruments in complex projects (Taxén & Lilliesköld, 2008)

Taxén, Lars; Lilliesköld, Joakim: Images as action instruments in complex projects; in: International Journal of Project Management, Vol. 26 (2008), No. 5, pp. 527-536.

Images are quite powerful. I hate motivational posters which a distant corporate HQ decorates every meeting room with, but I once saw the department strategy visualised by these folks, they include all employees and the group dynamic is unbelievable. Later on they cleaned the images, blew them up, and posted them around the company – of course, meaningless for an outsider but a powerful reminder for everyone who took part.

Taxén & Lilliesköld analyse the images typically used in project management. They find that these common images, such as PERT/CPM, Gantt charts, or WBS are increasingly difficult to use in complex projects, in this case the authors look into a large-scale IT project.

Based on Activity Domain Theory they develop alternative images better suited for complex projects. Activity Domain Theory, however, underlines that all tasks on a project (= each activity domain) have a motive, fulfils needs, modifies objects, and has actors. Outcomes are produced by activity domains and are at the same time prerequisites for activity domains. Activity domains have activity modalities, which can be either manifested as resources or as communal meaning. These activity modalities are

  • Contextualisation = situation of human action
  • Spatialisation = need for spatial orientation in human action
  • Temporalisation = need for certain order in human action
  • Stabilisation = need for certain rules and norms in human action
  • Transition = need for interaction between activity domains

Useful images, the authors argue, need to fulfil these needs while being situated in the context of the activity. Traditional images focus on optimisation and control, rather than on coordination and action. Thus alternate images need to focus on dependencies and integration; on value comprehensibility and informality over formality and rigour.

Alternative images suited for complex project management are

  • Anatomies – showing modules, work packages and their dependencies of the finished product, e.g., functional node diagrams
  • Dependency diagrams – showing the incremental assembly of the product over a couple of releases, e.g. increment plan based on dependencies (a feature WBS lack)
  • Release matrices – showing the flow of releases, how they fit together, and when which functionality becomes available, e.g., integration plan
  • Information flow diagrams – showing the interfaces between modules, e.g. DFD

A comprehensive model for selecting information system project under fuzzy environment (Chen & Cheng, in press)

Dienstag, Oktober 7th, 2008

A comprehensive model for selecting information system project under fuzzy environment (Chen & Cheng, in press)Chen, Chen-Tung; Cheng, Hui-Ling: A comprehensive model for selecting information system project under fuzzy environment; in: International Journal of Project Management, in press.doi:10.1016/j.ijproman.2008.04.001Update: this article has been published in:  International Journal of Project Management Vol. 27 (2009), No. 4, pp. 389–399.Upfront management is an ever growing body of research and currently develops into it’s own profession. In this article Chen & Cheng propose a model for the optimal IT project portfolio selection. They outline a seven step process from the IT/IS/ITC project proposal to the enterprise success

  1. IS/IT/ITC project proposal
  2. Project type classification
  3. Individual project analysis
  4. Optimal portfolio selection
  5. Portfolio adjustment
  6. Successfully selection
  7. Enterprise success

Behind the process are three different types of selection methods and tools – (1) crisp selection, (2) strategy development, and (3) fuzzy selection.The crisp selection is the first step in the project evaluation activities. It consists of different factual financial analyses, e.g. analysis of discounted cash flow, cost-benefits, total investment, payback period, and the return on investment.Strategy development is the step after the crisp selection, whilst it also impacts the first selection step by setting guidelines on how to evaluate the project crisply. Strategy development consists of a project strategic status analysis. According to Chen & Cheng’s framework a project falls in one of four categories – strategic, turnaround, factory, or support.The last step is the fuzzy selection. In this step typical qualitative characteristics of a project are evaluated, e.g., risk, feasibility, suitability, and productivity improvements. In this step lies the novelty of Chen & Cheng’s approach. They let the evaluators assign a linguistic variable for rating, e.g., from good to poor. Then each variable is translated into a numerical value, e.g., poor = 0, good = 10. As such, every evaluator produces a vector of ratings for each project, e.g., (0;5;7;2) – vector length depends on the number of characteristics evaluated. These vectors are then aggregated and normalised.[The article also covers an in-depth numerical example for this proposed method.]

Construction client multi-projects – A complex adaptive systems perspective (Aritua et al., in press)

Donnerstag, Oktober 2nd, 2008

 Construction client multi-projects – A complex adaptive systems perspective

Aritua, Bernard; Smith, Nigel J.; Bower, Denise: ; in: International Journal of Project Management, Article in Press, Corrected Proof.

The meme of Complexity Theory is unstoppable in recent project management research. On the other hand it does make sense. Research such as this and, of course, common sense, indicate that the project’s context is a field better not left unmanaged. Since reality is quite complex  and peoples‘ behaviour is anyway – a view like this increases the pre-existing complexity of projects management.

In this article Aritua et al. analyse the special complexity which presents itself in multi-project environments. I posted about complexity theory before and in more detail here.
A quick recap. Complexity theory has 6 distinctive features, which make the outcomes of decisions, actions, and events increasingly unpredictable

  • Inter-relationships
  • Adaptability
  • Self-organisation
  • Emergence
  • Feedback
  • Non-linearity

Aritua et al. model the multi-project environment as being two-fold – (1) strategic environment and (2) tactical environment. The strategic environment builds the business context for the projects, programmes, or portfolio. The authors conceptualise the typical strategic cycle as consisting of vision – mission- strategic blueprint & objectives.

The tactical environment is the project portfolio/programme itself. Consisting of a couple of projects, it does provide a Risk:Value ratio for each project, which leads to an overall risk:value ration for the whole portfolio/programme, as such it feeds back into the strategic cycle in the business context environment.

In a second step the authors analyse the dynamics of such a system – what happens to a mulit-project portfolio if its external environment changes?
First of all, the boundary spanning activity in this conceptualisation is the information exchange with the environment. The information exchange into and out of the project portfolio triggers dynamics inside and between each project. Self-organising local relationships emerge into complex adaptive behaviour which feeds back, positively or negatively into the self-organising relationships. Huh?

Firstly, the project portfolio/programme is a complex system and therefore adapts itself when the environment changes. The one and only pre-requisite for this is, as the authors argue, that information and feedback freely flows inside, into, and out of the system.

Secondly, the self-organising relationships simply imply that individual components of the system affect each other and influence behaviour and actions. That is no project in a portfolio is independent from others. The authors cite the ant colony example, where ants make individual decision based on decisions by their closest neighbours. Thus complex interaction emerges.

Thirdly, self-organisation is the driving force behind creating stability in this open system. As the authors put it: „This aspect of the relationship between complexity theory and multi-project management would imply that programme managers and portfolio managers should not be bogged down with detail and should allow and enable competent project managers to act more creatively and on their own. This understanding also influences multi-project managers to seek a balance between trusting project managers and allowing them to concentrate on details – on the one hand – while seeking the necessary level of control and accountability.“

Fourthly, emergence is the effect that the group behaviour is more than the sum of behaviours of each individual project. Which implies, that risk and value can better be managed and balanced in a portfolio. On the flipside non-linearity shows that small changes in the system have unpredictable outcomes, which might be quite large. Thus management tools which don’t rely on non-linearity are needed. Moreover „it also emphasises the need for the multi-project management to react to the changing business environment to keep the strategic objectives at the fore while providing relative stability for the delivery of individual projects“.

So what shall the manager of a programme/portfolio do?

  • Find a right balance between control and freedom for the individual projects (self-organisation)
  • Enable information flow between the environment and the projects, as well as in between the projects (adaptability)
  • Adapt strategic objectives, while stabilising project deliveries (feedback)
  • Balance risk and value in the portfolio (emergence)
  • Use non-linear management tools (non-linearity), such as AHP, Outranking, mental modelling & simulation

Formulation of Financial Valuation Methodologies for NASA’s Human Spaceflight Program (Hawes & Duffey, 2008)

Dienstag, August 12th, 2008

Real Option Modelling of Projects

Hawes, W. Michael; Duffey, Michael R.: Formulation of Financial Valuation Methodologies for NASA’s Human Spaceflight Program; in: Journal of Project Management, Vol. 39 (2008), No. 1, pp. 85-94.

In this article Hawes & Duffey explore real option analysis as a financial management tool to evaluate projects. The basic idea behind that is management can make go/no-go decisions thus eliminating the downside variability of the value of the project. In short you can always kill a project gone bad of course with sinking some costs.
[Some might call again for Occam’s razor and argue that it is sufficient to model this into the cash flow, because for the option price you need a cash flow anyway. But the authors ]

To put the classical Black-Scholes formula to use the authors look for equivalents to the input variables. More specifically they analyse NASA’s space flight program and valuated projects in respect to their go/no-go decision after the conceptual design. The authors used as input variables

  • NPV of project cash flow = Asset-value (S)
  • Actual one-time development costs = Exercise cost of the option (X)
  • Time until go/no-go decision = Expiry time of the option (T)
  • 5% treasury bill rate of return = Risk-free rate of return (R(f))
  • Historical data on initial budget estimate vs. actual development costs = Distribution of underlying (σ²)

Hawes & Duffey then compare the Black-Scholes pricing to the NPV and find that projects with higher volatility and longer time until decisions are higher priced than short-term decisions with less volatility (i.e. history of cost overruns).

I do find the managerial implications quite counter-intuitive. I modelled some Black-Scholes pricing for a real life project I worked on. My project had a NPV of 48 Mio. EUR but only an option price of 17 Mio EUR since the company had a history of cost overruns and a lot of front-loaded costs, in fact 70% of total expenditures would be spend before the go/no-go decision.
That is all very well and I can clearly see how that improves the decision making,
but if I look into the sensitivity analysis the longer the time to decision and the higher the volatility the higher is my option’s price. This is where I do not fully understand the managerial implication. Given that a similar judgement rule to a decision based on NPV comparison, I would favour a project where I decide later and I would favour projects from a department with higher variability in costs, because this gives me a higher degree of flexibility and higher variability can yield a higher gain. Surely not!?!?

Project Management Practice, Generic or Contextual – Reality Check (Besner & Hobbs, 2008)

Dienstag, August 12th, 2008

Tool usage in different types of projects

Besner, Claude; Hobbs, Brian: Project Management Practice, Generic or Contextual – Reality Check; in: Project Management Journal, Vol. 39 (2008), No. 1, pp. 16-33.

Besner & Hobbs investigate the use of project management tools. In a broad survey among 750 practitioners, they try to find patterns when different tools are applied to manage a project. They authors show that tool usage depends on the factors

  • Organisational maturity level of project management
  • Project similarity and familiarity
  • Level of uncertainty in project definition
  • Internal customer vs. external customer
  • Project size and duration
  • Product type

Among these factors the last one is the most interesting. Besner & Hobbs grouped their sample into three legs according to product type a) engineering & construction, b) IT, and c) business services.
So where do IT projects fall short compared to their counterparts in Engineering and Construction?
One area is the vendor management (bidding documents, conferences, evaluations) which is a strong point in E&C but a weak one in IT. Another area is the cost planning (financial measurements, cost data bases, top-down/bottom-up estimation, software for estimating costs) and in execution IT projects show lesser usage of Earned Value Techniques and Value Analysis.
[Fair enough – I do think – the intangibility of IT projects makes it difficult to apply these concepts unbiased and meaningfully].

Project management and business development: integrating strategy, structure, processes and projects (Van Der Merwe, 2002)

Montag, Juli 14th, 2008

Business development

Van Der Merwe, A. P.: Project management and business development: integrating strategy, structure, processes and projects; in: International Journal of Project Management, Vol. 20 (2002), No. 5, pp. 401-411.

Van Der Merwe outlines organisational theories and configurations. Furthermore he applies systems and process theory to explain the relationship between strategy, structure, processes, and projects. The author shows that projects in business development are used to transform a vision into results by bringing together diverse teams. He concludes with this [delightful] paragraph:

„This aspect [projects bringing together diverse people] revealed project management as the point of departure for management theory, where management manages the behavioural processes of people who manage the continuous incremental improvement of business procedures in the organisation, through projects that guide the business process to address the change in the strategic direction of the organisation. If business is to develop then the successful outcome of any change in the organisation can only be achieved when business processes and human behavioural processes converge in the person of the project manager.“ (Van Der Merwe, 2002, p. 411)