Video - Will Project Portfolio Management Help Us Develop Exciting New Products and Services?

 

In these three-part video series Jamal will talk about how project portfolio management helps in assessment of multiple project proposals, how to nurture project-friendly environment and about the “Gut Feel” projects and “joker” concept. Topics include:

 

About the Author

Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East.  Read Jamal’s Blog @ www.thinktankconsulting.ca

Article - Why Do Clients Prefer to Live in Denial? A Drama in 4 Acts

Foreword

Throughout my career I have always tried to build a relationship based on trust with my clients. I always made sure that the time and budget estimates were based on cold reality rather than some enigmatic expectations of the customer. I did this not only because of PMI Code of Ethics and Professional Conduct  but also because in my humble opinion, it is much easier to weather the storm at the very beginning of the venture, than to agree to everything your customer wants at inception and turn your life into a living hell for the rest of the project.

As a result whenever a client came to me asking for something like this (see if you can recognize some of your clients!):

"I want a customized Ferrari delivered to me tomorrow for $500"

I always replied:

"Sorry, but with that kind of timeline and budget, the best I can do is a bicycle and here is why ..."

Usually if what followed after "why" was fairly reasonable and convincing, about 90% of the stakeholders agreed with me and we proceeded to work on the project at hand in a friendly and collaborative manner.

Having said that, today I want to share with you story that falls into the other 10% ...

Introduction

Imagine the following situation:

Video - How to Develop a Scoring Matrix?

 

In this three-part video series Jamal will explain how to develop a project scoring matrix for your organization, including the variable selection process, the "Halo Effect" and imposing measurability on the matrix parameters. Topics include:

 

 

About the Author

Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East.  Read Jamal’s Blog @ www.thinktankconsulting.ca

Case Study - Kashagan Oil Field - A Fiasco That is 11 Years Late and $100 Billion Over Budget

Introduction

The Kashagan Oil Field has been discovered in 2000 in the Northern part of the Caspian Sea (see Figure 1). It was quickly confirmed that it was the world's largest discovery in the last 30 years, combined with the Tengiz Field located nearby, with a projected output close to that of the Ghawar field in Saudi Arabia. The recoverable oil reserves of the Kashagan Filed were estimated to be at 19-20 billion barrels.

Figure 1

Caspianseamap.png

The consortium consisting of several global energy players along with the government of Kazakhstan was formed in order to develop the reserves. The number of players and the make-up of the conglomerate changed several times over project lifecycle (we will come back to this fact at a later time), but as of 2012 the group consisted of the following players:

  • Eni (Italy) - 16.81% stake
  • KazMunayGas  (Kazakhstan) - 16.81% stake
  • Royal Dutch Shell (UK/Netherlands) - 16.81% stake
  • Total S.A. (France) - 16.81% stake
  • ExxonMobil (USA) - 16.81% stake
  • China National Petroleum Corporation (China) - 8.4%
  • Inpex (Japan) - 7.56% stake

The Project

The project started in 2001 with an expected completion date of 2005. The allocated budget for this venture was US$10 billion. The oilfield was expected to become operational around 2005 and produce anywhere between 90,000 and 370,000 barrels (at peak production) a day. Needless to say, this project was viewed in Kazakhstan as one of the most important initiatives for the young country and was expected to generate considerable income for the government.

However the project fell 8 years behind the schedule and ended up costing a bit more than the original forecast. Depending on who one chooses to believe, the cost of the venture as of 2015 was either US$50 billion (official number provided by the government of Kazakhstan), US$115 billion (CNN Money's estimate) , or close to US$150 billion (number being mentioned in some publications).

Video - What is the Value of Project Portfolio Management?

 

In this two-part video series Jamal will talk about the value of project portfolio management for various organizations around the world. We will share the results of a famous study as well as describe typical situations that happen at the companies that do not have sound project portfolio management. Topics include:

 

About the Author

Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East.  Read Jamal’s Blog @ www.thinktankconsulting.ca

Project Failures: Black Swans and the Crack Spread Phenomenon

 

Why Your IT Project May Be Riskier Than You Think

I have recently stumbled across a very interesting article titled "Why Your IT Project May Be Riskier Than You Think" published by Bent Flyvbjerg and Alexander Budzier.

I am a big fan of professor Flyvbjerg and his work and as a result needless to say I read this article with great interest. The article describes the phenomenon called the "black swan projects" or as he puts it "high-impact events that are rare and unpredictable but in retrospect seem not so improbable". In other words, these are the endeavours that are vastly over budget and sometimes so bad, that they kill the companies that conceived them. Some of the examples are:

  • Levi Strauss' migration to the SAP system (original budget - $5 million, actual cost - $192 million)
  • Hong Kong’s airport's IT system upgrade (losses of $600 million)
  • Hershey’s a new order-taking and fulfillment system (losses of $100 million causing an 18.6% drop in quarterly earnings)
  • Kmart's IT modernization project (original budget - $1.4 billion, actual cost - $2 billion; led to company's bankruptcy)

Professor Flyvbjerg further states:

"The average overrun was 27%—but that figure  masks a far more alarming one. Graphing the projects’ budget overruns reveals a “fat tail”—a large number of gigantic overages. Fully one in six of the projects we studied was a black swan, with a cost overrun of 200%, on average, and a schedule overrun of almost 70%. This highlights the true pitfall of IT change initiatives: It’s not that they’re particularly prone to high cost overruns on average, as management consultants and academic studies have previously suggested. It’s that an unusually large proportion of them incur massive overages - that is, there are a disproportionate number of black swans."

The article proposes the following steps to be taken in order to address this challenge:

Video - Project Portfolio Management - What Exactly is Value, Balance and Strategic Alignment?

In this three-part video series Jamal will talk about the three pillars of project portfolio management: project value, portfolio balance and portfolio strategic alignment. Topics include:

 

 

About the Author

Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East.  Read Jamal’s Blog @ www.thinktankconsulting.ca

Case Study - Project Portfolio Model - Global Satellite Operator and Manufacturer

 

Yet another company to be presented in our ongoing project portfolio management series is a satellite operator and producer that operates several dozen satellites providing communication services to businesses and government agencies, and broadcast TV and radio channels to audiences worldwide.

Despite an acceptable financial performance the executives of the company felt that there were several challenges awaiting the organization in the near future. One of the potential problems were saturated existing markets and stiff competition from other satellite operators.  As a result the company could not assure the same growth rates as were achieved in the previous years.

The organization needed to move into the new emerging markets and develop new products and services for both developed and developing countries.

 

Strategy

As a result of the analysis of the challenges facing the organization the executive management created the following strategic plan for the upcoming five years:

  • Maintain market shares in developed countries
  • Increase investments in the developing countries
  • Improve innovation
  • Improve vertical integration of the organization (develop end-to-end solutions)

 

The Scoring Model

The scoring model developed by the company management consisted of the following six variables (see also Table 1):

  • Strategic Alignment
  • Customer Need
  • Synergies with the Existing Business
  • Technical Feasibility
  • Profitability (Payback)
  • Commercial/Technical Risk

 

Table 1

Sat-op-portfolio.JPG

The first variable added to the model was the popular "strategic alignment" category. The points have been allocated in the following fashion:

  • Fits 1 of the criteria - 1 point
  • Fits 2-3 of the criteria - 5 points
  • Fits  4 of the criteria - 10 points

The strategic fit variable has been deemed to be a "kill" category. If the project reflected none of the company strategies it would be automatically removed from the list, unless it was designated as "joker" or a regulatory project.

Article - Dangers Of Relying On Purely Financial Methods When Prioritizing Your Projects

 

There are many different approaches to project prioritization, but the most popular ones are the financial method and the scoring model. In this posting let us examine the financial methodology. In a nutshell it implies choosing some kind of a financial criterion – be it a net present value, internal rate of return or some other formula – and calculating a value for each project. Once the ROI for each project has been calculated, the projects are ranked according to their ROIs in the descending order.

Let us look at an example of how it may happen. We have a company that wants to implement 10 projects and has 200 man-months in their resource pool (roughly speaking 20 people working together for one year including vacation time, and allowances for sick days, etc.)

The list of projects together with their expected ROIs is presented in Table 1:

Table 1

Dangers Of Relying - T1.JPG

Next, the company needs to estimated the efforts required for each project and rank the projects according to their ROIs (see Table 2):

Table 2

dangers-of-relying-t2.JPG

It is clear from Table 2 that the company in question can do projects H, E, A, F, C, I and G assuming their projections regarding the projects’ ROIs and efforts required were correct. Adding Project B to the mix will force the company to exceed their effort threshold.

While the purely financial models are very good at instilling the sense of discipline and accountability they all suffer from a couple of inherent problems. One can argue that every financial formula out there can be presented in the following form:

Financial value = f(Revenues/Costs)

In other words any financial value is positively correlated with the expected cash inflows from the project and negatively correlated with the cost of the project.

Video - Project Portfolio Management - What Is PPM?

In this three-part series Jamal will talk about the basics of project portfolio management. The topics included are:

About the Author

Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East.  Read Jamal’s Blog @ www.thinktankconsulting.ca