Towards project portfolio management 200019801960194019201900 Mass manufacturing Project management MTM Toyota system TQM Lean manufacturing Scientific management Gantt schedules MBO Network planning Matrix organizations Critical chain PMBOK Certifications Project portfolio management OPM3 PM as core competence Lean eng. Stage-gate models Risk management PM offices
Benefits from Portfolio Management Alignment –Projects are aligned with business objectives Value –Focus on projects that deliver value to customers and shareholders Strategic –Focus on projects that increase the strategic capability Timeliness –More projects are completed on time and budget Balance –Portfolio has the right balance of high, medium and low risk projects Right Number –Portfolio has the right number of projects plus Develops Trust, Shared Vision and Communication with the Business Portfolio spend decreased by 10-40%(META) Portfolio spend decreased by 10-40%(META) Portfolio value maximised -increased by 2x to 3x (META) Portfolio value maximised -increased by 2x to 3x (META) Source: Portfolio Management for New Products, Cooper, Edgett, Kleinschmidt (Perseus Books, 2001)
Where does your organisation stand in relation to Portfolio Management? 2 2 3 3 4 4 5 Excellent 1. Projects are aligned with business objectives 2. Portfolio contains very high value projects 1 Poor 3. Spending reflects the business strategy 4. Projects are done on time 5. Portfolio has good balance of projects 6. Portfolio has right number of projects Source: Portfolio Management for New Products, Cooper, Edgett, Kleinschmidt (Perseus Books, 2001) p149
Maturity levels for Portfolio Management… 23451 INITIALREPEATABLEDEFINED MANAGED OPTIMISING Ad Hoc Initiatives are selected for investment based on ad hoc processes. No overview is maintained of all investments Business cases may be needed for initiatives: Typically based on simple financial metrics. Business cases are considered in isolation. Once approved, there is no consistent or effective management and tracking of benefits. Making Lists Business cases are needed for most initiatives. Business cases are scored and assessed primarily on financial measures. An investment approval lifecycle is established and followed. But there are no effective processes to track the outcomes of investments and to manage the investment portfolio as a whole. Portfolio View Business cases are essential for all initiatives. The whole portfolio is captured and outcomes are tracked and reported, using basic measures of financial value, alignment, risk and initiative health. Refined Metrics Robust metrics of financial value, alignment, risk and health are established. Initiatives are categorised. Scorecards are used to summarise portfolio composition and health. Project selection is integrated with resource management. Portfolio management is pro-actively used as a means of aligning the portfolio to business strategy, through a cyclical investment process. Dynamic Execution There is feedback and continuous improvement. The portfolio is continuously monitored and adjusted to maximise its value. Portfolio management is no longer tied to cycles. Dynamic portfolio management is the accepted process. Initial tool implementation and investment capture. Extended metrics and scoring. Dynamic analysis and measurement. Value Capability
The Symptoms We Regularly See Arising From Poor Portfolio Management Can’t kill projects Leads to.. Too many projects, resource collisions Quality of execution suffers Underestimation of risks and costs Projects not aligned to strategy Over budget Projects Late Business needs not met Lack of confidence (in IT) Results in.. Benefits not received Situation Reluctance to say no to projects Lack of Capacity Focus Projects are “sold” on emotional basis -- not selected No strong review process Overemphasis on Financial ROI No clear strategic criteria for selection
The ”evil circle” for project workers 1. Neglect of capacity issues Competition and rationalisation 2. Assumptions of organisational slack 3. Assumptions of high individual capacity 4. Too much work ordered to individuals 5. Success out of heoric action Market Organisation Individual Project
Points of departure Value = A capability provided to the customer at the right time and at an appropriate price, as defined in each case by the customer. Features of the product of service, availability, cost and performance are dimensions of value. Waste = any activity that consumes resources but creates no value.
Value-adding time Typically 90-95% of total lead time is non-value added Examples of non-value adding activities: - Overproduction - Excess inventory - Defects - Waiting - Underutilized people - Excess motion - Transportation
Lean manufacturing A manufacturing philosophy which shortens the time line between the customer order and the shipment by eliminating waste.
Order-to-Delivery Cycle Distri- Distri- bution and bution and Customer Customer Service Service Custo-merPlacesOrderOrderEntryEngi-neeringDesignSched-ulingManufacturing Lead Times Purchasing Manufacturing Cumulative Lead Time Order-to-Delivery Cycle
Lean manufacturing focuses on eliminating waste in processes Lean manufacturing is not about eliminating people Lean production is about expanding capacity by reducing costs and shortening cycle times between order and ship date Lean is about understanding what is important to the customer
Lean thinking Specify value - can only be done by the ultimate customer Identify the value stream - exposes the enormous amounts of waste Create flow - reduce batch size and WIP Let the customer pull product through the value stream - make only what the customer has ordered Seek perfection - continuously improve quality and eliminate waste
Non-blaming culture Problems are recognized as opportunities - It is OK to make legitimate mistakes - Problems exposed due to trust People are not problems, they are problem solvers - Find solutions, do not ask ”who did it” and ”how shall we punish him/her?”
View on profits Old way: Price = cost + profit New way: Price – cost = profit
Uncovering Production Problems QualityProblems MaterialShortages MachineBreakdowns WorkloadImbalances WorkerAbsenteeism Out-of-SpecMaterials QualityProblems In-ProcessInventory l We must lower the water level! Visible Production Problems are Only 5% of the Total!
Implementation success factors Prepare and motivate people Employee involvement Share information and manage expectations Identify and empower champions Strategic alignment of lean initiatives Ask WHY? At least 6 times Deep commitment to excellence Atmosphere of experimentation Wise and realistic measurement and reward systems Implement pilot projects and market quick wins
Evicence of progress Smaller lot sizes Increased capacity/throughput Higher inventory turns More available floor space Improved workplace organization Improved quality Reduced inventories Reduced lead times Greater gross margin Improved participation and morale
(1) Waste from overproduction (2) Waste of waiting time (3) Transportation waste (4) Inventory waste (5) Processing waste (6) Waste of motion (7) Waste from product defects Waste--Operations
Individual effectiveness Wheelwright & Clark (1992)
Three kinds of time 1.Calendar time: The actual duration of a task from start to finish 2.Work time: The percentage of the calendar time that resources are available 3.Value-added time: The amount of work time that is actually value-added, i.e. that something is done during that time that the customer will gladly pay for.
Principles of lean project management 1.Precisely specify the value of each project 2.Identify the value stream for each project 3.Allow value to flow without interruptions 4.Let the customer pull value from the project team 5.Continuously pursue perfection
1. Precisely specify the value of each project Value is anything that a customer will gladly pay for Internal and external customers An activity on a project is value-added if it transforms the deliverables of the project in such a way that the customer recognizes the transformation and is willing to pay for it. Get rid of excessive hidden features, excessive complexity. Use one-page project summaries.
2. Identify the value stream for each project Every task within a project should be directed toward creating deliverables (i.e. outcomes with a customer value). The sequence of activities producing the project’s deliverables is the project’s value stream. Value stream mapping – focusing on assumed high-waste segments
3. Allow value to flow without interruptions A started project represent accumulating value Projects that are kept queuing or waiting represents waste. Projects are resource constrained, not time constrained. Think ”critical chain” instead of ”critical path”! Do not start projects ASAP, start them when there are available resources. Starting a project sooner does not mean it will end sooner. Construct reservation systems for key resources. Use dedicated resources, calculated buffers, identify bottlenecks. Never use FIFO, always make priorities. Use just-in-time decision making, just-in-time information flows and urgent stand-up-meetings
Critical path thinking Identify logical task flow in order to see what path of activities is the longest. By making sure all activities on the critical path is performed on time, the project as a whole will be delivered on time. Activities should be given time estimations and the started ASAP in order to keep the deadline. Problem: Resources often forgotten, high risk of delay when overloading resources
Critical chain thinking After identifying the critical path, one must also consider the resources necessary to perform these activities. The critical chain is the longest path through the project after resource leveling, i.e. making sure that each resource are used no more and no less than its availability. In the critical chain, buffers are used to handle variations – if not you must estimate each activity at its worst case duration. Otherwise there will be collisions => bottlenecks => delays
Obstacles to the value flow Functional departments. Lack of resources (caused by bad resource planning or project collisions) imply bottlenecks, queues and waiting times. Executive gate meetings and sequential approval cycles. Fire fighting and expediting. Changing requirements. Managerial interference i.e. organizational problems causing both waste and human irritation!
4. Let the customer pull value from the project team Each deliverable in a project has a downstream customer. That customer must be identified and activated as a demanding recipient of the deliverable. Tasks are linked to each other, not dependent. Customers are involved in the execution of the task from the beginning and are expected to provide frequent review and feedback Customers are expected to participate in stage- freeze-processes
5. Continuously pursue perfection Continuous efforts are required for the maintenance of a lean project management system. Teams must be persistently intolerant to waste.
For each theme Introductory lecture, ended by a set of discussion questions Set of articles published at the course homepage or handed out in paper format Hand-in of group report, containing (1) literature review, (2) group’s opinions/answers to discussion questions Plenary discussion seminar, all groups expected to be able to make short presentations and participate actively, following the instructions of the lecturer Of the five questions in the final written exam, at least four will be identical with discussion questions raised during the course
Discussion questions for April 13th Each group shall make short summaries of the literature and be prepared to present this summary in class (about 4 pages) Give examples of the seven wastes as applied to (1) a construction project, (2) a corporate training project Formulate five arguments for, and five arguments against, the application of lean thinking to project management Consider the five principles of lean project management in this lecture. For each principle, identify at least two success factors to make the principle work in practice If you succeed to implement lean project management, what would be the unwanted consequences of this success – i.e., what do you not want to happen? All summaries and answers/reflections to questions shall be handed over to Johann in paper format at the beginning of the seminar. Use the standardised cover form!!!