2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 1 By Harold Kerzner, Ph.D. Project Management Case Study Pharmacy Industry 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. DRUG DEVELOPMENT (LIFE CYCLE PHASES) DISCOVERY (R & D) DISCOVERY (R & D) DEVELOPMENT COMMERCIAL- IZATION COMMERCIAL- IZATION 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. DRUG DEVELOPMENT (MANAGEMENT STYLE) DISCOVERY (R & D) DISCOVERY (R & D) DEVELOPMENT COMMERCIAL- IZATION COMMERCIAL- IZATION PROJECT MANAGEMENT PROJECT MANAGEMENT PROGRAM MANAGEMENT PROGRAM MANAGEMENT PRODUCT MANAGEMENT PRODUCT MANAGEMENT 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. DRUG DEVELOPMENT (COST) DISCOVERY (R & D) DISCOVERY (R & D) DEVELOPMENT COMMERCIAL- IZATION COMMERCIAL- IZATION $850 MILLION 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. DRUG DEVELOPMENT (TIMING) DISCOVERY (R & D) DISCOVERY (R & D) DEVELOPMENT COMMERCIAL- IZATION COMMERCIAL- IZATION 3000 DAYS 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Commer- cialization Solution/ Prototyping Solution Through Adoption Solution Through Invention Debugging Prototype & Scale-up Problem Solving Experiment- ation & Calculation Idea Formulation & Evaluation Technical Feasibility Rough Design Concept & Evaluation Economic Feasibility Modeling the Innovation Process Problem Recognition Recognize Technical Need Recognize Market Need Current State of the Art 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Penetrate New Markets Extend Existing Markets Strengths, Weaknesses, Opportunities, Threats The R&D Strategic Planning Process Support for Present Products Defensive R&D Penetrate New Markets Extend Existing Markets Environmental Analysis Competitive Forces R&D Goals, Objectives and Strategies Integration into the Strategic Plan Evaluation and Selection of R&D Projects Feedback Support for New Products Offensive R&D 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Project Selection Process Environmental Situation Competitive Situation Resources & Capabilities Analysis of Past Performance Project Definition Opportunities & Threats Strengths & Weaknesses Specification of Present Project Project Objectives Impact Analysis Identify Skills Needed Develop Potential Benefits Identify Skills Needed Develop Potential Benefits Risks Cost / Schedule Technical Decisions Accept The Project Reject The Project 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Differences in Strategic Importance Project A Project B Project C AvailabilityQuality Product Variety Price Features Marketing Least Important Medium Importance Medium Importance Most Important Most Important Marketing Importance 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Differences in Strategic Importance Project A Project B Project C Cost Reduction Quality Rate of Changes Hard Automation Innovation/ Technology Manufacturing Least Important Medium Importance Medium Importance Most Important Most Important 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 0%10%20%30%40%50%60%70%80%90%100% Mortality of New Product Ideas Cumulative Time 60 Screening Number of Ideas Business Analysis Development Test Commercialization One Successful New Product 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Cumulative Expenditures and Time Percent of Total Evolution Expenditures ( Cumulative ) (Expense Items Plus Capital Expenditures) Cumulative Time 100% %10%20%30%40%50%60%70%80%90%100% Screen Business Analysis Development Test Commercialize Total Expenditures Capital Expenditures Expensed Items 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 13 Todays View of Project Management Project management has evolved into more of a business process rather than just a project management process. Today we are managing our business by projects, and project management is being applied to both traditional and nontraditional projects. Each project is seen as a collection of value scheduled for realization. Project managers are now filling program and product management positions 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 14 Changes in Project Management ROLE AND RESPONSIBILITY MONITOR AND CONTROL DURING EXECUTION PLANNING FOR PROJECT EXECUTION STRATEGY DEVELOPMENT AND PROJECT SELECTION INPUT WHEN BROUGHT ON BOARD AFTER CONTRACT AWARD OR AT END OF INITIATION DURING PROPOSAL PREPARATION DURING CONCEPT DEVELOPMENT AND INPUT IN THE BID/NO-BID DECISION KNOWLEDGE REQUIREMENTS TECHNICAL KNOWLEDGE (COMMAND OF TECHNOLOGY) MOSTLY TECHNICAL BUT SOME BUSINESS KNOWLEDGE MOSTLY BUSINESS BUT SOME TECHNICAL KNOWLEDGE (UNDERSTANDING OF TECHNOLOGY) CUSTOMER EXPECTATIONS DELIVERABLES BUSINESS SOLUTIONS DEFINITION OF SUCCESS MEETING THE TRIPLE CONSTRAINT MEETING THE TRIPLE CONSTRAINT MULTIPLE SUCCESS CRITERIA (BOTH PROJECT AND BUSINESS SUCCESS) HISTORICAL 1990S TODAY VIEW(AND IN THE FUTURE) 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 15 Defining Project, Program and Product Success PROGRAM SUCCESS PROJECT,PROGRAM AND PRODUCT SUCCESS ARE INTEGRATED PROJECT SUCCESS PAST VIEW PRESENT VIEW UNCOUPLED COUPLED 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 16 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 17 Customers Expectations Contractors Expectations Business Solutions Long Term Strategic Partnerships Engagement Expectations 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Before and After Engagement Proj. Mgt. 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 value of the deliverable Focus on lifetime value of the deliverable Contractor provides minimal support for client with their customers Support client with their customer value analyses (CVA) and customer value measurements (CVM) Utilize one inflexible, linear EPM system Access to contractors many nonlinear systems 18 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. The Need for Business Solution Partners Not all companies have the ability to manage complexity in new product development Solution providers must learn while managing the project Solution providers can bring years of history to the table Solution providers have a greater understanding of cultural change and the ability to work within almost any culture 19 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 20 Two Types of Projects Traditional Project: Focus on the Triple Constraint Nontraditional Project: Focus on the Triple Constraint and Value 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 21 Percent of Projects Using Project Management Current use of project management 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 22 Traditional Projects Nontraditional Projects Fuzzy, Gray Area Projects Radical Breakthrough High Technology Platforms Maintenance and Enhancements Linear thinking Structured processes Within existing technology With existing resources Without changing the culture Nonlinear thinking Spontaneous Technology breakthrough needed Consultants and contractors required Cultural change highly probable Elements of Complexity 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 23 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 team and the sponsor) The statement of work is reasonably well- defined The target is stationary 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 24 The Nontraditional (Complex) Project Time duration can be 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 (and are part of the governance) may not be there at completion The statement of work is ill-defined and subject to numerous changes The target may be moving 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 25 Why Traditional Project Mgt. Must Change New projects have become: Highly complex and with greater acceptance of risks that may not be fully understood during project approval More uncertainty in the outcomes of the projects with no guarantee of value at the end Pressed for speed-to-market irrespective of the risks 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 26 Why Traditional Project Mgt. Must Change The statement of work (SOW) is: Not always well-defined especially on long- term projects Based upon possibly flawed, irrational or unrealistic assumptions Inconsiderate of unknown and rapidly changing economic and environmental conditions Based upon a stationary rather than moving target for final business value 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 27 Why Traditional Project Mgt. Must Change The management cost and control systems (enterprise project management methodologies [EPM]) focus on: An ideal situation (as in the PMBOK Guide) Theories rather than the understanding of the work flow Inflexible processes Periodically reporting time at completion and cost at completion but not value (or benefits) at completion Project continuation rather than cancelling projects with limited or no value 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 28 MANAGING TRADITIONAL PROJECTS MANAGING NONTRADITIONAL PROJECT Single person sponsorshipGovernance by committee Possibly a single stakeholderMultiple stakeholders Project decision-makingBoth project and business decision-making Inflexible project management methodology Flexible or fluid project management methodology Periodic reportingReal time reporting Success is defined by the triple constraint Success is defined by the triple constraint and business value KPI are derived from earned value measurement (EVM) Unique value-driven KPI can exist on every project Traditional Versus Nontraditional Projects 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 29 The Need for Value as a Driver Factors promoting value-driven project management include: Identifying the value of business opportunities that do not yet exist Identifying better ways of selecting projects with the greatest potential value Identifying better ways of measuring the value of projects once they begin and/or end Making better decisions in turbulent and highly dynamic markets Measuring value has become a competitive necessity Implementing customer-value programs 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 30 The benefits of Value as a Driver Value-driven project management leads to: Better decision-making especially when considering non-financial (intangible) benefits Better analysis of options especially when considering scope changes and tradeoffs Better alignment of projects to corporate objectives during business case development Easier to get stakeholder consensus on value than on just the triple constraint Better persuasive and defendable justification for funding during portfolio project selection activities Typical project portfolios can expect an increase of 30% or higher in total portfolio value, but can be industry-specific 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 31 Postulate #1 It doesnt matter if you execute a project extremely well or extremely poorly if you are working on the wrong project. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 32 Postulate #2 Being on time and on budget is not necessarily success. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 33 Postulate #3 Completing a project within the triple constraint does not guarantee that the necessary business value will be there at project completion. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 34 Postulate #4 Having mature project management practices, including an enterprise project management methodology, does not guarantee that business value will be there at project completion. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 35 Postulate #5 Price is what you pay. Value is what you get. Warren Buffett 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 36 Postulate #6 Business value is what your customer perceives as worth paying for. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 37 Postulate #7 Success is when business value is achieved. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 38 Following a project plan to conclusion is not always success if business-related changes were necessary but never implemented. Postulate #8 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 39 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 part of the success criteria (2004) (2008) 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 40 Redefining The Triple Constraint Success Criteria Cost Time Quality (or Scope) 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 41 Secondary Success Factors Secondary Factors: Customer Reference Follow-on Work Financial Success Technical Superiority Strategic Alignment Regulatory Agency Relationships Health and Safety Environmental Protection Corporate Reputation Employee Alignment Ethical Conduct (Sarbannes-Oxley Law) 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 42 Disneys Prioritization of Constraints Safety Aesthetic Value Quality Time Cost Scope 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 43 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 and the customer receives the desired value. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 44 New Developments in Project Management New Success Criteria Key Performance Indicators Dashboard Design Governance Measurement 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 45 Defining Value at Initiation How do we define value in the early life cycle phases of a project when value may be just a perception? 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 46 A New Job Responsibility Part of the project managers new role is to understand what are the key metrics (KPI) that need to be identified and managed for the project to be viewed as a success by all of the stakeholders. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 47 A New Job Responsibility Defining project-specific metrics and key performance indicators are necessities in order to get stakeholder agreement. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 48 Selecting The Right KPI Not everything that counts can be counted. Not everything that can be counted counts. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 49 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 Project Management) 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Uses for a KPI Selecting the right KPI will: Allow for better decision-making Improve results Help identify problem areas faster Improve customer-contractor relations 50 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Complexities with Identifying KPI It may be difficult to get customer and stakeholder agreement on the KPI Must determine if the KPI data is in the system or needs to be collected Must determine the cost, complexity and timing for obtaining the data May have to consider the risks of information system changes and/or obsolescence that can impact KPI data collection over the life of the project 51 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 52 The Need for Changing Metrics Metrics can change, from project to project, at each life cycle phase and over time because of: The way the company defines value internally The way the customer and contractor jointly define success and value at project initiation The way the customer and contractor come to an agreement at project initiation as to what metrics should be used on a given project New or updated versions of tracking software Improvements to the enterprise project management methodology and accompanying PMIS Changes in the enterprise environmental factors Changes in the assumptions 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 53 New Developments in Project Management New Success Criteria Key Performance Indicators Dashboard Design Governance Measurement 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 54 Dashboard Design 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 55 Dashboards Versus Scorecards FACTORDASHBOARDSSCORECARDS Performance Operational issues Strategic issues WBS level for measurement Work package level Summary level Frequency of update Real time data Periodic data Target audienceWorking levelsExecutive levels 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Dashboard Design and Layout Factors that must be considered include: Colors Positioning Brightness Orientation Saturation Size Texture Shape 56 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Dashboard Design and Layout Some rules exist for dashboard design and layout: Rules for selecting the right artwork Rules for artwork placement Rules for color selection Rules for accuracy of information 57 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Examples of Rules Must select the correct metaphor (i.e. gauges cannot show trends; pretty artwork can distract users from critical information) There must be a speed of perception (i.e. upper left corner more critical than lower right corner) Visualization (i.e. easy to read and understand) Aesthetics (i.e. pleasing to the eye) 58 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 59 New Developments in Project Management New Success Criteria Key Performance Indicators Dashboard Design Governance Measurement 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 60 When to Assess Value We must establish a time frame for how long we are willing to wait to measure the value or benefits from a project. This is particularly important if the actual value cannot be identified until some time after the project has been completed. 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 61 New Developments in Project Management New Success Criteria Key Performance Indicators Dashboard Design Governance Measurement 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. KPI for Added Value Decision-Making Cost of Obtaining Added Value Low High LowHigh Percentage Increase in Value RISK BOUNDARY Unacceptable Risk Acceptable Risk 62 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. Cost versus Value Paradise Cemetery Cost of Obtaining The Value LowHigh Low High Impact of The Value Sustained Competitive Advantage Sustained Competitive Advantage Region of Competitiveness Danger Zone 63 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 64 Failures Projects Time Successes MATURITY EXCELLENCE 2 YEARS 5 YEARS 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 65 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 66 Best Practices Questions DEFINITION VALIDATION IMPLEMENTATION PUBLICATION UTILIZATION MANAGEMENT REVALIDATION DISCOVERY CLASSIFICATION 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 67 Question #1 What is the definition of a best practice in project management? (Past view vs. present view) DEFINITION 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 68 Question #2 How do we discover best practices? Where should we look first? Who is responsible for the discovery? DISCOVERY 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 69 Question #3 How do we validate that something actually is a best practice? Who should perform the validation? VALIDATION 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 70 Question #4 Are there levels or categories of best practices? If so, who is ultimately responsible for determining the levels? CLASSIFICATION 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 71 Question #5 Who has the responsibility for the ultimate management/ administration of the best practice once it is identified? MANAGEMENT 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 72 Question #6 Who has the responsibility for revalidation of current best practices? How is this accomplished and how often? REVALIDATION 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 73 Question #7 How are best practices commonly used by companies once they are validated and/or revalidated? UTILIZATION 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 74 Question #8 What techniques are available by which best practices can be effectively communicated to the employees within a company? PUBLICATION 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 75 Question #9 How do we get employees to use a best practice? How do we validate that it is used properly? IMPLEMENTATION 2009 INTERNATIONAL INSTITUTE FOR LEARNING, INC. 76 Conclusion