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Projects and Business Value
Projects and Business Value
Projects and Business Value
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which organizations drive change and progress in our world today. But what exactly is
a project? If we are to create value the project way, we will need to understand what
constitutes a project in the first place, then go on to explore the philosophy, principles
and best practices required to develop solutions the project way.
The definition of a project: what is a project and what is not
Projects are activities. Yes, almost everything we do is an activity. But which of those
activities can we rightly classify as projects? One thing we need to remember is that
projects are not shapeless endeavours. Every project is started to create business
value – it could be the creation of a new service or an infrastructure – imagine we
decide to build a warehouse or create a new software application for the marketing
department or plan for an event, say the company’s customer service week. Before a
project begins, we clarify and establish the intended value. Then, go on to determine
which activities must be pursued in order to create that value [the activities end in the
creation of that value].
The PMBOK® Guide of the Project Management Institute® (PMI) defines a project as
a temporary endeavour undertaken to create a unique product, service or result.
Let’s dive a bit deeper into this definition. What does it mean to say an endeavour is
temporary? Project as temporary means the endeavour is timebound. In other words,
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every project must have a beginning and a definite end. Of course, projects are
timebound endeavours. If projects are started to deliver business value, once that
value is created, the project ends. The project to put up the 5-bedroom house ends
with the creation of the facility. This means that an endeavour that doesn’t seem to
have an end cannot be classified as a project endeavour. When you enter a banking
hall, what do you see? A client service representative responding to customer queries;
tellers behind the shelves accepting deposits and issuing out withdrawals; a manager
in a translucent cubicle overseeing affairs, a uniformed security personnel opening
and closing doors, directing customers and ensuring general security. On which day
will these activities end? Never. You realize that so long as the bank continues to run,
these activities will recur in the same manner they happen every day in a never-ending
fashion. They are routine activities. They cannot be described as project endeavours.
The banking industry has aspects of its work that are projects. For example, all the
products and services the bank offers, the software systems they use, the strategies
they use to grow and expand their business and even the structure and modus
operandi that define their way of work have all been engineered by a project team you
did not see when you entered the banking hall. In these instances, their projects ended
with the creation of their respective value – when the products, services, solutions,
software are created and made ready for use. Projects are timebound endeavours.
Second point: Every project creates a unique outcome. The word unique means one
of a kind, peculiar, distinct, exclusive, none exactly like it. Project pursuits are unique
endeavours that create unique outcomes. This means that the deliverable or solution
that emerges out of a project endeavour does not have exactly same attributes as
another although arguments of similarities can always be made. It is true, the
marketplace is filled with substitute or competitive products that “lookalike.” But alas,
that’s the most we can say – lookalike; not same-same. You may make a case, for
example, that bottle water is pretty much the same everywhere, but you cannot
continue the conversation to say the same for their brand labels, colour, pH content
and the projects that created them. In a similar vein, you can make arguments of
similarities for products within the same organization but an argument for sameness
can be made only when one product is an exact copy of another. Quantities of iPhone
13 are the same, but iPhone 13 and iPhone 14 are two different products. A key
takeaway in this lesson is that you don’t need a project to create a copy of something
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that already exists. Another organizational function (production/manufacturing) is meant
to generate copies of prototypes that have been created by projects – more on this soon.
The concept of uniqueness does not only apply to the solution or deliverable. It also
applies to the project work. We emphasize on this uniqueness in this regard to mean
no two projects are the same. Projects can be similar but no two projects are the same.
The experiences, methodologies, lessons-learned, templates and checklists of a
similar past project may be imported and used to influence a current project’s outcome,
but we tailor those experiences to the unique nature and needs of the current project
we manage. Project practitioners are typically inclined to adopt a copy-and-paste
approach towards another new endeavour on the assumption of sameness and
encounter a lot of errors. Sometime ago I was called into an office to support a project
that delivered so well in the United Arab Emirates. And the idea is being implemented
in West Africa “same way.” True, the idea was the same but their environments are
different. And that is what makes the project different. There is always something
different or unique which project teams must explore and take into consideration when
delivering on a new project that is similar to other projects.
Let’s explore this attribute of uniqueness further in a situation where deliverables are
expected in copies or quantities. Projects end with the creation of a unique outcome –
mostly a final sample, along with documentation which serves as a stencil or body of
instructions so it can be multiplicated anytime. But the multiplication of that outcome
is not considered a project because it is a repetitive endeavour and does not create
unique value. It only creates what is already there. Each time we run out of stock and
we are increasing production to fill up the shelves, we are NOT engaged in projects.
We are replicating what is already there. iPhone 13 project has been completed long
ago that is why we have it on the market. When the stores run out and the company
increases production to restock the shelves, they are not engaged in a new project
because the endeavour will not create any new unique outcome. It only replicates what
is already there. It becomes a new project when they consider a modification: including
new features, changing style and performance attributes, etc. (such as a modification
from iPhone 13 to iPhone 14; Corolla 2021 to Corolla 2022) because modification of
an existing product is a project. Do you get it?
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The author who writes a book is engaged in project work. His project comes to an end
when all the chapters and the editing works are done and a final draft copy is made.
End of project. Production then takes over to multiply that sample. Anytime they run
out of stock on the market, the production unit just replicates what is there. It becomes
a new project when the author initiates an action to create a newer edition: update the
content, add new discoveries, change a perspective or even write an entirely different book.
But the endeavour to create more copies of the same old is not a project. It is production.
The musician who works on her songs to produce an album brings her project to an
end when all the songs have been developed and a prototype collection on a CD is
created (do we even have CDs these days). Thereafter, the effort to create quantities
of the CD and to create more each time they run out cannot be considered a project
because it doesn’t create anything new. It only replicates what is already there.
The project to create covid vaccine ends with the creation of the finally approved
prototype, the patented procedures highlighting proportions of inputs that create it.
Thereafter, manufacturing takes over to create more and more quantities to serve
demand. It becomes a new project when they want to change or reinforce the chemical
components if the viruses have mutated and former solution is no longer as potent.
The project to create iPhone 14 ends with the development of the finalized prototype
and the body of instructions that create it. Manufacturing, production and assembling
take over in order to multiply.
As simple as these modification projects may sound, the lines are not so hard and fast
with some endeavours.
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An argument can be made for post-project software upgrades that add feature
increments to improve stability, security and performance or even correct defects that
arise. Does one classify these works as part of the original project work, a new project
aimed at modification or part of after-sales service warranty agreements?
In the end, nothing in our world is hard and fast. What is more important is the
appreciation we give to value engineering that constitutes project work and mind-
mapping efforts that deliver more and more value to organizations and to humanity.
Deliverables, Business Value, Business Objectives,
Business Needs, Business Case, Project Objectives and Benefit Management
Deliverables, business value, business objectives and project objectives may be used
interchangeably, and rightly so, because they are interlinked and occur within the
same context or environment. However, there are variations among them.
1. Deliverables refer to the tangible [or intangible] solution or output of the project
(product, service or result); what we see after the project is done. If the project is
to create iPhone 14, then the physical prototype model is the deliverable. The
PMBOK® Guide Sixth Edition defines deliverable as any unique and verifiable
product, result, or capability to perform a service that is required to be produced to
complete a process, phase, or project. If the project is to come out with a 4-
bedroom house, then the house with its walls and gates become the deliverable.
The deliverable embodies the attributes – the features and functions – that serve
human or organizational needs. Sub-components of the final or overall deliverable
are commonly referred to as sub-deliverables or interim deliverables when the
intended final value is still in process. For example, the door is a sub-deliverable;
the window is also a sub-deliverable. In project management, work is broken down
to the development of sub-deliverables which are then integrated to constitute the
final deliverable.
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Services and results are intangible outcomes and assets. For projects that create
services, the deliverable will be the service model after its attributes have been
explored, processed and made ready to advance business value. An airline
company that intends to start a new service into domestic flights will have to commit
to project efforts to evolve the service and its attributes in a way that advances
business value. The deliverable becomes the service package and its attributes.
As intangibly as it may appear and shown merely as service description on paper,
it is often the outcome of long periods of planning and intensive value engineering
that takes into account the structure and dynamics of the marketplace, the
infrastructure and resources of the organization, assumptions, constraints, risks,
expectations of stakeholders, among others, in order to birth it.
Take note that deliverables do not only refer to the product, service or result the
project aims to create as enumerated above. In project management, deliverables
also refer to the templates, documentations, lessons learned and experiences
generated from a project. This category is for the benefit of the implementing
organization that undertakes the project, helping them work better next time. The
product goes to the customer, we take the lessons. Cool?
2. Business Value answers to the question: what is in it for the company undertaking
the project? What is the benefit? Yes, Apple Inc. has created iPhone 14. To what
end? Why did they do it? In discussing business value, it is important to note that
the underlying objective for any business undertaking is to make and maximize
profit. A project could be undertaken by a business to automate and optimize
operational processes. Although the solution could be a software or a capability to
perform a service, this deliverable impacts on the company’s performances and
ultimately increases revenue. A project could be undertaken by a university to
improve its cultural diversity. Although the solution could be scholarships for foreign
students, this move puts the university at the forefront of many students’
consideration around the world, ultimately impacting on its revenue. A business
could undertake a project to build a stronger social brand among a chosen
community. Although the deliverable could be a borehole facility, a school or a
hospital, this outreach creates visibility and positive emotions among the
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inhabitants of that community who end up choosing that brand’s services among
its many rivals.
PMI defines business value as the net quantifiable benefit derived from a business
endeavour…tangible, intangible or both. The deliverable holds the business value.
In connecting the deliverable to the business value, it is important to note that the
attainment of interim value is critical without which the ultimate value cannot be
realized. A visibility campaign, the introduction of new technology, early market
entry, more customers, improvement of existing products and services are all
interim value that connects to ultimate value.
3. Business Objectives refers to the business value defined in measurable terms for
the purposes of accounting and measuring results. When a project is launched, the
business value needs to be translated or readable in metrics so we know what to
measure. Think of it this way: A telco company undertakes an infrastructure project
to put up a telecom mast in order to offer reliable connections to a previously
unreached community. The tower is the deliverable; “gain new customers and
increase revenue” is the business value; but those definitions alone do not suffice
in quantifying value until the business objectives are stated. Hence, “acquire
20,000 new customers in two years and make $5million in cumulative revenue
within the next two years” could be some of the business objectives justifiably
stated for that project.
4. A Business Need explores reasons for undertaking the project and serves as the
catalyst for starting the project in the first place – sometimes called project triggers.
There are a wide range of business needs that could trigger a project. Evidence of
demand in a marketplace can propel a business to start a project to respond to that
call. When oil was first discovered in the western part of Ghana, the city experienced
lots of foreign invasion who had come to exploit the opportunity. This mad rush
triggered, among others, an increased demand for accommodation. Real estate
companies followed up immediately in order to respond to the need. Operational
and service deficiencies can also cause an organization to undertake a project to
improve their systems. The need to maximize profit can cause businesses to enter
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into new products and new markets, reinforce existing solutions or venture into
entirely new industries. New laws, regulations and compliance requirements,
technological advancements, competition, trends are all factors that could create
the need for new projects to begin. A business need is the embryo of the project;
where there is no need, a project has no reason to exist.
5. A Business Case is a cost-benefit analysis document that justifies the project from
a profit-making standpoint especially in cases where the business’s immediate
value to be realized is financial. It analyzes the returns on investment as against
the cost of fulfilling project objectives in order to justify the decision. It is the
outcome of an economic feasibility performed to align resources to expectations in
a chosen industry or business environment in order to determine if the expectations
are realistic. It may also be developed for several project ideas in order to put
forward the most profitable venture among a host of options. A poor business case
can cause an organization to terminate a project idea. A business analyst is
typically consulted by the sponsoring entity to lead this inquiry before a project
decision is made.
6. Project Objectives refer to the goals and objectives we hold towards project
management as an instrument in creating business value. Project objectives
include goals associated with the work in creating deliverables such as optimizing
resources, reducing wastage, completing the project to specifications and the
acceptance criteria, within schedule and within budget, efficiently managing risk,
ensuring quality in creating solutions that resonate with human needs, and many
more.
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A Benefit Management Plan includes:
• Strategic Alignment: How the benefits align with the strategic objectives of
the organization.
• Benefits Owner: Who will monitor, record and report on realized benefits.
Standards, Regulations and Compliance Requirements
Projects are pursued with established procedures, methods, processes, principles and
best practices. These are collectively known as standards and typically determined by
the discretion of the project manager and the team for a given project. Most people
come to a knowledge of these standards for undertaking project work by experience,
mentorship under senior practitioners and/or through formal training programs and
certifications such as the Project Management Professional (PMP®), Disciplined
Agile® Scrum Master (DASM), Agile Certified Practitioner (ACP®) and PRINCE2®.
Collectively, these experiences improve on our skill and judgement, showing us how
to administer projects. When we study into professional project management, we are
introduced to methods and best practices that are implemented all over the world as
recommended by the experiences, lessons-learned and ingenuity of practitioners who
practice project management in diverse fields. Training is faster and shortens the
learning curve in leveraging the experiences of those who have gone before us.
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Generally speaking, standards are not compulsory; they are recommendations. Nobody
gets arrested for not following best practices in achieving results. Eventually, we have
a decision to make, to choose what to apply to our work and what to ignore – according
to our discretion. However, there are some standards that are determined by law.
These special standards – known as regulations – are advanced to regulate industries;
to establish a surety in the compliance of some sensitive best practices. Regulations
are mandatory and administered through a regulatory body. Because these specific
procedures are established by law, the project team has no choice than to observe
and implement them as they are – according to the law. This means that although, as
a project manager, you will exercise the power of discretion for project processes,
there are some other procedures that you will need to comply because the law directs
them. Project practitioners have an obligation to update their knowledge on regulations
about their industries so projects they oversee do not contravene the law.
On an ongoing project, issues of new laws and compliance requirements are typically
escalated to the sponsor, senior management or other key stakeholders as they would
mostly require a workaround to the project underway. There are arbitrary situations in
which key stakeholders strongly insist on requirements that violate regulations. Such
cases are typically escalated to the organization’s legal department.
• On the project level, policies are established among management plans to govern
and direct project actions – spearheaded by the Project Manager.
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People, Process, Value
Knowing how to effectively deploy people in the most optimum approach to create
value is essentially the heart and soul of project management. We need to get it right
in terms of value that translate into business benefits. But that is not the end of the
story. We need to get it right in the use of optimized processes to create that value.
And finally, we need to get it right in how effectively we utilize resources to create and
advance business value. Let’s get into this in further detail.
Project Management
Project Management is the art and science of managing projects. It involves coordinating,
facilitating, integrating, leading and guiding the work to create value. It is the application
of knowledge and skills to project work. Knowledge is information, understanding and
insight one has into a particular subject matter or field of practice. When we say
someone is knowledgeable in medicine, it means the person has access to a pack of
information, understanding and insight into medical practices such that if your health
breaks down, she would know what to do in order to restore you unto perfect health.
When we say someone is knowledgeable in law, it means the person has access to a
pack of information, understanding and insight into legal practices that enable them
maneuver the field. Similarly, there is a host of information, understanding and insight
you need to have in order to command the field of project management.
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Business Value: Every project is authorized to create business value. As a project
manager, you need to know how to translate the project’s vision and the intended
business value into executable project activities. On the other hand, you will need to
keep the performance of these activities continually aligned to the business value in
the face of changing circumstances, adversities and risks.
Feasibility Research and Business Case: The role of the project manager has
largely evolved in recent times to include the ability to lead research work to establish
the project’s feasibility and to interpret the business case that justifies the investment
on the business level. The creation of a business case is the job of business and
financial analysts. But project managers need to understand and be able to interpret
the tools used by these experts to perform the cost-benefit analysis that informs the
projects investments and connects to market opportunities.
Scope, Method and Value Engineering: Project management is about the performance
of work elements and the connection of value. Although project managers do not
directly perform tasks that create the deliverables, they lead efforts and engineer the
value – together with domain experts – in order to determine the required tasks to be
performed. The enlightenment that comes with knowledge, skill, experience and exposure
is what establishes your technical dominance in project management to lead work
efforts and create deliverables.
Project Scheduling: Project management is also about planning and managing the
durations within which projects tasks are performed in order to meet the project’s
schedule objectives. Your ability to translate project activities into their respective
durations, determine their sequences, concurrences and map out their interdependencies
is key to your role as a project manager.
Financing, Cost Planning and Budgeting: The job of raising required funds to
sponsor the project is not the role of the project manager unless the raising of the
funds itself is established as a project; but the effort in planning for the cost in order to
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determine how much is needed to complete project work is a major aspect of the
project manager’s role. The enlightenment that comes with leading cost and
contingency planning and controlling project activities to cost will also come in handy
as a project manager.
Risk Management, Health, Safety and Environment: Every project is inundated with
risk, health, safety and environmental issues. Leading exercises and brainstorming
sessions to identify, qualify and quantify risks, and develop mitigation and response
strategies is pivotal in project management. Understanding the protocols of health and
safety that manage workplace hazards is also important to protecting the personnel
who deliver on projects.
Project Resources and Logistics: Projects are achieved with physical and material
resources, machinery and equipment, raw materials and supplies. Project managers
lead efforts to plan for these resources and their movement through just-in-time or
inventory models. As a project manager, you will need to plan an efficient process from
order to delivery that outlines a timely supply of goods and services while reducing the
cost and risk in the supply chain for both local and global outsourcing.
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Communication, Integration and Execution: The office of the project manager is
integration, where he leads project efforts and their implementation, communicates
with all stakeholders across board, facilitates key stakeholder and team meetings and
puts the pieces of project management together.
Change Management: Project managers are also change managers. The skills of
planning and implementation are fantastic but what truly sets you apart as a project
manager, in my opinion, is your ability to manage changes. Demonstrating knowledge
in the protocols of change management, when to handle issues on your level and
when to escalate matters to organizational leaders is key in change management.
Above all, reinforcing systems at a project’s onset to prevent unnecessary changes
from occurring is a game-changer especially in waterfall environments.
Project Closure: A controlled closure to climax project activities and hand over results
is the final ceremony of project management; it must be done well. Final project
reporting and financial closure will be key in closing projects. Putting the team together
to perform regression analysis in order to retrospect into the project and identify
variables that contribute to project outcomes will contribute great lessons learned for
future projects. Finally, knowing how to perform emotional closure and celebrate the
efforts of team members who contribute to project outcomes will boost their confidence
levels on their next endeavours and present you as a great leader.
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Documentation: The skill in preparing project documents is an ability you can’t forfeit
especially on waterfall projects.
Projects and Products
From the just-ended discussion, it is clear that projects relate to the work required to
deliver an outcome – the product [service or result]. Let’s take a moment to talk about
the product that is created out of project efforts in a project scenario that creates
consumer products. Typically, a project ends when the product is created. The
business’s operations – production, marketing, distribution, etc. – then take over to
make the product available on the market. The product begins a new life on the market
and in the hands of end-users. This period of the product’s life also requires some
studies and support system in a discipline known as product management. But the
scope of this book does not allow me to get to the nitty-gritties of product management.
Our interest here is to explore the relationship that exists between both disciplines,
namely, how projects and project management interface with products and product
management.
The Project Life Cycle and the Product Life Cycle: A project life cycle refers to the
period of the project’s existence, from the time the project idea is first conceived to the
final moment when the deliverable is created and handed over. This period is marked
by several stages, namely: initiation, planning, execution and closure.
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The product life cycle on the other hand refers to the period of the product’s existence,
from the time the product is first introduced into the market to the final days when it is
replaced with a newer or better equivalent or withdrawn entirely from the shelves. The
product life cycle is also marked by several stages, namely: introduction, growth,
maturity, and decline.
Although they may seem to have a sequential relationship, the project life cycle and
the product life cycle often rather overlap. Advertising and marketing efforts that take
place during the introduction stage of a new product may begin while the project is still
under development in order to create initial market hype, generate some early interest,
demand or pre-orders.
Several factors account for the replacement or withdrawal of a product from the
market. The decline stage of a product life cycle is marked by depressed profit margins
caused by market saturation and lower prices from competitors, new innovations that
supersede older products, and products that merely outlive their usefulness. R&D units
are established to research into consumer behaviour and use cases in order to
innovate and/or introduce entirely new products and services. The activities of R&D
trigger new projects in order to maintain an organization’s market relevance.
Businesses also examine trends that show when their products enter maturity stage
and when they descend to the decline stage to inform a regular calendar pattern on
the release of newer models.
For products with a relatively shorter product life cycle, the introduction of a new model
in the market triggers a new project life cycle for the next product version to begin;
project work also takes time. By the time the current product runs into the decline
stage, the new version from the project team will be ready and preparing for release.
Apple Inc. has demonstrated a one-year product life cycle for its range of iPhones –
iPhone 12 was released in October 2020, iPhone 13 in September 2021, and iPhone 14
in September 2022. It is easy to speculate that the project work towards the release
of a next model, iPhone 15, is in course; project management is typically backstage
endeavours, hidden from the rest of the world – at least for us as end-users.
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Projects and Operations
Operations are the daily administrative functions of an organization that are repetitive
in nature and produce recurrent results. Operational work encompasses all functional
units that keep the organization running regularly including the functions of central
administration, human resources, accounting, marketing, production, distribution,
client service management and many more. Operations are typically organized by
departments and specialties and serve as the frontend of the organization. When you
visit an organization, chances are high that most of the people you see work within
operations: from security guards to receptionists to about everyone you encounter –
unless the entity is a projectized one. Project team members are mostly out of sight.
In the banking hall illustration, all the identified personnel work within operations.
Operations are managed on the organizational level as part of its regular efforts in
running the vision whereas projects are vital offshoots meant to deliver specific
objectives to the organization.
Project ideas are typically conceived within operations. And when projects are
completed, the result, deliverable or solution from the project is handed over to
operations – who are the custodians of the “regular presence” of the organization. It is
important to note that projects have no home. When a project is completed, the team
is disbanded and the project ceases to be. In a handover ceremony, operations
receive the output of project and carry it out to fulfill the purpose for which it was
authorized. Consider the following differences between projects and operational
endeavours:
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o Whereas projects are temporary, operations are permanent. Operations never end;
they are ongoing. So long as the business exists, operations continue in perpetuity.
Projects, however, are temporary endeavours.
o Whereas projects are unique, operations are repetitive. Operational work is routine,
recurrent and repetitive in nature. Personnel who work within operations tend to do
the same thing over and over again in line with their job description. Project ideas,
however, are mostly different depending on the trigger of the moment.
o Although the idea of a project may be conceived within operations, they command
separate DNA. The heartbeat of projects is different from the heartbeat of operations.
The work rhythm and delivery cadence are different for either endeavour. Personnel
who work for organizations that run projects and operations will feel the difference.
Some elements will feel differently. For example, they will have different ways of
defining time. For operations, time has linear property – whatever we are unable to
complete today we will continue tomorrow; whereas for projects, time is a
countdown. Whatever time is lost is gone forever, and will be paid by the project.
o Operations are typically the frontend of the organization that define regular roles.
Projects are the backend of the organization that creates products, services,
strategies, systems, capabilities and many more.
o It is safe to argue that projects are done for operations. Project ideas are typically
conceived within operations, and the outcome of the project when realized is
handed over to operations.
o Project outcomes typically affect all aspects of operations. When a new product is
created for the business, for example, operational units are typically reinforced in
order to receive the new member: accounting, marketing, distribution,
warehousing, customer support all get affected.
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Organizational Systems and Project Governance
o Projectized organizations are organizations that are basically into projects. They
finish with one project, the next thing you find them doing is another project. You
see projectized in fields of construction, engineering, mining, oil and gas,
agriculture and many others. In a projectized organization, a project manager is a
project manager in the real sense of the word. He exhibits command and control
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over project resources. Team members give him primary allegiance. The
organizations have their focus on him because his work defines the business.
Projects and Programs
Organizations typically pursue multiple projects that contribute to the bottom line.
Organizational project management is a function that is established to bring structure
and control to all the endeavours undertaken within a business. PMI defines
organizational project management as a framework used to align project, program,
and portfolio management practices with organizational strategy and objectives, and
customizing or fitting these practices within the organization’s context, situation, or
structure. In the study of organizational project management, we unravel the larger
environment in which projects take place, the relationships that exist between and
among projects and other organizational endeavours in order to deliver the strategic
goals of the business.
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is a close relationship between Geisha soap and Rexona soap – a relationship that
does not exist between Geisha soap and Frytol cooking oil. As such, the Geisha
Project and the Rexona Project can be treated to a common program where Frytol will
not belong. In practicing organizational project management, Unilever can place all of
its different soap projects under a common program and all of its toothpaste projects
under another program. All the soap projects are likely to share similar resources,
infrastructure, assembly-line, consulting services, lessons learned etc. among them
because they are related in nature. This is the benefit we derive when we manage
projects that are related under a common program. The principle that governs the
formation of a program is simple – synergy. In constituting a program, or, in adding a
project to an existing program, you will need to analyze which synergistic value is
being anticipated. The point is, if there is no benefit, then there is no program. Program
management comes with its own principles and best practices to ensure the benefits
of synergy are realized. A program manager is typically appointed to manage this
objective. Take note that one project alone cannot constitute a program. If a project
has no semblance with any other project in the organization, it stands alone.
Portfolios and Strategic Management
A portfolio combines all standalone projects, programs, operations and other works
of an organization in order to deliver strategic objectives. The objective of portfolio
management is the integration of all organizational endeavours to realize business
goals developed under strategic management.
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STRATEGIC OBJECTIVES
PORTFOLIO
PROJECT 2
PROJECT 3
Project Management Office (PMO)
A project management office is what it is – an office for projects. But if project work is
not the typical “office work,” why an office for projects? Projects are usually out and
about endeavours and can happen anywhere. But usually, a physical designation is
dedicated within an organization in order to centralize and coordinate all of its projects,
and support the organization’s ongoing effort and maturity towards project
management, before, during and after projects. Many organizations have a PMO. The
setting up of a PMO by an entity is one of earliest indications that the organization is
concerned about its capacity to deliver and has prioritized its project management
maturity needs. Let’s examine some functions a PMO may serve an organization.
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o A PMO serves as a central repository for the organization’s OPAs and its knowledge
assets, policies and standards. PMOs typically have libraries that house all the
accumulated experiences, templates, checklists, methodologies and lessons-
learned from past projects.
o A PMO mentors a new project manager in the ways, methods, philosophy, culture,
practices and disposition of the organization on projects.
o A PMO may raise a new team for a new project. Especially when the project team
is to be created from members of operational units, the PMO fronts this effort.
The structure and style of a PMO differs from one organization to the other.
Directive PMOs are the most powerful type of PMOs. Directive PMOs actually take
charge of the projects by directly managing them. A project manager who works in this
structure reports to the PMO.
Supporting PMOs are the least powerful type of PMOs. They exist to support and
serve projects in specific areas of need in order to fulfill their objectives.
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Organizational Process Assets (OPAs)
Organizational Process Assets (OPAs) are the historical information assets (typically
documented) of an organization from previous projects that can be used to influence
a current project’s success. OPAs represent the cumulative experiences of the
organization over the years on its projects. Because of OPAs, we don’t get to reinvent
the wheel each time we undertake a project. Some procedures and strategies come
in handy because of OPAs. We don’t do a lot of things from scratch simply because
they have been developed, tried and tested from past projects. Of course, no two
projects are the same. But the concept of tailoring allows us to tailor past experiences
to brand new endeavours.
A good lessons-learned document must cover above areas, helping the organization
in their continuous improvement efforts on projects.
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Enterprise Environmental Factors (EEFs)
Internal EEFs are factors that are specific and peculiar to an organization and may not
affect others in a different organization. A factor peculiar to an organization (say, MTN)
will not affect another organization (say, Vodafone). External EEFs emanate from the
generic industry and will affect both MTN and Vodafone alike, and all other players in
the telecom industry. Similarly, factors differ from one industry to another. The
environment of a construction project is different from the environment of a software,
pharmaceutical or a movie project; factors that affect their projects will most likely differ.
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When Projects Start
(Project Triggers)
o Strategic Opportunity: Not all projects are pursued out of conscious plans by a
strategic team. Some projects happen because they were opportunities triggered
from external forces that align with the organization’s position in the marketplace.
A number of projects also gets triggered this way. As the FIFA World Cup
tournament moves to Qatar in 2022, we expect opportunities to be invariably
created for businesses in the hospitality, fashion and tourism industry. Covid-19
created an opportunity for distillery businesses to create hand sanitizers. Strategic
opportunities mostly spring out spontaneously. They are also typically timebound.
The same way they fizzle in, they fizzle out. And when the organizations for whom
the opportunities are created do not act promptly, they lose out.
o Market Demand: Market demand represents the large array of human needs,
wants, necessities or luxuries people are willing and ready to pay for, ranging from
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obvious regular needs to hidden or latent needs that will require surveys to
uncover. Lots of project get triggered this way. There will always be need for food,
clothing, shelter, cosmetic products, mobile phones, internet facilities, cars, roads,
the list is endless. Real estate companies put up residential and commercial
facilities to address the need for shelter and business operations. The farmer
cultivates maize because there will always be need for corn. Trends and shifting
market forces also create new demand for certain types of products and services
all of which call for the need for new projects to be undertaken.
o Legal Requirements: The introduction of new laws and regulations can also
cause projects to be triggered in affected organizations in order to comply with the
new order. In Ghana, a new order was passed by the National Communications
Authority that required every phone user to re-register their SIMs with a newly
introduced national identity card. This regulation caused all telco companies to start
a SIM re-registration project for all their subscribers. Triggers emanating from legal
requirements is not just about new laws. A project is triggered by legal requirements
when the project is also being done by organizations in order to satisfy an existing
requirement in a particular industry. For example, mining firms must understand
the need to undertake a “land reclamation project” each time they complete a
project in order to return used lands to an improved state – because it is a legal
requirement – noncompliance can lead to a revoke of license by the state. In
discussing legal requirements as a project trigger, it is important to note that there
is usually low internal motivation by the entities themselves to do the projects –
most of them will never get done in the absence of the law. It is also important to
remember that not all legal requirements lead to brand new projects. Others lead
to mere modifications. When a law was passed for every public building to modify
their structure to enable access by persons living with a disability, lots of
modification projects were triggered.
o Stakeholder Request: Some projects are pursued because they come as a direct
request from organization’s stakeholders. The financial institution sponsoring your
project may request for a feasibility report, your board of directors may require the
management team to undertake research, your client base may request for an
improvement of service, etc.
o Social Needs: Societies are packed with problems most of which call for projects
to address them. Governments, humanitarian and development organizations are
mostly structured to identify these community challenges and undertake projects
to address them. A community that lacks portable drinking water may have an NGO
step in to undertake a project to offer them that facility. Disasters also create the
need for new projects to begin in order to restore what is lost.
This is not the end of the list. Anything, whatsoever, that causes an organization to
undertake a project is a project trigger. A project trigger begins a project discussion.
Finally, if a project has commercial interest as its primary objective, then something
else must be discussed too – the business case.
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Developing a Strong Business Case
(Project Selection Methods)
When a project is conceived with the main objective of making and maximizing profit,
a trigger will not be enough to justify the project. There is the need for the business to
subject the project investment to a cost-benefit analysis in order to justify its ability to
meet that objective. A business analyst is typically consulted for this exercise before a
project decision is made. A cost-benefit analysis evaluates a project’s benefits or its
returns on investments as against the project cost in order to determine its profitability.
If the project is analyzed to be a loss, the project idea is terminated. Cost-benefit
analysis also examines a number of profitable project options in situations where the
business is open to alternatives in order to propose the most profitable project of all.
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Two (2) Different Approaches to Project Selection
In this book, I focus on the benefits measurement methods and how they are used
with a deeper illustration of the net present value.
Net Present Value (NPV) compares future revenue projections in today’s terms
(present value) against the cost of investment in order to determine the profitability of
the project. The net present value approach first computes for the present value of
future benefits and compares that present value against the cost of investment. Money
reduces in value with time because of inflation – we all know this. NPV explores
profitability based on this reality. So, if say, you invest $5million into a project and
expect a total revenue of $9million in three years, it will be incorrect to read the
profitability on face value and conclude $4million as the project’s profit. You must first
compute for the present value of the future $9million; in other words, what is the value
of three years’ $9million today? It is typically a lesser amount because of a backward
adjustment for inflation.2 After you generate the present value, the next step will be to
compare that value against your $5million cost of investment in order to determine the
project’s profitability. Take a look at a sample illustration below:
2If the present value of five years’ $3.5million is $2million, what it means is that whatever you buy for
$2million today, you will need $3.5million to buy the same thing in five years’ time all things being
equal.
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- You compute for the present value of $9million and realize it to be $6.5million.
- You subtract your cost of investment of $5million from the present value of
$6.5million and your profit is $1.5million (Not $4million).
- Conclusion: A project that cost $5million and returns $9million in three years
has $1.5million as profit (remember this is just an example).
NPV must be positive in order to be declared profitable. The bigger the NPV, the better.
For any number of options, the project with the biggest NPV presents the biggest
opportunity. An NPV of zero breaks even. Negative NPVs are losses and should not
be considered. Some projects are actually concluded to be losses and terminated after
their NPVs are calculated. Although their future values look bigger on paper, they turn
out to be smaller in reality than their cost of investment – bad business. The formula
for present value is presented below:
Internal Rate of Return (IRR) is the annual rate of growth an investment is projected
to generate. It is a financial measure of the attractiveness of an investment calculable
in percentages. The bigger the IRR, the better. For any number of options, the project
with the biggest IRR presents the biggest opportunity.
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Return on Investment (ROI) is a financial ratio that measures the performance of an
investment by dividing the investment’s benefit by its cost. An ROI of 1.0 breaks even.
The ROI must be greater than 1.0 to be declared profitable. The higher the ratio, the
greater the benefit. For any number of options, the project with the highest ROI
presents the biggest opportunity.
Benefit-to-Cost Ratio (BCR) is a ratio that represents the relationship between the
relative costs and benefits of a proposed project in order to determine its profitability
by dividing the benefit of the project by its cost. The project cost outweighs its benefit
and should not be considered if the BCR is less than 1.0. A BCR of 1.0 breaks even.
The BCR must be greater than 1.0 to be declared profitable. The higher the BCR, the
greater the benefit. For any number of options, the project with the highest BCR
presents the biggest opportunity.
Payback Period (PP) is the length of time it takes for a business to recoup its initial
investments in a project before it starts making profit. The shorter the payback period
the better. All things being equal, a shorter payback period is a preferred option for
businesses and investors.
Opportunity Cost (OC) represents what you lose in doing something else. It is the
opportunity a discarded option commands. For any number of options, opportunity
cost is the [forgone] business gains of the next best option. The opportunity cost of an
investment must be smaller in order to validate the choice of the first option.
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When Projects End
(Project Closure)
Ideally, a project comes to an end when its objectives are met. There are other
conditions, however, that could cause a project to be terminated such as:
o When it is foreseen at any stage of the project that the objectives cannot be met.
o When funding is exhausted or no longer available for the project. When a project is
deprioritized, it can cause funds to be shifted away to more important concerns.
o When human or physical resources are no longer available for the project.
For any of the above reasons, there is the need for the team to perform administrative
closure. Administrative closure allows the team to state the reasons for which a given
project is being ended.
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