Exploding the project myths – 4
by jed simms on June 15, 2011
‘Time – cost – specification’ — you can only have two out of the three
‘Time-cost-specification’ – is called the ‘iron triangle’ for projects. The goal is to deliver any project on time, on budget, and to specification. However, it is often argued that this is too demanding and unreasonable, so something has to give.
As time and budget are very visible and routinely reported, the element most often sacrificed is ‘to specification’ (scope). Sacrificing scope leads to businesses assessing an ‘on time/on budget’ project that fails to deliver the expected business outcomes as more acceptable and successful than a project that delivers the desired business outcomes in full but runs over in cost or time.
This does not make sense. Starting a project with a view to compromising the value is an admission of failure up front.
The Real Truth
Scope (specification) and value are the primary control and measurement parameters
The primary focus of a project needs to be on the one dimension that is missing – value. Every compromise to time, cost or specification/scope reduces the resultant value. Delivering the value is the reason for doing the project.
Time overruns reduce value by extending the time before benefits are fully realized.
Cost overruns reduce the net value realized.
But scope changes can destroy all of a project’s value.
Instead of thinking in terms of managing the ‘iron triangle’ you should think in terms of optimzing the scope and (net) value.
TOP argues that, having defined your project you then need to optimize your scope and value.
You can make informed optimization decisions by asking four simple questions:
- Of each outcome – what value does it enable, support or deliver? – Is this outcome necessary?
- Of each outcome and its benefits – how much does it cost to deliver? – Is it worth it?
- Of each high cost/low value outcome/benefit with downstream dependencies – How can we adapt it to reduce its cost of delivery while preserving its downstream value contribution?
- Of the scope – is it worth spending more now to reduce later ongoing operating costs?
Your business goal on any project is to realize the optimized net value – to deliver 90% of the value for 60% of the cost – not just deliver ‘something’ on time and on budget.
One comment
I belive that there are four elements of the investment lifecycle , the business case development component where the need and drivers should be described and costed, project delivery, benfits realisation and investment evaluation.
However in order apply this approach there are a number of sub processes involved. These are really done, for example in the development of the business case and costing environment it should include a detailed work breakdown structure, this process would determine what are the essentail requirments (outcomes and objectives), priority (what can be given up and what can not be, thus causing the project to be terminated) and resources (factual assessment of labour and material costs).
The purpose of a WBS is to document the scope of the project. Its hierarchical arrangement allows for easy identification of the activities (the actual items to be done in a project). The WBS is an exhaustive process of the project scope (indeed the backbone) for much of the project planning. All the work undertaken must be capable of tracing its origins from one or more of the WBS components.
Breaking the work down into individual activities with the detail of dates, dependencies, and named resources helps accomplish the following key objectives:
• Develops an objective, rational view of the amount of work required
• Helps team grasp the skills required and amount of resources required for the project
• Provides a clear framework for assigning to individuals a clear task definition and delegate the responsibility for completion
• Lays a foundation for analysing the task dependencies and isolating and managing risks
• Lays a foundation for developing a bottom-up estimate for the Project Management Plan
The fact is little time and resources are provided to understand the grandular requirments at the investment stage, which leads to underdeveloped investments failuring at the project or befits realisation phases.
Finally, few investments conduct informative evaluation points to measure performance. Most investments undertake summary evaluations at the either the project level (project delivery performance including cost, time ,scope and quality) and or at the end of benefits relaisation phase. The evaluation process is almost always an undersated activity really described in any project plans and documents. Without incremental measurement it is not possible to establish
if the investment is achieving it objectives and expected outcomes to which project performnce is only one.
by Barrie on June 15, 2011 at 2:46 pm. #