Project management chapter 2 summary note PDF

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2 Why Project Managers Need to Understand Strategy -There are 2 main reasons project managers need to understand their organization’s mission and strategy: So they can make appropriate decisions and adjustments. 2. So they can be effective project advocates.2 The Strategic Management Process: An Ove...

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2.1 Why Project Managers Need to Understand Strategy -There are 2 main reasons project managers need to understand their organization’s mission and strategy: 1. So they can make appropriate decisions and adjustments. 2. So they can be effective project advocates. 2.2 The Strategic Management Process: An Overview -strategic management: The process of assessing “what we are” and deciding and implementing “what we intend to be and how we are going to get there.” Strategy describes how an organization intends to compete with the resources available in the existing and perceived future environment.

-The typical sequence of activities of the strategic management process: 1. Review and define the organizational mission. 2. Analyze and formulate strategies. 3. Set objectives to achieve strategies. (Specific, Measurable, Assignable, Realistic, Time-related) 4. Implement strategies through projects. 2.3 The Need for a Project Priority System -priority system: The process used to select projects. The system uses selected criteria for evaluating and selecting projects that are strongly linked to higher-level strategies and objectives. -project portfolio: A group of projects that have been selected for implementation, balanced by project type, risk, and ranking by selected criteria. -3 problems of implementation of projects without a strong priority system:

2 1.The Implementation Gap: The lack of consensus between the goals set by top management and those independently set by lower levels of management. This lack of consensus leads to confusion and poor allocation of organizational resources. 2.Organizational politics: Actions by individuals or groups of individuals to acquire, develop, and use power and other resources to obtain preferred outcomes when there is uncertainty or disagreement over choices.  sacred cow: A project that is a favorite of a powerful management figure, who is usually the champion for the project.  project sponsor: Typically a high-ranking manager who champions and supports a project. 3.Resource Conflicts and Multitasking

2.4 Project Classification

-Compliance projects are typically those needed to meet regulatory conditions required to operate in a region -Operational projects are those that are needed to support current operations. -Strategic projects are those that directly support the organization’s long-run mission. 2.5 Phase Gate Model -Phase gate model: A structure process to review and evaluate each project phase to determine whether to continue, revise, or cancel the project.

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2.6 Selection Criteria -net present value (NPV): A minimum desired rate of return discount (e.g., 15 percent) is used to compute present value of all future cash inflows and outflows.

-a firm may support projects that do not have high profit margins for other strategic reasons:  To capture larger market share.  To make it difficult for competitors to enter the market.  To develop an enabler product, which by its introduction will increase sales in more profitable products.  To develop core technology that will be used in next-generation products.  To reduce dependency on unreliable suppliers.  To prevent government intervention and regulation.

4 -Two Multi-Criteria Selection Models:  the checklist (list of questions to review potential projects and to determine their acceptance or rejection).  multi-weighted scoring models (weights x scores = total weighted score for the project) -priority team: The group (sometimes the project office) responsible for selecting, overseeing, and updating project priority selection criteria.

2.7 Applying a Selection Model -the most important criterion for selection is the project’s fit to the organization strategy. -Senior management should be responsible for prioritizing projects. 2.8 Managing the Portfolio System -Management of a portfolio system requires two major inputs from senior management: 1. senior management must provide guidance in establishing selection criteria that strongly align with the current organization strategies. 2. senior management must annually decide how they wish to balance the available organizational resources (people and capital) among the different types of projects. -The governance team, or project office, is responsible for publishing the priority of every project and ensuring the process is open and free of power politics. -A major responsibility of the priority team is to balance projects by type, risk, and resource demand. -2 types of risk are associated with projects: 1. risks associated with the total portfolio of projects, which should reflect the organization’s risk profile. 2. specific project risks that can inhibit the execution of a project.

-Bread-and-butter projects are relatively easy to accomplish and produce modest commercial value. They typically involve evolutionary improvements to current products and services. -Pearls are low-risk development projects with high commercial payoffs. They represent revolutionary commercial advances using proven technology.

5 -Oysters are high-risk, high-value projects. These projects involve technological breakthroughs with tremendous commercial potential. Examples include embryonic DNA treatments and new kinds of metal alloys. -White elephants are projects that at one time showed promise but are no longer viable. Summary -Multiple competing projects, limited skilled resources, dispersed virtual teams, time-to-market pressures, and limited capital serve as forces for the emergence of project portfolio management that provides the infrastructure for managing multiple projects and linking business strategy with project selection. -Every significant project selected should be ranked and the results published. -The governance team needs to scrutinize significant projects in terms of not only their strategic value but also their fit with the portfolio of projects currently being implemented....