Readings (remember please, one post per question to make sure I give you the appropriate credit)
- What is the importance of having a target mix before starting to approve projects?
- Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
- Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
- How would you justify a project that shortens a company’s sales cycle or improves the yield of an production process. What assumptions would you have to make?
- How does your company make project funding decisions? How well does it work?
The MDCM Case
Work with your team to prepare project recommendations for the MDCM board. Please come (in class or on the Webex) ready to present what you think MDCM’s strategic, business and IT goals ought to be. Here is your assignment:
You are a member of the MDCM executive team. Use the information given in this case to help solve this management crisis with the other executive team members in your group. Your team should define the overall corporate strategy for MDCM, the business goals matched to this strategy, and the related high-level IT objectives. Be prepared to present your recommendation to the MDCM corporate board.
You don’t need to post anything on the case this week.
Rich
1. What is the importance of having a target mix before starting to approve projects?
One reason is that it’s probably a bad idea to overinvest in one area while neglecting others. For example funding only projects that exclusively focus on driving growth while excluding initiatives that focus on increasing operational efficiencies will probably lead to the loss of competitiveness for the business over the long run.
Another reason to have an appropriate target mix is because as COBIT APO05 points out, it helps to:
“Execute the strategic direction set for investments in line with the enterprise architecture vision and the desired characteristics of the investment and related service portfolios and consider the different categories of investments and the resources and funding constraints.”
Specifically, APO05.01 guidance states that establishing the target investment mix allows you to:
“Review and ensure clarity of the enterprise and IT strategies and current services. Define an appropriate investment mix based on cost, alignment with strategy, and financial measures such as cost and expected ROI over the full economic lifecycle, degree of risk and type of benefit for the programs in the portfolio.”
It also allows you to adjust the enterprise and IT strategies where necessary.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
Projects should be proposed in in a uniform way so that they can be compared in an “Apples to Apples” fashion. Having one project that’s based on a lot of intangible projections and a competing or completely different project that’s exclusively quantitative and metrically driven makes it nearly impossible to conduct a fair evaluation and assessment between the two.
I’d suggest that all project business cases include both an alternative, “pros and cons” section and an assessment on what the long term benefits of the project will be from a competitive positioning perspective as well.
The reason to include the “pros and cons” section would be that it would ensure that the project team had thought through all of the aspects of what they were purposing from as many perspectives as possible.
The advantage of addressing the competitive perspective would be to emphasize that improving a few internal metrics is not enough – it’s just as important, possibly more important, to make sure that the company is continually improving/increasing its competitive differentiation in the market. That is, increasing top line growth doesn’t necessarily help if the rest of the industry is eating your lunch:)
Vince- from a portfolio management perspective all projects are competing for the same investment dollars, even one’s already approved. In theory, a company that’s out of money should stop an existing marginal project and move the money to a proposed project if it is seen as having a much better return. In practice this is hard to do, but it may be the right thing to do.
Totally agree with you professor. Even from outside the perspective of portfolio management, (like capital budgeting), your right, every project in a company needs to be evaluated for how to get the most bang for the buck. The company must constantly be willing to ‘pour gasoline on the fire’ when opportunities come up that can produce better returns,(no matter if the company is trouble or not).
The problem, as you know is when a company becomes married to a particular measure of what it believes constitutes a ‘better return’ and blinded to everything else – for example, a company that’s in trouble because of ‘lumpy’ cash flows – (positive inflow one year, negative flow the next) but relying on IRR as its only means of selection because it thinks only in terms of projects that show the best ‘rates of return’ rather than the actual profit being added to the company . Or the company that fixates on just showing some kind of profit without necessarily considering the impact of factors like the initial investment.(NPV).
Vince – you could even go further to include projects that don’t have a obvious financial benefit. One that I remember was about investing in an online training program for our ERP package. We had 17,000 people using the system and as we got further away from our rollout we recognized that as people left the company and new people came on, the average skill level was declining. Tough to show how and when the increased training would impact results but we all believed that we would be maintaining/improving the value of a very expensive asset. Our steering committee agreed and invested $1MM in the program without any real financial benefits forecasted.
While subjective, it would be an interesting metric to keep track of. Based on hiring practices (HR could provide meta-data related to age ranges, level of education, years of professional experience, etc.) what is a companies baseline time frame of what they deem success for a new hire (aka – they become proficient in their respective job and possibliy able to train or work independently, i.e. a new hire between the age of 20-25 with 3 years experience took on average 3 months before being able to perform this function proficiently. A new hire between the age of 26-30 with 5 years experience took on average 2 months to become proficient.) I notice the skill level is different for alot of new hires, not necessarily declining, just different. I believe that is where EA comes into play. If you have a large amount of legacy systems (some of which are customized and/or proprietary), it will be near impossible to find the right skill set to manage those systems. If the organization is looking at flexibility and the future, it will look to stay away from that situation.
Michael – well said. The lack of talent to support many legacy systems is a major problem.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
I think it depends. If the project is extremely large or critical to the success of the business or if the company is in a position where it’s extremely sensitive to any kind of capital outflow,(i.e., its failing), then there probably is some detailed analysis.
But that being said, for most projects I’d think that while some level of inspection does occur, it would probably be rare that the inspection lasts more than a few quarters or until a perception is formed that the project ‘is on track’ to do what it initially claimed. There may be several reasons for this including:
– There may not be enough time or resources to do the comparison, and depending on the type of industry and employee turnover, the accountability for initial project claims may have shifted substantially or even
disappeared entirely (as a result of layoffs, outsourcing of responsibilities, organizational compression, etc.)
– Project requirements very often change in ‘mid-flight’ because of some new or unforeseen requirement. As a result, the final product may turn out to be radically different to what was initially proposed,(and so a fair comparison might not possible).
– Many projects are often born out of crisis and fire-drills and so the thought of actually comparing the results to what was claimed is a luxury for many companies,(because no baselines existed, no business case made, etc.,, etc.)
Vince, I think it would really depend on the type and size of the organization combined with the project size. I work for a large financial services firm which places a great emphasis on their IT organization. Any formally slotted project which would come down the pipeline, would have gone through proposals and prioritization. After the project implementation as well as at another specified point in time down the road, stakeholders look at the data and do the comparison. While smaller projects might not get the attention which the larger more “flashy” ones do, there is still some research into any variances and a “lessons learned” discussion is formally documented.
These types of discussions and reviews are imperative for improving future forecasting.
After hearing classmates talk about the lack of organizacion in hospital IT environment versus the rigidness that defines financial organizations’ IT culture I would surmise that the difference is the intense regulations and public perception to publicly scrutinize financial businesses. If that’s the case then the benefits of project management don’t seem to rank as one of the higher motivators for companies to commit resources to project management as Vince said. It makes me wonder if there will be a time PPM is the rule and not the exception.
Patrick – my question is who is in the lessons learned discussions and are these project variances or business result variances?
I believe there is some discussion around both project and business result variances. That being said, the project variance and lessons learned discussions at a project level happen much earlier and more in depth than the business results lessons learned discussions.
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of an
production process. What assumptions would you have to make?
I’d have to assume that improving quote-to-cash cycles or production yields was something that the company had enough interest in to be willing to invest. I.e., that there were no other projects that were more strategically important to the business or that the project was compelling enough that the company would ‘find’ the additional budget needed to fund it.
I’d also have to assume that all of the organizational entities involved,(eg., production and/or services, pricing/finance, legal and order management, A/R, etc.), had the capacity and willingness to accommodate the changes that would need to be made
5. How does your company make project funding decisions? How well does it work?
There are many types of budgets in any company, sales budgets, operations budgets, etc., etc. Typically
the budget allocations for each organization is intended toward helping to achieve the overall goals of the company.
At the highest level, the company allocates budget based on, (one of many) objectives – namely, to foster innovation across four strategic domains;
– Network
– IoT and Applications
– Security
– Next generation Data Center, Cloud and Analytics.
For each of the four domains, dollars are allocated based on five decision criteria: to invest, to build organically, to buy/acquire, to co-develop or to partner,(leverage the channel). For example, at the company level:
– Investment allocation: 100 companies, total of $2B
– Build allocation: 19,000 patents, $6B R&D
– Buy: 1 to 2% growth contribution each
– Co-develop: $1B target revenue stream for each alliance
– Partner: $48.6B in partner bookings
(dollar allocations are company cumulative and publically available)
One of many example budgets that comes out of the R&D budget is the multi-million dollar Technology Fund, (TF). The purpose of this fund is to:
“….help us explore, design and implement innovations in time to catch the market waves of the future. It ensures that we don’t sacrifice precious long-term breakthroughs for near term revenues. Since late 2011, the program has invested $20 million in 22 projects, allowing each between six and eighteen months to incubate….”
Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
Projects are going to be distinct depending on what area of focus they have, but they will all contribute to the overall value for the company. In a proposal/business case, any project must consider this: how does this help the company? This can be presented in uniform analyses such as cost-benefit, or perhaps a table displaying cost savings over several years from implementing the change. These numerical considerations are also best understood by c-suite personnel, especially those who may not have the most technical background. The supporting details of value, cost and risk are the best avenues to approach with such a numerical approach, especially using dollar value. These are very straightforward measurements that apply across all industries and business departments.
Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
This would certainly be best practice, but I’m a pessimist, so I’ll say no. In one personal example, I initiated a project to develop an online resume/professional development system to incentivize students and employers. The goal at the outset was a specific number of students added to the program within a year, more job offers after graduation, etc. These were quantifiable KPI’s to use in determining if the project succeeded and how well it did. I left the program, and I do not believe they measured these after I left, so determining success likely became much harder, risking the buy-in from the folks in charge. I think it’s a combination of several factors. 1. It requires effort and probably a dedicated person to collect the data. 2. Decision-makers need to see why having the data helps them, in terms of future project success and knowing if things are successful right now, and 3. As decision-makers retire, change jobs, etc. without explaining things to successors, the interest, knowledge and even awareness of the project will wane.
Great points Michelangelo. I agree the value of metrics and measurement change over time because everything around those things changes as well – company culture, shifts in a particular market or an entire industry, loss of institutional knowledge or experience, change in management perspectives or strategy ,etc., etc. In fact, I would think that it would be reasonable for what is actually considered to be ‘good’ or expected project performance to be identified in the short term, then somewhat inconsistent in the medium term and finally to be completely different over the long term.
Great posts Michelangelo and Vince.
In a somewhat similar initiative, I am trying to get buy in for applying continuous monitoring and continuous auditing to critical processes across the organization. We have gone through the steps of identifying critical controls but do not have the buy in to have the business units formally identify how they are measuring and monitoring their processes. With the amount of data we capture, I’m trying to sell the benefit as near-real time assurance. The business units by performing and reporting on their processes can adjust processes that are not performing well and with the continuous auditing piece in place, we would be able to reduce the time frame of identifying, reporting and hopefully remediating issues.
Michael – how is this going? Are the businesses supportive or not? If not, what are their objectives. Also, are all the businesses using the same software for the basic business processes of buy, make, store, sell?
What is the importance of having a target mix before starting to approve projects?
A target mix allows the firm to keep a diverse portfolio of strengths and possible avenues for expansion. In the event that a given area takes a turn in the market (e.g. applications focused on gamification), it would be bad for the company if that is the entire focus. If however, such a downturn happens and they have diversified, spending resources on other areas such as quiz applications, then they may still produce some expansion or at least maintain stability in market share. Following trends in the Gartner hype cycle is often popular, but not knowing what exactly is going to pan out technologically, a firm runs the risk of wasting resources if they throw all their eggs in a particular basket.
Michelangelo – you have the right idea about the market changing and being prepared. If you related this question back to the two last topics (EA and IT Strategy), I hope you recognize that these plans are not unidirectional. They attempt to show how progress can be made in multiple areas. Thus, when it comes to portfolio target mix, you probably want to make some progress in each strategic direction. Thus you may allocate so much money to improving your infrastructure (EA) even though other business efficiency projects may have a better ROI.
How would you justify a project that shortens a company’s sales cycle or improves the yield of an production process. What assumptions would you have to make?
In a business case, you could calculate cost savings in labor, billable hours, etc. if you can quantify the improvement in yield. This means specific dollar values to show management so they can say, “This project might allow me to reduce labor costs by 17%, or I can stick with the status quo and achieve no reduction.” Such an argument is very powerful for decision-makers, and it eliminates the need for technical staff to explain the more nuanced technical reasons to adopt a project. With that said, some assumptions would need to be made, to include estimates on productivity gains. Such estimates would likely be provided by SME’s either in the department pushing the project or perhaps an external analyst. Also, some financial assumptions would need to be made, such as no reduction in labor costs through some downsizing independent of the project adoption. From a technical standpoint, a proposal would need to make some assumptions on the technical kn0w-how of the reader, perhaps the CIO, CISO, or CFO. This would be on a case-by-case basis, with a firm’s staff having a reasonably good sense of the c-suite person’s knowledge in a given area. If such knowledge is absent, this might require more complex preparation for the proposal, essentially preparing the individual with knowledge to help them comprehend the value being presented in the proposal/business case.
1. What is the importance of having a target mix before starting to approve projects?
The target mix allows the organization a framework to operate in. If it has already been decided that we should spend 30% of the budget on running the engine then we can not get carried away and approve a budget spend of 40%. In addition, by determining the target mix ahead of project approvals, the organization has already established their priorities and strategy. When the optimal mix is known ahead of time, it will be easier to evaluate projects when they are performing less than optimal. If the organization’s mix was concentrated in innovation, they may be more willing to funnel extra cash to a revive an innovation project than spend additional dollars to fund an efficiency project that is barely meeting expectations.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
The reason that all projects are proposed in a uniform way is to ensure that you can compare apples to apples. When the information is consistent across projects then it is easier to perform a fair comparison of the options. The following should be available for all projects: objective, scope, deliverables, value, cost, risk and assumptions.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
I think that most organizations do not compare the projects’ performance to what was proposed. Some may feel that there is no reason to compare the expectations as the project is already underway and will be completed. If I have championed for a project and am now responsible, the chances are less likely that I am going to compare the projects’ performance because I would not want to highlight that I have missed the mark.
Tamekia- somewhat cynical but I think you’re probably right. This is another way in which the tone of the organization can have impact. If the tone is not one of blame, but rather one of data-driven discovery, then project impact reviews are likely. If blame is common, no one will look unless its being used to nail someone.
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of an production process. What assumptions would you have to make?
This scenario comes down to justifying a project that increases efficiency. When the organization is able to save time or maximize output, they are saving money but that is harder to quantify. As an example, in the insurance industry, a portion of payroll can be capitalized based on time spent successfully acquiring a contract. If a project can increase an underwriter’s ability to successful acquire a contract then this project impacts the results but it may not be as clear initially. In this example, a solid business case is necessary to explain how the project would allow for potential to successful acquire more business even though the revenue of the company will not go up immediately as result of the project.
Tamekia -did you notice that you talked about efficiency first and then acquiring business second. IT folks usually think in terms of efficiency and to be sure, that is where the bulk of past impacts have come. But what about acquiring more business (increasing revenue). Is this a legitimate IT goal? How would you know?
This is an legitimate IT goal because it is a legitimate organizational goal. This is where it is important to ensure that IT is aligned to the business goals.
IT has to make it clear how efficiency leads to or can lead to increased revenue. There are some projects that will only increase efficiency and while that is nice to have, it may not be the best option. There may be other projects where the increased efficiency is directly correlated with an increase in revenue or deduction in expenses. For example, if IT has two projects – one project reduces time spent by employees paid per hour versus time spent by salaried employees. The cost of the salaried employees is not reduced by choosing the second project, while selecting the first project the hours worked by hourly employees could drive a reduction in expenses.
Tamekia – unless of course you layoff some of those salaried workers.
I wouldn’t Have thought to question the order in which I thought of efficiency ember effectiveness over increase sales. In fact I specifically thought of questions of efficiency and effectiveness not for any particular IT reason, but because of lessons I learned as an undergrad from the integrated business course. Since the goal of this class is to be able to think outside of the box of the standard IT business person I think I reflect on and options I choose and ponder their importance and priority.
5. How does your company make project funding decisions? How well does it work?
The company uses business cases that are brought to a steering committee. Based on timeline, impact and costs, the projects are selected. I think that this process works well because projects have been stopped for the benefit of others. In other cases, the scope of project has been reduced. This illustrates that even if the organization is not initially making the right call, they are willing to course correct and will not continue to spend money reinforcing a bad decision.
Tamekia – sounds like the company has its act together. One question though, how many projects are reviewed at a time? Why do I ask?
There are several projects reviewed at a time that address different organizational needs. You ask because the more options you have to choose from limits the risk of choosing poorly or picking from a limited set. In this case, having multiple options with limited resources means that the organization has to truly assess what is the best option. This is preferable to picking from a limited number of options. Example, if I choose from the available stock in a store then I am artificially limiting my options instead of choosing from all available. This is an easy way to later be unhappy with the option selected.
Tamekia – Exactly the right answer. Approving one project at a time is a terrible way to invest capital dollars into projects for the reason you state. Each one will look good with no competition and it becomes a question of first come first served.
What is the importance of having a target mix before starting to approve projects?
Having a target mix prior to approving projects is very beneficial. Investing more or over investing on one project versus an another can be disastrous. As it’s mentioned in Cobit AP005, the appropriate set of investments that corresponds with the architect vision based on “…cost, alignment with strategy, and financial measures…,” will help an enterprise in preventing over investing on a project, and protect it in the future from any loss due to not appropriating investments.
Hi Tuh40379,
I completely agree. In addition, and I think you were headed in this direction with your response, having a good target mix is essential for project diversification to mitigate risk of any one area failing. If you invest too much in any one area and it fails, you just wasted all your money when you could have ideally invested that in another area which would have been successful.
It is prudent to know where, how, and why the organization resources are going (investment). What to expect or what is the ROI? A target mix helps to determine the cost, align strategy, cost, risk, and benefits for programmes in a portfolio. The organization needs to achieve its goals; thus, the organization must determine why, time, risk, cost, ROI before investing. A target mix will review the cost, risk, and benefit; and aligns the organization strategy for decision. Know where, when, what, how much to invest, and what to expect from a project (investment).
Lesson learned is an important variable in the equation of a project. Project proposal uniformity is essential as it enables comparison for decision-making. Though no two projects are the same, they have some phases and variables in common. Some question can be answered, some mistake can be corrected, and some additions can be made.
Information that must be available for all project are: budget (cost), outcome, and risk analysis. What was the estimate, how must was spent, what was the level of risk? Was it mitigated? Was the contingency?
Performance comparison a way to determine the success of a project by milestone or at completion. Success can be time, cost, communication, and not just final product. Performance comparison aligns progress, strategy, and objectives.
Most organization do not compare their project’s performance to that of which was proposed. Some organization do not observe the project trend while other conceptualized that they are performing and meeting goals as along the project is not having constraint, there are deliverables, and there is no need to shut the project down.
From the business standpoint, shortening the sale cycle means more sales, less effort and duration, and improve production to meet the demand need. Now if you sell more, that is more return, if you use less effort and duration, means the organization will save on resources which can be reinvested to increase productivity.
The assumption here will be demand is high then supply or the business is going low on capital or investment. An updated target investment mix was done and the finding says it all.
Pascal- very good. It helps here to understand accounting, a dollar is not always a dollar. For instance, lets say your company has $10MM of sales but the goods cost $5MM to produce(50%). That would leave the company $5MM of gross profit (Revenue- Cost of good sold, COGS). If shortening the sales cycle lead to $1MM of increase sales, the companies revenues would got to $11MM(10+1), but you would still have to produce those goods at $.5MM (50%) thus increasing gross profit to $5.5MM. If, on the other hand, increased yield allowed you to reduce COGS by $1MM, gross profit would increase to $6MM (10-(5-1)).
Putting together business cases that reflect all the intricacies of accounting is one more way of “speaking the language of the business” and will earn you credibility.
Everyone – which has the most impact on the bottom line of the company? (keep the accounting simple)
1. a dollar of increased sales
2. a dollar of saved COGS costs
3. a dollar of saved administrative costs
4. a dollar of tax
I’d go with what’s behind door number 3 😉 administrative costs for two reasons:
1. it has the most immediate impact on the bottom line
2. its a component of the company’s (pre-tax) operating profit.
That being said, you could argue that there are scenarios where a company might actually WANT to have more taxable income and so they might not necessarily be looking to improve operating profit – but I’ll still go with door number 3:)
Thanks for answering Vince. Actually its a tax dollar. Remember that you have operating profit before tax (OPBT) and operating profit after tax (OPAT). Since most companies pay somewhere in the 16-25% marginal tax rate range, $1 of tax is worth $4 to $6 of OPAT. Administrative costs would be next since every dollar avoided there becomes a dollar of OPBT. $1 of sales would be least valuable because you need to subtract the cost of good sold (COGS) from that.
Project funding decision are made at the general assembly which means projects need to be passed in the house for funding and implementation. It is a little bit of bureaucracy, sometimes there are hurdles.
Smaller projects are approved by internal by business executives (CIO, CFO, TC’s).
Whether in house or at the general assembly, the relevance of the project is reviewed, need and opportunity are considered, the institution financial position is factored into the decision-making process, and the benefits (short or long term).
1. What is the importance of having a target mix before starting to approve projects?
Having a target mix before starting to approve projects can make sure your projects have a strategic direction and will support specific business objectives. When creating a target mix for their projects, an organization should use the business case to provide the necessary facts and data for understanding the value and benefit the implementation of a certain project will add to the business. This should provide a mix of projects that target a specific business goal. The organization can then make educated decisions on what projects should be implemented.
1. What is the importance of having a target mix before starting to approve projects?
Having a target mix helps set the direction and remove emotion when making investments. You need to see the pipeline of projects to determine what is best for the company in the long run. More than likely each individual project will have a compelling case. If there is not a target mix than the portfolio of projects could become lopsided. This could result in numerous projects that may have extremely high ROI’s but also a very high risk of failure. It is crucial that a strategic approach to IT investments is utilized to ensure long term success is realized. The example in our readings was a Naval Captain. It’s important to strategically deploy the fleet so that they are not spread too thin or over deployed. This is also why it’s important to know what’s already out there when considering the next moves.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
Processing projects in a uniform manner allows an organization to control which projects are undertaken in accordance to business needs, monitor how well each project is executing, and gives them the ability to adjust project execution to adapt to emerging demands that impact the business. Uniformity of processing projects makes it possible to monitor how well the process is executing and if the desired outcomes are being achieved.
Data must be available for all projects to compare each one and determine which should remain in the portfolio, how much should be invested in each, and which should be removed from the portfolio. This data includes metrics on how well a project is executing, what business goals are being achieved, and whether or not the project completion time frame is still on target.
1. What is the importance of having a target mix before starting to approve projects?
Having a target mix is important to meet the short and long term goals of the organization. A target mix will bring diversity and provide a better chance of the project(s) succeeding. The right mix of projects will increase an organization’s chances at learning more even when certain projects fail.
Donald – its also about spreading the risk. If you picked only one area to invest in and that turned out to be a bad idea, then you are totally sunk until the next budget.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
Projects should be proposed in a uniform way because that will provide a level foundation across the board when proposing projects and deciding how funds and resources should be allocated to meet business needs. If a process does not exist for project proposal, it can get messy and projects could be approved that may not be beneficial for the organization or align with the organization’s goals.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
I think most organization compare their projects’ performance to that which was originally proposed by the project because that should serve as a guideline for how the project should be performing. However, it is almost always the case that a project does not go according to plan, so although the project’s performance is compared to what was proposed, it is always changing and should not be held as a standard. Therefore, organizations should consider and agile approach to project management.
Donald – are you speaking of the project’s performance (on time, on budget, on quality) or are you speaking about he business benefits that the project was supposed to produce?
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of an production process. What assumptions would you have to make?
I would have to assume that the organization evaluated costs and benefits to determine the benefits outweigh costs and that the specific project was more strategically aligned than others in the pipeline. I would justify the project by highlighting the fact that shortening a company’s sales cycle can bring in more revenue and provide helpful insights into sales processes.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
I would say most companies compare a project’s performance to what was proposed by the project at some point in the project’s life cycle. An organization that proposes a project will naturally have some expectations of its performance once it’s completed. Once the project is completed and the new process is implemented, it will monitor its outputs to see if the desired outcome was achieved. How effective the organization’s monitoring system is depends on how well the project was designed, and the effectiveness of the personnel tasked with executing the process.
Bilaal – I am a bit surprised as I don’t think most companies do. How does this work in your organization? Who does the review and how soon after the completion of the project?
A project that shortens a company’s sale cycle will increase the amount of sales that can be made which will increase revenue and hopefully profits. The effectiveness of a project involving the sales cycle can be measured easily by keeping track of the length of the sales cycle before and after the project’s implementation. This will allow the organization to judge if the project has the desired outcome. Having a fast sales cycle is generally better for businesses because the longer it takes to make a sale, the higher chances of the sale falling through. Also, if the company’s sale cycle is shorter than the average of its industry, it could mean that the implementation of the project gives the organization a competitive advantage over its competitors.
I would have to assume that the proper research has been done to ensure the new process will shorten the sales cycle. I also will have to assume that a proper cost benefit analyses has been performed to ensure the cost of the project will not outweigh the benefits, such as the added revenue from the increase in sales will be higher than the cost of the project’s implementation.
Bilaal – well said but I will quibble with one point. The increase in sales must be much higher than the cost of the project because a large percentage of the sales dollars go to the cost of making the project. If the gross profit margin of a company is 50%, then you would need to increase sales a minimum of twice as much as the project cost (simple accounting, it gets much trickier).
Project funding is based on business need and objectives. Each department has its own committee which reviews business process and decide if there is any need for innovation in the processes. The potential impact to the business is evaluated and projects are funded according to impact level. The ultimate decision for funding of projects is made by C-level executives. Timelines are sometimes miscalculated, and I am unaware of any Project Portfolio Management initiatives, so I feel the process could be streamlined.
Bilaal – each business proposing its own projects makes this sound like an anarchy on deciding where to spend and a business monarchy in deciding how much to spend. Does this sound right to you?
1. What is the importance of having a target mix before starting to approve projects?
The importance of having a target mix before starting to approve projects is the ability to diversify risk. You do not want to put all of your eggs in one basket. As noted in the presentation, a good portion of projects are going to be the non-excitement type of projects that keep the organization running (example centered around Enterprise Architecture). Growth projects that increase revenue are also important for any organization that does not wish to remain stagnant. Efficiency projects that improve processes or save money (business process improvement projects) are another category that a good portion of projects would be worthwhile to allocate resources to. Depending on the industry, projects around innovation to help achieve a competitive edge or advantage are worth pursuing as well.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
Having projects proposed in a uniform way helps the Steering Committee look at each project in a consistent manner. Bias will always play a role with these groups but being able to look at each project and see items such as how much is this project going to cost in terms of money, employee time, training, etc. is a good piece of data for the Steering Committee to see so they can make an informed decision regarding resources. If the project has a specific attribute, that should noted as well (i.e. regulatory requirement combined with monetary fines if the project does not go through, business process improvement – by doing this project, we can eliminate X number of hours from this department and reallocate that time towards X initiative. To complete, we need X number of programmers and X number of business unit quality assurance people to complete). The more valuable the information that can be presented, the better decisions the Steering Committee can make.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
No, I do not think most organizations compare their projects performance to that which was proposed by the project. I have seen a lot of projects start with a very large scope but a hard deadline has been set (whether by Board, CEO, Management, etc.). To meet the deadline, the scope becomes smaller and the project manager starts classifying items as required or phase II. In my experience, phase II does not make its way back to the IT Steering Committee because success has already been reported to all levels that the date for the original project was met and phase II is not in line for a new project. Looking a Project Portfolio Management, a lot of the phase II items could fit into the categories of business process improvement, growth and/or innovation.
Michael – differentiate project success from business success. By that I mean getting the project done on time, budget, quality and scope are measures of project success. Producing the intended business results are separate and define business success (value). You can have any mix of the two. Like the old joke, the operation (project) can be a success, but the patient (business value) died. IT projects such as these destroy value.
Great point. We have suggested there be a cool down period between the project closing and the first review or if the project hits a certain threshold (monetary, strategic objective, regulatory, etc.) and after the review is completed, then those original factors would be reported on and any deficiencies would be included to give the key stakeholders a true picture of the project as a whole.
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of an production process. What assumptions would you have to make?
I would justify a project that shortens a company’s sales cycle by putting a dollar figure to the resources required. I am a huge proponent of using data analysis and aggregating as much relevant data as possible to base a conclusion on or make a recommendation. Some assumptions that would have to be made would include the accuracy of the historical data being analyzed as it relates to the proposed project (some people have been known to skew data to get a project approved). You would have to have enough data points that you could factor in variables such as different times of year that sales may be slower than other times of year.
Michael – I like how you are thinking. A few metrics that would be very useful would be to know would be:
1. Market share – if the company has a 90% market share there may be no more business to get.
2. Size of the sales force – the more sales people, the more freedom you have in rearranging bits of time into productive sales opportunities.
2. Average sales cycle length, value, and % chance of success. With these you could predict how many more sales opportunities are possible and what the expected value of these opportunities would be.
Of course you are also correct that if the market crashes, the benefits will not be seen.
5. How does your company make project funding decisions? How well does it work?
Project funding decisions are done in multiple ways at my organization. From an IT resource standpoint, the project is brought to the IT Steering Committee if it requires resources from IT (programming, database, networking, IT Project Management, etc.). If there is a regulatory requirement and the cost of the project (cost as in purchase, not internal resources) does not exceed the purchasing policy, it is almost an automatic approval and resources allocated. If it is a large purchase price, there is more items that need completed (risk assessment, vendor due diligence, executive sign off for large purchase, board sign off if the cost hits a certain threshold, etc.). If the business unit does not need IT resources, most likely it will never make it to the IT Steering Committee but in a perfect world, it would because many of these one off solutions could be a project in itself and there may be overlap with solutions that are purchased in this manner.
Michael – your firm sounds like it could be a federal or a feudal arrangement. Can businesses do anything they want so long as they don’t spend too much on any one project? Do they have their own IT staff? What areas, if any, are they forbidden from doing?
Definitely a mix of federal and feudal Professor. The business units can do what they want if they have the money in their budget and say it falls within that VP’s spending limit, they can go ahead. If it’s over that limit and they have buy-in from the CEO, they are also good to go. I wouldn’t say they are forbidden from doing anything but if it requires in-house hardware and/or programming resources, it goes through the IT Steering Committee. Most departments have small “rogue IT” groups that administer their specific systems (separate issue from an IT General Controls standpoint). From a project standpoint, the issue I run into with the different departments is do they put the resources towards audit findings and remediation efforts or towards new projects. If the control piece held more weight during the project phase, they wouldn’t have to choose as much.
1. What is the importance of having a target mix before starting to approve projects?
• Target mix is an organizational agreement of investment strategies. The purpose is to know where the focus resources and diversify organizational risks pertaining to IT projects. With targets in mind, then the organization can correctly allocate resources based on the investment strategies. Knowing the where to focus and the strategy, the organization would be in better positions to decide which project and how much.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
• Having uniformity in project business case gives an organization a balanced view amongst all projects. It presents projects with the same information of facts, costs, value, and benefits of implementation. Ideally, a business case should also include financial implications, risks, and options for implementations. With uniformity in business cases, it presents a tool to organizational leaders to better prioritize projects that are financially and strategically in line with organizational goals.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
• Based on the reading, organizations should not base their assessment on just the project’s performance. But the assessment needs to be dynamic and considers changes in the organizational strategy, industry, assets, and technology. These assessment needs to incorporate and present a change analysis with IT recommendations based on impact changes form a type of impact, the timing of impact, and who it impacts. Reviewing project’s performance with this methodology allows an organization to have a whole portfolio view of all projects. Organizationally enabling decision-making that would align IT projects with dynamic strategy.
• But in my opinion, most organizations do not use this methodology. This assessment takes resources and time, which most organizations are not willing to spend in addition to project costs.
Duy – I was asking about assessing the impact of a project on the company after its finished. It reads like you are talking about assessing different potential projects in the portfolio in order to decide which to fund. Am i reading you right?
Hi Professor,
Yes, you are right. I was answering how to assess a project at the pre-approval level, not once a project is finished.
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of a production process? What assumptions would you have to make?
• Of course, a project that shortens the sales cycle and improves production is a definite GO. But these claims must be examined, verified, validated and capture. To ensure that benefits are fully realized, benefits must be actively managed dynamically measured with business change. In addition, benefits should always be evaluated at the business portfolio level instead of project level.
Duy -part of portfolio management is having more good projects that you can fund, so nothing is a “definite GO.” Every business project should have a great ROI or it shouldn’t be on the table (excepting those that are must-do’s like compliance, upgrades, etc.) The trick is deciding among the good projects to identify which are best. That’s the reason business executives and not IT people, should be making the decision.
Hi Professor,
I meant a definite GO sarcastically.
5. How does your company make project funding decisions? How well does it work?
• My organization tends to keep budgetary information to executive staff. Not much detailed are relieved to staff. But from my understanding, the organization spends on IT as needed, unless it to upgrade our enterprise software ie Financial, HR, and CRM systems. The bigger projects are planned with the project team but funding is handled strictly by the CIO without much input from anyone. The CIO has been with the organization for 20 plus years, so his IT input is pretty much all that is needed for the executive staff to approve any type of budgetary issues.
Duy – If you think back to the J&W archetypes, what does this sound like?
Seems like little like Business Monarchy, but more like IT Monarchy.
1. What is the importance of having a target mix before starting to approve projects?
The importance of having a target mix before starting to approve projects is because it diversify risk. You would want different projects such as innovation, growth, efficiency and run the engine projects. Also I feel like if you only do one project at a time you kind of get tunnel vision and start to neglect certain things. It also gives direction to where the investments are going.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
You would want all project to be proposed in a uniform way to be able to measure it appropriately. Different projects would have different benefit and straits so if you don’t have a uniform way projects could be all over the place. I would suggest all projects would have a S.W.O.T analysis to the project. This could tell if it’s worth pursuing.
Hi Heiang,
Keep in mind that most people in business, while they would appreciate something similar to a SWOT analysis of the project, they would much rather look at hard data and estimates. They would want to see numbers such as Return on Investment, Break-Even point estimate, Estimated total cost, Estimated timeline, Risks, constraints, and any dependencies. These should ideally be included, at minimum, on all project proposals so steering committees, project teams, and other stakeholders can better understand the business value and be able to prioritize the project in relation to others.
Patrick – agreed but you also need to base your financials soundly in some process metrics as assumptions. Without these, IT may agree on some figure to put in the business case like 1% boost in sales that they all think of as conservative. The business folks may look at it as, 1% is more than we have gotten from anything in the last 5 years, these IT people don’t know what they are talking about. Never good for carrying the day.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
I think most organizations compare their projects’ performance to what was propose because what was propose is like the goal/ baseline that you want to hit, so if the goes above what was proposed than it was a great project. If it doesn’t hit what was proposed than it clearly didn’t meet everything that was promise, this also doesn’t mean it is a failure but just didn’t meet expectation. Well at least I think they should if they actually don’t.
Heiang – from my experience with several companies, I don’t think this is true. Most businesses are just too busy to do this six months or a year after the project ended. By then its old news and they are facing today’s challenges. Still, if someone in senior management sets the tone of expecting such reviews and monitors leadership’s compliance, then I would bet that it does get done.
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of a production process. What assumptions would you have to make?
I would have to assume the company is a manufacturing company or based on selling because that would make it really important for them to improve those projects. Also I would have to assume that their current sale cycle or production process are not efficient. The project would need to have a greater ROI than they currently do now that would outweigh the cost of the project and be able to grow profit or sales because money talks.
5. How does your company make project funding decisions? How well does it work? I believe our budget department handle projects a as needed bases. Things are handle one thing at a time because of funding issues and if we start multiple at one time none of them would get finished. We’re funded by the federal government and budgets have been cut almost every year I’ve been there. Also because we don’t make money we only focus on efficiencies and not all the other innovation of growth projects. Well that from my point of view, So I can’t be certain.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
Yes, all projects should be based off a standardized proposal. You should review each project to confirm that it fits into strategic goals of business. Each individual project should include a budget, a schedule, and product delivery criteria. Included in the budget should be analysis of how it contributes to the program structure and the ROI for the program. “Technology Costs” need to be analyzed. This would include the trade-offs in cost, time, and quality of a new technology when employed in place of another. It should also include measuring guidelines and check points to monitor the performance.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
I don’t think enough companies compare the performance of a project to that which was originally proposed. It is challenging to determine the exact return of an IT project. If it’s based off a factor like revenue results are determined by the season or economic factors that year. If it was a bad year revenue might not reflect the performance of the project. If parameters are not set forth in a standardized process than it becomes even more difficult to monitor performance. Furthermore, if the Archetype isn’t appropriately established or aligned with business strategy than the appropriate measures of performance may not be accurate.
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of an production process. What assumptions would you have to make?
When making a business case to prove that a project shortens a company’s sale cycle it’s important to have standardized process. The business case should analyze value, cost, risk, and payback period or in this case specific time frame in which the sales cycle will be shortened. It should be compared to what’s in place along with other alternatives. It’s also important to know what facts the project team was considering when they started the case. One should consider what assumptions the project team may have considered when collecting data and organizing their ideas. If they assumed that revenue stays the same then projections for analyzing the project should do the same.
5. How does your company make project funding decisions? How well does it work?
Unfortunately, most capital investment projects are done out of our home office in Chicago. I don’t have much in put when it comes to investments of any kind nor do I know how the company handles these decisions. One thing that comes to mind is the decision of what client to spend corporate assets on while marketing. We are expected to spend time outside of our office with clients and at times spend money entertaining within corporate guidelines. Theoretically entertaining should have a similar thought process. A Business case as to why a client or broker was “entertained” should apply. I think what happens is people tend to market with clients or brokers that they like (understandable) but they don’t put any thought process into a business case. When spending corporate money on a client one should consider the objective, scope (maybe in the form of what this client can bring to our company) deliverables, value, cost, risk and assumptions. This would help remove emotion from the thought process and hopefully diversify one’s time with various clients. At the current state the process is not streamlined and corporate assets aren’t always spent strategically.
5. How does your company make project funding decisions? How well does it work?
In my company, management makes the project funding decisions based on resources and the projects that align most to the strategies for the year. In my opinion, it works well because there is a defined strategy and clear focus in terms of what should be funded. In addition, the group I work under will request funding on a yearly basis but they will only get approved if we have proved that the current project we working has been implemented successfully.
1. What is the importance of having a target mix before starting to approve projects?
COBIT defines an investment mix as,
“an investment mix that achieves the right balance amongst a number of dimensions, including an appropriate balance of short- and long-term
returns, financial and non-financial benefits, and high- and low-risk investments.”
Your portfolio should align with the broad strategy and financial measures such as cost and expected ROI of the overall enterprise. As such, you would want an initial target mix that would cover as much of that broad space as possible.
Anthony – you didn’t explicitly mention IT strategy and EA needs but I assume you meant them to be included as part of the “broad space.”
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
Having just left the Marine Corps I am intimately familiar with the requirement for uniformity on all projects. The projects are worked on were called Operational Plans and each of them, no mater what country or AOR they were dealing with, were built off of the same uniform template. Since every plan was structured the same, the decision makers knew where to look to find the pertinent information. You were also able to quickly determine if some required information is missing.
Every project should include the following:
Who: Who needs to know what I am about the project
What: What are we doing
Where: What area of the enterprise will this impact
When: What is the timeline for completion
Why: What is the purpose of this project, and how does it benefit the enterprise
How: What is the plan for development and implementation.
Anthony – two I would add would be:
1. What are the project and business risks associated with the project (ie what could go wrong)?
2. What assumptions are you making that could jeopardize the project if they proved not to be true?
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
I won’t speak for most companies, but I can speak for the one I work for.
One of the main projects that I am part of are the implantation of various strategy rules that deal with debit, credit cards.
Prior to implementation, each proposed rule goes through an approval process in which we look at numerous metrics including Return on Investment (ROI). Once the rule is approved we implement it and monitor it’s performance.
If the rule is underperforming (according to its predicted metrics) we will either attempt to modify it, or delete it.
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of an production process. What assumptions would you have to make?
Probably one of the largest cost a company has is personnel. We look at manpower units as Fulltime equivalents (FTE) and use that metric as a basis for manpower costs.
Shortening the sales cycle and improving the production process would mean a decrease in the required FTE of those specific areas. That typically does not mean that we will be laying people off. Instead we can use that FTE in other areas that are deficient.
An added benefit of the improvement would be a trickle down effect to adjacent units due to the increased FTE availability.
Anthony – be careful of a common IT problem. IT’s role is not always to cut costs. This is a very old and ingrained point of view. What you say might be true if the company is stagnate with a large market share and sufficient production. But what if it is a rapidly growing company with a small market share too little production to support growth. Then the issue is not saving FTE’s but rather extending how much each resource, FTE or production line, can do. Most of IT’s history has be cost cutting and it is important, but it is no longer the whole game.
5. How does your company make project funding decisions? How well does it work?
Each LOB is responsible for managing their annual project budget and prioritizing which projects get sourced. The prioritization typically takes place via a project management governance board where they line up each project using PMP methodology.
The final decision is made by either the LOB head or their designate.
Considering the amount of projects that are typically in the queue, it is a fairly effective process.
What is the importance of having a target mix before starting to approve projects?
It is important to have a target mix before stating to approve project. This is because you need to know your allocation before you initially start approving projects. You need this because you can not over allocate your resource for projects. If you have a specific point to need to stay within, if you over allocate you will not be able to meet the goals and the project will fail.
Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
I think it is important to have all the project to be proposed in a uniform way so that you are able to see exactly how each of the projects compare to each other. This way when you are deciding you can see how each one shapes up. I think that each project must include the objective of the project, the cost and risk to the organization, the value to the organization and what exactly is the final product the project is.
Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
I do think that organizations compare their projects’ performance to the one proposed on the project. This is especially important during the life of the project during its life cycles. This way a company can see if it is on track and if it is keep up within the correct budget. If for some reason it is not they are able to make corrections to keep it back on track.
How would you justify a project that shortens a company’s sales cycle or improves the yield of a production process? What assumptions would you have to make?
I think that is is justifiable because it could help the company bring in more revenue. This is because if you shorten the life cycle and/ or improve the yield of the of the production process you are essentially are spending less money and man hours to have more product which will increase your ROI. If this is the case then you are able to bring in more revenue and who doesn’t like more money. Also I think you need to assume that the market you are in will allow for you to sell the product you are making or a high demand for this product. This way you are able to sell more of them and keep your costs low.
How does your company make project funding decisions? How well does it work?
My company makes funding decision a couple different ways. First through an annual budget that is for all of IS and the whole organization as a whole. Then there a more broken-down budget based on departments. Within that budget we have an allocated amount for project or a project budgets. From here a lot of decisions are based on committees. If a system needs to be replaced or a department needs to be moved and it is turned into a project a team of individual figured out the logistics and the costs behind it. Then they would go to the board, the CIO, CTO, COO, CEO and receive the approval from them to complete these projects depending on multiple different factors like cost. When it comes to spending large sums of money for an actual on the books project there are a lot of steps that need to be taken. Sadly, I’ve noticed it does not happen like that all the time and things are done more under the radar where costs can be spread around.
1. What is the importance of having a target mix before starting to approve projects?
The importance in having a target mix of investments before beginning to approve new projects is to ensure that the organization is covering all areas of business necessary to keep its organization diverse and well managed in its focus. Without a target mix of investments, and organization may over invest in a particular area or market and then causes its business model to heavily rely on the outcome of that particular area of business, thus causing a massive shift in its vision and values. A key determinant for a target mix would be that it is crucial to invest heavily in an area that returns a large ROI, but essential to continue diversifying its projects because if the area heavily invested in fails or comes across issue, another aspect of the business is still ROI as the heavily invested area can be repaired.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
By proposing all projects in a uniform way, it ensures that those deciding on which projects to approve are limited in their biases so that all projects have a fair shot at gaining approval. Through this, each project has a fair chance at presented its value to the organization and is able to layout all of the features that it has to offer without worrying about the differing presentation of a competing project. It allows a business to understand the true ROI of one initiative compared to another without additional fluff being portrayed for one example compared to the other. Information that should be available for all projects should what it is, how it works, how does it benefit the company, and why does it need to be initiated now.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
I feel that in order to determine the success of a project, it is important to determine If the project met or exceeded the goals that it planned to achieve. By comparing the projects performance to the plans proposed by the initiative, it allows the organization to understand whether or not it was successful in its implementation. It also provides the organization data as to whether or not it is worthwhile to pursue similar initiatives to the proposed project based on its outcome because the business would then generally have an idea of the ROI it will being as well as the success level it can achieve.
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of an production process. What assumptions would you have to make?
It is possible to justify a project that shortens a company’s sales or improves the yield of a production process by being able to achieve a value to the business that is worth more than a monetary sense. An example of this would be implementing an online dashboard that customers can use to make and place orders to a business rather than having to go into a physical store or make orders by phone or email. This value is present in that customer relationships are greatly improved for the business because it allows their life to become easier. While a monetary value is not seen through this project, it can possibly be expressed in positive customer relationships will lead to larger orders being placed and a positive reputation of the company being spread. This positive reputation leads to new clients working with the business.
5. How does your company make project funding decisions? How well does it work?
My company makes project funding decisions based on what it currently needs in order to put it at an advantage to competitors or what it can do to quickly and efficiently resolve an issue that became present. For example, I work in the banking industry and in order to set itself aside from other banks, my company implements projects that work to make a customer’s life easier, especially if they become forgetful. By adding advances to technology to ease the customers life, the bank does not gain profits but gains customer loyalty. In turn, this allows customers to spread positive word on my company which essentially drives in more clients.
1. What is the importance of having a target mix before starting to approve projects?
It’s extremely important to select a target mix of different projects in order to diversify your IT investments into different areas. It would be unwise to invest all of your IT budget in RTE projects. You may help with RTE, however you end up neglecting other business opportunities in Investment, Growth, and Efficiency.
The target mix should ideally have a lower investment in Run The Engine than in the other areas. If most of your budget is going to RTE, you should seriously consider investing in Efficiency projects to lower your required RTE budget.
The mix goal should have a final investment which best meets the business and IT strategies to give you a mix of projects which provide the best business value to the company.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
Uniformity in project proposals assists the steering committee and stakeholders best understand the actual relevant business value which can be achieved with each project. The consistency between the proposals allows for strategic comparison between projects to get the best idea on which would be best to prioritize.
Along with a uniform format, proposals should ideally, at minimum, have data points such as expected cost, return on investment, break even point, total expected duration of project, dependencies, risks associated with the project, constraints, any external involvment (such as vendors or partners, and types of resources needed (software, hardware, special skills)
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
I would expect most organizations and all large firms which are serious about their IT to compare project performance to what was proposed when the project was initially slotted. Organizations look at any variances and would be wise to use this data to have “lessons learned” discussions with stakeholders, steering committee members, and project delivery teams. This data should be used to improve future forecasting and or to keep in mind any unforeseen realized risks for future projects and forecasts.
These type of lessons learned discussions, greatly help with future forecasting and with keeping any obstacles in mind which may be easily overlooked otherwise.
Question 1
A target mix allows you to look at the various benefits and risk your projects can create for the business strategy. A target mix helps deliver projects that create alignment between the IT and business strategies while realizing the benefits of IT investments. It prevents management from creating biases based on individual preferences.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
The need for having all the projects proposed a uniform way is to give an organization the ability to monitor and control the projects with regards to the business needs of an organization. By controlling the resources, it gives them an exact outlook on how, where, and when the resources can be used to prevent loss of resources such as time, money etc., all information must be available in regard to the project to comply with an organization’s needs and goals.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project
It would depend on the organization, the scale of the project, and if the project was a success or not. Within my organization, the project usually goes through an executive ladder for approval, and if all the requirements are met the project is initiated, and monitored. A second project is also introduced with the similar template as the first project, and if the first project was a success there is a high chance of the second project being approved.
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of a production process? What assumptions would you have to make?
Since the long-term project can impact revenues, shortening the sales cycle can improve the yield of production. Shortening a sale cycle would cause an organization to have an increase in revenue, and reduce the risk of anything going wrong during the process. It would be best to keep track of the sale cycle and understand the ins and outs of the sale cycle. Advertising the product in the best possible way, and keeping track on how a project is executed will enhance revenues.
Question 2
Creating a uniform process for a project proposal can directly positively affect the IT Budget. A uniform process can ensure that you don’t have multiple projects that either overlap or conflict with each other. A uniform process can allow for projects to be viewed from the organization-wide level as opposed to fixing a specificly identified issue or a specifically identified goal. This in turn could prevent the adoption of highly customized applications that are costly overtime. A uniform process also strengthens to overall IT governance culture by creating set standards on how to approach solving problems and taking advantage of opportunities.
5. How does your company make project funding decisions? How well does it work?
We get an assigned budget for the whole year that is used for funding a project to buying office supplies. Since the budget is allocated very carefully to each department, there is hardly much chance over funding for each project. In some cases, it does not work very well, for example. if a new project is implemented and is in need of funds, it takes quite some time for the funds to be allocated because the request for funds goes through the executive chain before the project manager approves the funds.
Mohammed – this makes it sound like there is no capital budget for projects, everything most come out of IT’s operating budget. Is that correct?
Hi, Professor,
As far as my understanding is there is no capital budget.
Question 3
I think the answer is currently no, but hopefully turning into yes. Globalization has created an exponential need for strategic learning and adoption of best in practice ideas. The adoption of new ideas, processes, frameworks, etc still face the age-old human enemy of complacency. Often new ideas, techniques and so on are only adopted after a catastrophic failure. That can be the failure to meet regulations, a failure to meet expectations and most often includes a failure that results in a financial loss. I believe that projects born of personal interests are still the prevailing type of projects that get approved. Such projects often don’t understand or have KPI’s attached to them. They can’t truly be judged based on what they were proposed for in the first place. They are often intended for good but not necessarily anchored in the tangible. I do think the connectivity of the world has created more visibility for those experiencing catastrophic loss and therefore encouraging more to be proactive than reactive. Because of that I hope that soon we will see a reverse where projects are created via structure and not grandiose ideas.
1. What is the importance of having a target mix before starting to approve projects?
COBIT 5: APO05 Manage Portfolio points out that it is important to evaluate, prioritize, and balance programs and services, that are in line with the organization’s objectives while managing demand and funding limitations. Once the targeted mix has been identified and categorized according to their value and risks they are then moved into an “active services portfolio for execution”, where they are monitored, adjusted and changed according to the organization’s priorities. Furthermore, our PPM readings point out that because money is a “limited resource” it is important that you invest in the “right things”, and continually evaluate the identified “things” during its life cycle.
2. Why would you want all projects to be proposed in a uniform way? What would you suggest as information that must be available for all projects?
I believe this question was addressed in our PPM readings this week. Our readings discussed the importance of using a Business Case which identifies the “facts and data to better understand the value, cost, and benefits of implementing a project”. By utilizing the Business Case it will allow the organization to identify the objectives and how it aligns with the business, the scope, risks involved, the efficiency and effectiveness of each project. Thereby assisting the business to implement the project, wait for the most optimal time, or to eliminate the proposal altogether.
Question 4
A company that shortens its sale cycle sounds like a company that has capitalized on making some part of their process more effective. A company that improves the yield of a production process sounds like there more efficient. Both situations sound like the possibility of more money is being generated. In the case of sales, it sounds like less time is wasted which means more money per time measurement calculated is higher. In the case of production, It sounds like fewer resources are being wasted resulting in cost savings. Both are easy pitches in my opinion.
Jason – actually to a manufacturer increasing yield is both efficiency and effectiveness. Efficiency as in less in, more out and cost per unit going down. Effectiveness because most manufacturing is fixed asset heavy. Thus a firm may have two lines, each worth a million dollars. By increasing yield I am increasing the output of those fixed lines and therefore being more effective. Its not like I am going to just add a third line if I need 5% more capacity.
Question 5
I haven’t been able to view traditional project funding decisions. I have observed on the conversations we’ve got to them the decision meetings. In many cases, it was like the concept of target mix. Multiple aspects of the proposed project were debated by all sides. Short term and long term, financial vs intangible benefits and so on. In the cases, I observed management operated in silos. This resulted in most sides not seeing the point of view of the other and created long-drawn-out processes to determine rather the project would get picked up or not. The lesson I took away from that was to be open-minded and consider the benefits and risks to the business of opposed to the one side I represent.
3. Do you think most organizations compare their projects’ performance to that which was proposed by the project? Why or why not?
Yes, I think a truly effective organization will indeed monitor and evaluate their project’s performance to its proposed objectives to truly identify if they are receiving the projected ROI. Do to funding limitation it is important to evaluate the “right things” that were originally identified are still in line and meeting the organization’s objectives, which will, in turn, keep the organization abreast of new enterprises to remain competitive. If it’s not, the organization can quickly re-evaluate and implement new initiatives.
5. How does your company make project funding decisions? How well does it work?
I believe my company has an ERP department that is dedicated to managing and automating our back office functions that are related to technology, and services. Since our Banner implementation several years ago it has been working well (for the most part). There are some business solutions that have not fully utilized the system’s automated potential, which resulted in more manual processing and in my (outside looking in) opinion has not effectively utilized the systems full potential. Therefore, the expected ROI has not been achieved for some units.
4. How would you justify a project that shortens a company’s sales cycle or improves the yield of a production process? What assumptions would you have to make?
A project that shortens a company’s sales cycle and increases the production process would have to justify a greater ROI for the organizations. I would assume in doing so the organization was monitoring and evaluating the project’s performance. And, in this scenario, I would also believe the organization is utilizing the Business Case to identify the objectives, risk, values, and efficiencies.
Lezlie – you really need to go beyond ROI. Every proposed project should have a good ROI, if not, why bother. Furthermore, ROI is based on assumptions. What are these and do the business people in the room believe them. Check out my reply where I talked about knowing not only the sales cycle time, but also market share, average value of an opportunity, and probability of closing an opportunity. If you used these know metrics to calculate an expected return (and the business looks at, and trusts, the same data)then your case will be accepted. If you just say that you expect a 1% sales increase without documenting why, then the business is apt to not believe you.
Alignment to the business objects is another key to success. If you proposed something targeted at sales growth to MDCM, they probably wouldn’t agree to fund it. Are they opposed to growing sales? No, but they are focused on consolidation and efficiency and by funding the growth project, they would not be fundings something that would support their consolidation efforts.