PROJECT IN R&D ENVIRONMENT

AND
- A LIFE CYCLE APPROACH A project is complete when it starts working for
you, rather than you working for it.

What Is Most Likely to Happen ?

August 11, 2013: The Hindu

Cost of Poor R&D Management in Pharma

$ 899 MM/Each New Drug

Opportunity Costs
Failed Drugs
Marketing & Sales Costs
The Patients are Still Waiting

In other words

Benefit of Good Management

Higher NPVs
More Products per $
Identify Losers Sooner
More Successful Projects
Faster Reviews

Projects of India
Combat Improved Ajeya

Mine Protected Vehicle

Passive Night Vision

Goggles 102A

Arjun Main Battle Tank

Stallion 7.5 / 5 ton MK -III

Laser Range Finder TPD

K1 for T-72

Carrier Mortar Tracker Vehicle

LCA

Brahmos

Brake Parachute for

MIG-23

Kaveri Engine

Did these projects drive you crazy?

What about DRDO Projects?

After 54 years of DRDOs
establishment, India still
imports 70 per cent of its
defense equipment
requirements.
On

the

Light

'Tejas'

Combat

project,

Minister)

said

he

the

getting

ready

for

Initial

Operational

Aircraft
(Defence

DRDO
the

was

second

Clearance

(IOC) of the indigenous fighter but

Kaveri Engine for LCA is running
late by 16 years and the cost
has escalated by around 800 per
cent

"I

am

impatient

for

the

Final

Operational Clearance (FOC).

5 February, Deccan Chronicle

What about DRDO Projects?

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Importance for Good Project

Management Practices for DRDO

The Indian Nuclear Industry Status and Prospect

(Nuclear Energy Futures Paper No. 9 December , 2009 by MV Ramana)

The Indian Nuclear Industry Status and Prospect

(Nuclear Energy Futures Paper No. 9 December , 2009 by MV Ramana)

The Indian Nuclear Industry Status and Prospect

(Nuclear Energy Futures Paper No. 9 December , 2009 by MV Ramana)

Indias Dream of Reusable Launch Vehicle (RLV)

India's Space capsule Recovery Experiment [SRE].mp4

Space Recovery Capsule

(SRE 1)

IMPACT ON PROJECT MANAGER

Why Projects are delayed?

Uncertainty: Difficulty in planning

High Level of Complexity
Multi Disciplinary resources
Conflicts: Organisational structure
External Stakeholders: Project
cross organizational boundaries

Management skills
In projects nothing is routine
Management by Exception is Management
Of everything

What is Managed in Project Management?

STRUCTURED
PROJECT
MANAGEMENT
METHODOLOGY

Characteristics of an R&D Project

complex,
interdependent,
responsive to sudden research environment changes (e.g.,
breakthroughs, new barriers, and collaboration changes), and
heavily reliant on expert judgment to maintain quality,
relevance, and performance.
The technical excellence of R&D activities is largely assessed
through peer review of projects and the use of review of
programs by advisory committees (or other outside expert
panels).

R&D Project Environment

ng
i
d
)
n
n
ta
io
t
s
r prioritize
c which
In R&D organization, the project customers may
e
u
r
d
t
n
s
of the triple constraints are most critical ftou their efforts
n (i.e., scope
o
Cunits of
specifications and capabilities; costck o
in tvarious
.
c (ex
a
l
e
j
resources; or schedule both interim
milestones
and completion
of Pro ent
e f
of final deliverables).
s
o oym
u
a
e pl
c
r
be atu De
s beginning of each fiscal year and
ce e n atVthe
Funding is fixed nannually
e th D)
r
customers require
deliverables
by a certain date.
&
ff e
i
(R
d
t
is
n
h
e
t
m
s
p
I projects
R&D
o frequently are required to offer maximum scope
l
efor a negotiated cost and schedule.
v
flexibility
e
D
.
e
.
i

Development Projects
Development activities are conducted to acquire
and disseminate new knowledge of a theoretical or
experimental nature. It may have any of the
following feature:

End Goals Known

(Milestone, deliverables)

Methods for
achieving them

YES

NO

NO

YES

NO

NO

Deployment Projects
?
?
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e
m
a
Deployment projects are conducted on fixed
scope
s
e
projects using established knowledge.sItb may have any
t
c
of the following feature:
je
o
Pr baseline) are well known
Goals (e.g., scope, cost, and schedule
e
h
t for achieving those goals are well
Methods (execution process)
g
n
i
known
g
a
n
Methods for quantitatively
measuring progress against the
a
M
r
goals (e.g.,
unit
fo rates, volumes of materials, and length of
h materials) are well known.
installed
c
a
o
r
p
Ap

Plan the work and work the plan.

Technology Readiness Level (TRL)

Progressive Scope/ Baseline

Unlike fixed-scope deployment projects:

scope baseline for R&D projects may never be frozen early in the
project life cycle because there is insufficient information to do so.

Artificially freezing the scope before the results of research are

known would inhibit the usefulness of the projects final result.

Deployment Vs Development Project Life Cycle

In R&D Project Managers should

Establish parameters that frame the scope, schedule,

and cost boundary conditions for the project (the
project plan)
Identify, in advance, research elements of the project
Use design-of-research/experiments concepts to frame
the research
Establish overall scheduled review dates to assess
progress
Approve (incrementally) the project detailed scope as
results of research become known.

PROJECT LIFE CYCLE

Project Phases and the Project Life Cycle

A project life cycle is a collection of project
phases that defines:
What work will be performed in each phase.
What deliverables will be produced and when.
Who is involved in each phase.
How management will control/approve work produced in
each phase.

A deliverable is a product or service produced

or provided as part of a project.

Project Life Cycle Issues

PROJECT SELECTION
Project Identification
(Brainstorming, SWOT analysis,
Project possibilities)
Project appraisal
(Market, Technical,
Financial, Economic
& Ecological Appraisal)

Multi-criteria decision
making for selection

PROJECT
COMPLETION
Accounting
Audit &Report writing
Handing over project to user
Disbanding project team
Disseminating learning's from project.

PROJECT PLANNING
Work breakdown structure
Basic Scheduling
Time/Cost tradeoffs
Resource loading
Resource Leveling
Limited Resource Allocation
Simulation

PROJECT
IMPLEMENTATION
Project Monitoring and control
(Earned value analysis)
Redefining priorities

Typical Project Life Cycle

e.g. A Good Student Project
100

Percent Completion

Needs Tidying Up
At The End

Gets Very Busy

Starts Slow

Tim e

Project Life Cycle

FIGURE 1.1

The Project Life Cycle

Project Life Cycle

selection

Follow up
Analysis

Project
Identification
Definition

Formulation
Feasibility

Evaluation
Post implementation
Completion
Termination

Project
Appraisal

Project Planning and

Implementation Cycle

Project Design
Selection
Negotiation
Approval

Supervision
Monitoring
Control
Implementation

Project
Activation
Organisation

More on Project Life Cycle Phases

In the early phases of a project life cycle:
Resource needs are usually lowest.
The level of uncertainty (risk) is highest.
Project stakeholders have the greatest opportunity to influence the
project.

In the middle phases of a project life cycle:

The certainty of completing a project increases.
More resources are needed.

In the final phase of a project life cycle:

The focus is on ensuring that project requirements were met.
The sponsor approves completion of the project.

What uncertainties are encountered in

project management?
Time required to complete a project
Availability of key resources
Cost of resources
Timing of solutions to technological problems
Actions taken by competitors

Advantages of Using Formal

Project Management
Better control of financial, physical, and human resources.
Improved customer relations.
Shorter development times.
Lower costs.
Higher quality and increased reliability.
Higher profit margins.
Improved productivity.
Better internal coordination.
Higher worker morale (less stress).

PROJECT IDENTIFICATION

Project Need Identification

Receptive to new ideas: Internal/External source

Vision of future growth
Long term objectives
SWOT analysis
Preliminary project analysis

Projects as an agent of Change

State B

State A

Alternative
Projects
(Paths)

Project Identification
OBJECTIVE

External

BRAINSTORMING
(SWOT, Emerging trends)
Internal
Objectives
To increase profits
To minimize threats of losses
To become more competitive
ALTERNATIVES
To provide
help after a disaster
To train people in a new area
To reduce pollution in Delhi
Screenng
Criteria
To become a successful
entrepreneur
CANDIDATE
PROJECT
SELECTION

SWOT

SWOT

STRENGTHS
Experience and expertise
Financial position
Capital raising capability
Industrial contacts
Foreign collaborations
THREATS
Competitors
Poor state of the economy
Outdated technology
Unprofessional management skills
New products and services

WEAKNESSES
Newer unfamiliar technologies
Inability to raise huge investments
Lack of experience
Lack of trained personnel
Inability to forecast market trends
OPPORTUNITIES
Emerging technologies
New products with new markets
New processes with better features
Special financing schemes
Government and other incentives

PROJECT SELECTION
&
FORMULATION

Project Appraisal

Market Appraisal
Technical Appraisal
Economic Appraisal
Ecological Appraisal
Financial Appraisal
A Feasibility Report considers all these
issues prior to project adoption.

Market Appraisal
Aggregate future demand: Demand estimation
Market share
Current and future competition
Location and accessibility of consumers
Technological scenario /Obsolescence
Possible pricing options

Service mix and cost involved

Extent of
Capital/Lab
Intensity

Concept, price, promotion and place

Post project support

Level of Customisation

Technical Appraisal

Engineering aspects: Preliminary tests and studies

Choice of suitable production process
Choice of appropriate machines and equipment
Proper layout of plant and buildings
Realistic work schedules
Socially acceptable technology
Effluents and waste disposal
Locations: Availability of raw materials, power and other inputs

Economic Appraisal

Social cost -benefit analysis

Direct economic benefits & costs in terms of shadow prices

Impact of project on distribution of income in society

Impact on level of savings and investments in society

Impacts on fulfillment of national goals: Self sufficiency,

employment and social order

Ecological Appraisal

Environmental damage: Air, Water, Noise,

vegetation, human life etc.

Restoration measures and cost major projects

which cause environmental damage like Power
plants, Irrigation schemes, Industries like bulk
drugs, chemicals and leather processing

Financial Appraisal
Whether the project is financially viable ?

Investment and phasing of the total cost

Means of financing

Projected profitability

Breakeven point

Cash flows in the project

Investment worthwhile?
Net present value

Discounted Cash Flow Criteria

n

Ft
t
t =1 (1 + k + pt )

Net Present Value (NPV) of project = A 0 +

Internal rate of return

Benefit /Cost ratio of discounted cash flows
Payback period
Discounted payback
Accounting Rate of Return (ARR)

Non-discounted Cash Flow

Criteria

Level of risk (as evidenced by the worst and best values of costs and revenues)

Parameters for Selecting Projects

Is it in line with the organization strategy

Case of multiple projects but limited resource:

There is usually not enough resources to implement all projects.

Does the firm has the skill and knowledge to complete the
project successfully?

Parameters for selecting projects include:

Focusing on broad organizational needs.
Performing net present value or other financial analyses.
Using a weighted scoring model.
Implementing a balanced scorecard.

Criteria for Screening Projects

Similarity to
existing business
Expected life
Flexibility
Environment
impact
Competition
NON-FINANCIAL
&
Non-numeric

Investment
Rate of return
Risk
Likely profit
Payback
FINANCIAL
&
Numeric

Project Portfolio Management Problems

The Implementation Gap: The lack of understanding and

consensus on strategy among top management and middle-level
(functional) managers who independently implement the strategy.

Organization Politics: Project selection is based on the

persuasiveness and power of people advocating the projects.

Resource Conflicts and Multitasking: The multiproject

environment creates interdependency relationships of shared resources
which results in the starting, stopping, and restarting projects.

Portfolio of Projects by Type

FIGURE 2.2

Benefits of Project Portfolio Management

Builds discipline into project selection process.
Links project selection to strategic metrics.
Prioritizes project proposals across a common set of criteria,
rather than on politics or emotion.
Allocates resources to projects that align with strategic direction.
Balances risk across all projects.
Justifies killing projects that do not support organization strategy.
Improves communication and supports agreement on project
EXHIBIT 2.2
goals.

A Portfolio Management System

Selection Criteria
Multi-Weighted Scoring Models

Nonnumeric Selection Methods

The Operating/Competitive Necessity:

There is a need for the project..
The Sacred Cow:
There is a strong will to make the project
succeed

Numeric Selection Methods

Financial Assessment Methods

payback period
discounted cash flow etc.

Scoring Methods
unweighted 0-1 factor method
weighted factor scoring method

Weighted Scoring Model

A weighted scoring model is a tool that provides a systematic

process for selecting projects based on many criteria.
Steps in identifying a weighted scoring model:
1.

Identify criteria important to the project selection process.

2.

Assign weights (percentages) to each criterion so they add up to

100 percent.

3.

Assign scores to each criterion for each project.

4.

Multiply the scores by the weights to get the total weighted

scores.

The higher the weighted score, the better.

Weighted Scoring Model for Project Selection

MORTALITY OF NEW PROJECT IDEAS

We start with large number of ideas and finally
after screening are left with very few projects.
One study indicated that out of 35 new
ideas only 1 made it to the final product

What uncertainties are encountered in

project management?
Time required to complete a project
Availability of key resources
Cost of resources
Timing of solutions to technological problems
Actions taken by competitors

IDEA GENERATION

Screening

Project Appraisal

Project Selection

Benefits of a Selection Model

Applying a weighted scoring model to bring projects

closer with the organizations strategic goals.
Reduces the number of wasteful projects
Helps identify proper goals for projects
Helps everyone involved understand how and why a
project is selected

Major
Project
Proposal

FIGURE 2.4A

Risk
Analysis

FIGURE 2.4B

Priority
Analysis

FIGURE 2.6

Project
Selection
Process

Project Selection Decision Process

Step1: Proposal Submission
Ensure the completeness of proposal

Step 2: Assignment of external reviewers (division managers)

Assign each proposal to one or more peer reviewers

Step 3: Peer review (external reviewers/division managers)

Division managers coordinate the process as coordinators
Validate the peer review results

Step 4: Aggregation of review results (division managers)

Recommend proposal list for panel evaluation

Step 5: Panel evaluation (department/division managers & experts)

Suggest a funded list

Step 6: Final decision (top management division managers)

Project/Portfolio Selection - Success Factors

Centralized view/Overall analysis : have an inventory of current and

proposed significant projects

Financial analysis: ROI, NPV, Payback,

Risk analysis: complexity, technology risk, cash flow, organizational
changes

Interdependencies among projects

Accountability and governance: top management involvement,
business leaders accountable, using regular project portfolio reporting

Challenge of Project/Portfolio Selection

Lack of knowledge to evaluate risks

Lack of commitment of business leaders
Lack of cross-functional communication
Lack of a clear company strategy
Lack of appropriate way to measure
project/portfolio benefits
Lack of knowledge of portfolio management
techniques

Why bad projects are hard to

kill? Belief The trap

How to Avoid Blind Faith

Thankyou

A project is complete when it starts working

for you, rather than you working for it.