PROJECT MANAGEMENT: I

SEM 2021-22
BITS Pilani Dr. ARUN MAITY
Pilani Campus
1.14. PROJECT MANAGEMENT:
MANUFACTURING

• Conceptualization of a Product
• Feasibility Study
• Market Survey: Cost, Product Functionality and
Comparative Manufacturer Reliability
• Cost Estimation
• Technology Assessment
• Product Design and Development: Adaptability,
Maintainability and Reliability
• Financing
• Process Planning

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• Quality Specifications
• Personnel Assignment and Training
• Operations Planning
• Facilities Layout
• System Integration
• Production Scheduling
• Production Run
• Product Shipment

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1.15 PROJECT MANAGEMENT:
Automotive Industry

Development process
• Concept Initiation / Approval
• Program Approval
• Prototype
• Pilot
• Launch
Phases of Advanced Product Quality Planning
• Planning
• Product Design and Development
• Process Design and Development
• Product and Process Validation
• Production
• Feedback assessment and corrective actions

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1.16 Department of Defense

FORMAL DESIGN REVIEWS: MIL-STD-1521B

• System Requirements Review
• System Design Review
• Software Specification Review
• Preliminary Design Review
• Critical Design Review
• Test Readiness Review
• Functional Configuration Audit
• Physical Configuration Audit
• Formal Qualification Review
• Production Readiness Review

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1.17 IEEE-1220: PROJECT
MGMT.
• System Definition
• Subsystem Definition
• Preliminary Design
• Detailed Design
• Fabrication, Assembly, Integration and Testing
• Production
• Customer Support

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1.18. ELECTRONICS
INDUSTRY: EIA 632
• Assessment of Opportunities

• Investment Decisions

• Systems Concept Development

• Subsystems Design and Pre-deployment

• Deployments, Operations, Support and Disposal

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1.19. NEED: DRUG
DEVELOPMENT
• How are projects brought to market quickly?

• How do we decide which projects are likely winners or

losers?

• How can we avoid wasted expenditure on projects?

• What can be done to get best return on projects that make it

to the market?

• How do we organize ourselves to develop drugs effectively?

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1.19.1 DRUG
DEVELOPMENT PHASES
• PRECLINICAL PHASE: A drug merits into human clinical
testing

• PHASE 1: A drug merits progression into patent trials

• PHASE 2: To characterize dose response relationship for

efficacy and safety

• PHASE 3: To provide pivotal trial evidence for efficacy

and safety in chronic dosing

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• REGISTRATION : To secure registration approval for the
intended product label

• LIFE CYCLE MANAGEMENT: To maximize the

commercial return for the product

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1.19.2 GOOD STRATEGIES

• Understand the inherent risks and risk management

strategies in product development

• Profitable to flourish in future

• Return on investment

• Time to market

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1.19.3 EXAMPLES:
Pharmaceutical Industry
• Major players were companies operating in industrial
chemicals, retail healthcare, or foods
• Glaxo’s original interests in baby food and other non-
pharmaceutical products, but now has rebuilt its
business around pharmaceuticals with considerable
success.
• Bayer and Hoechst funded R & D intensive
pharmaceutical operations through the cash generated
by other business

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1.19.4 Challenges

• Inefficiency of R & D process became evident and new

regulations introduced to promote safety result in further
escalation of costs and increased timescales

• Increasing competition with similar products reaching the

market meant significantly higher sales and marketing
costs

• Improving the efficiency and effectiveness of R & D

process is an increasingly important objective of most
companies

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• Portfolio Management Is a subject of effectiveness -
Picking the winners

• Project Management Is more about efficiency or

ensuring that the selected products are developed
economically.

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1.19.5 BENEFITS

• Provides a structure for decision making when multiple

projects are competing for common limited resources
• Allows common methods to be used for comparing the
attractiveness of projects
• Creates a group of projects that has the potential to meet
their overall objectives of business.
• Minimizes investment in projects that are judged unlikely
to achieve the technical profile required for commercial
success
• Portfolio management : A dynamic process

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BITS Pilani, Pilani Campus
1.20 PROJECT INTEGRATION
MANAGEMENT
• Focuses all project effort toward the strategic plan of the
organization

• Reinforces mastery of project management and inter-

personal skills

• May require re-engineering of business management

process

– Integration of projects with strategic plan of the organization

– Integration within the process of managing actual projects

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1.20.1 ALIGNMENT OF PROJECTS WITH
ORGANIZATIONAL STRATEGY

• Need: Strategic plans are made by one group of

managers, projects selected by other and implemented
by another

• Independent decisions lead to conflicts, confusion etc.

on unsatisfied customers

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1.20.2 CHARACTERISTICS

• All the parts are inter-related. A change in one of the

parts will influence the whole
• Vision, mission, objectives and strategies need to be
prepared considering internal and external environmental
factors
• External factors: political, social, economic and
technological
• Internal factors: management, facilities, core
competencies, financial conditions

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• Implementing strategies through projects

• Selecting proposals that make largest and most

balanced contribution to the objectives and strategies

• Prioritizing projects so that resources are allocated to the

right projects

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1.20.3 INTEGRATION WITHIN THE PROCESS
OF MANAGING ACTUAL PROJECTS

• Technical side of the management process

– Planning, scheduling, controlling

• Socio-cultural side of the project management process

– Shaping a project culture that stimulates teamwork and high levels

of personal motivation

– Problem solving approach

– Effective communication sessions with stakeholders

BITS Pilani, Pilani Campus

 BITS Pilani
Pilani Campus

ORGANIZATION STRATEGY & PROJECT

PORTFOLIO MANAGEMENT
LECTURE 2 CHAPTER 2 OF T1
TOPICS

• NEED FOR STRATEGY

• ROLE OF PROJECT MANAGER

• STRATEGIC MANAGEMENT PROCESS

• PROJECT PORTFOLIO MANAGEMENT

• PROJECT SELECTION MODEL

• MANAGING PORTFOLIO SYSTEM

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NEED TO UNDERSTAND
ORGANIZATION STRATEGY
• Identify a project’s priority and link with organizational
strategy

• Effective utilization of resources: people, money,

equipment and core competencies

• Clear organization process, best use of scare resources

and improved communication across projects using a
process that is open and transparent

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PROJECT MANAGER’S NEED TO
UNDERSTAND ORGANIZATION STRATEGY

• To make appropriate decisions and adjustments

• Modify design of product to enhance performance

• Product leader through innovation or
• Achieve operational experience through low cost reduction

• Response to delays : Will authorize overtime if firm places on

premium on getting to the market first or accept the delay if
speed is not essential.

• To understand their organization’s strategy so that they can be

effective advocates

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ROLE OF PROJECT
MANAGER
• Understand organization’s mission and strategy otherwise project
manager will tend to
– Focusing on problems or solutions that have low priority strategically
– Focusing on the immediate customer rather than the whole market place
and value chain
– Overemphasizing technology
– Solve every customer issue with product/ service
– Engaging in perfection for jobs which are not in priority
• Demonstrate senior management how the project contributes
firm’s mission
• Explain team members and other stake holders : objectives and
priorities
–

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STRATEGIC MANAGEMENT
PROCESS
• Review and define the organization mission

• Set long term goals and objectives

• Analyze and formulate strategies to reach objectives

• Implementation of strategies through projects

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MISSION STATEMENT

• Mission gives the general purpose of the organization.

• Goals give global targets within the mission.

• Objectives give specific targets to goals.

• Objectives give rise to formulation of strategies to reach

objectives

• Strategies require actions and tasks to be implemented.

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• Mission statements identify the scope of the organization
in terms of its product and service

• Every one in the organization should be aware of

mission

• It includes organization philosophy, key technologies,

public image and contribution to society

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EXAMPLES

• Provide hospital design services

• Provide voice/data design services

• Provide information technology services

• Increase share holder value

• Provide high value products to our customers

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LONG RANGE OBJECTIVES

• Objectives translate mission into specific, concrete,

measurable terms

• Objectives cover markets, products, innovation,

productivity, quality, finance, profitability, employees and
consumers

• SMART Goals (specific, measurable, assignable,

realistic and time bound)

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• Specific : Be specific in targeting an objective

• Measurable: Establish a measurable indicators of progress

• Assignable: Make the objective assignable to one person for

completion

• Realistic: State what can realistically be done with available

resources

• Time Related: State when the objective can be achieved

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ANALYZE AND FORMULATE
STRATEGIES TO REACH OBJECTIVES

• Determining and evaluating alternatives that support

objectives

• Select the best alternative

• Assessment of internal and external environments

• SWOT analysis

• Objectives or tasks assigned to divisions, departments or

individuals

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IMPLEMENTING STRATEGIES
THROUGH PROJECTS
• Implementation requires action and completing tasks

• Allocation of resources: Funds, people, technological

skills, management talents and equipment

• Requires formal and informal organization that

complements and supports strategies and projects
• Planning and control
• Motivating project contributors
• Prioritizing projects

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NEED FOR PROJECT PORTFOLIO
MANAGEMENT SYSTEM

IMPLEMENTATION GAP
– Conflicts frequently occur amongst functional
managers and cause lack of trust
– Frequent meetings are called to establish or re-
negotiate priorities
– People frequently shift from one project to another
– People are working on multiple projects and feel in-
efficient
– Resources are not adequate

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ORGANIZATION POLITICS

• Politics exist in every organization

• Influences funding and high priority

• Project selection may not be on facts and sound

reasoning but on persuasiveness and power of people
advocating projects

• Top management should develop a system for identifying

and selecting projects that reduce the impact of internal
politics and fosters the selection of the best projects.

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• Sacred Cow: Projects that powerful, high ranking official
advocates

• New Baby: Obsession with project

• Sponsored project : Selection and implementation of

product innovative projects

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RESOURCE CONFLICTS
AND MULTI-TASKING
• Problem of share and scheduling resources across
projects

• Multitasking involves starting and stopping work on one

task to go and work on another project and then return to
work on original task

• People feeling inefficient

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ADVANTAGES

• Builds discipline into project selection process

• Links project selection to strategic metrics
• Prioritize project proposals
• Allocate resources to projects that align with strategic
direction
• Balances risk across all projects
• Improves communication and supports agreement on
project goals
• Justifies killing projects that do not support organization
strategy

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PORTFOLIO MANAGEMENT
SYSTEM
• Ensure projects aligned with strategic goals and
prioritized appropriately

• Design of portfolio management system

– Classification of the project

– Sources of proposals
– Evaluating proposals

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CLASSIFICATION OF THE
PROJECT
 Compliance and Emergency: “Must Do Projects” to
meet regulatory conditions required to operate in a
region

 Operational : To support current operations e.g.

reduce downtime, improve efficiency, enhance quality
etc.

 Strategic: directly supports long run mission e.g. New

product development, Research & Development
projects etc.

BITS Pilani, Pilani Campus

SOURCES OF PROPOSALS

• Encourage and keep solicitation open to all sources:

- internal sources
- External sources

• Solicit ideas for projects when the knowledge

requirements are not available in the organization

• Request for proposal (RFP)

• Bid to design and build a new operating room that uses latest
technology

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EVALUATION OF
PROPOSALS
• Ranking proposals

• Assess the value of the proposed project to the

organization and for future backup

• Evaluation form to prioritize and select new projects

• Impact of project on meeting a particular objective

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PORTFOLIO MANAGEMENT
PROCESS
• PROJECT PORTFOLIO IDENTIFICATION
• Identification of programs and projects for meeting business goals
• Done by using standard processes supported by standard templates
• Initial cost-benefit analysis to support the evaluation process
• PROJECT PORTFOLIO SELECTION
• Analysis on the ideas and initiatives identified
• Detailed analysis so as evaluate the financial return on investment,
resources and budget needed
• Identify skill development programs and training to execute selected
projects
• Complexity Vs. Business Value
• Multitasking resources can result in schedule slippages, lower productivity
and project conflicts which can lower profits and missed objectives

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• Project Portfolio Initiation

• Generation of Project charter

• Annual Project Budgets are consolidated
• Alignment of the project with business goals

• Project Portfolio Execution

• Portfolio follows the standard procedures of performance

management, status reporting
• Communication Plan
• Risk management across the portfolio

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PORTFOLIO MANAGEMENT
TOOLS
• Project Prioritization Methods
– Checklist Method:
• A set of criteria is defined against which all projects
are evaluated. A project may only proceed when it
satisfies all criteria
• It is simple and quick.
– Paired Comparisons
• Compare each project against all others, one at a
time with the most favorable project scoring 1 and
the other scoring 0.
• Projects then be ordered, based on total scores

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• Dynamic Rank - Ordered Lists

– A set of criteria Is defined on the basis of which projects are

ranked

– For each project, the average criteria ranking is calculated and

used to rank it overall

• Weighted Scoring Models

• Financial Measures

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OPTIMIZING THE
PORTFOLIO
• Objective : Maximize the value of the launched products

– Few products with high average value

– Large number of products with a lower average value

– Reducing expenditure on projects through efficiency measures

or concentrating on low risk products

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OPTIMIZING THE
PORTFOLIO BY TIME
• Analyze:

– Potential launches over time

– Number of launches x probability of their occurrences

– Monte carlo simulation: reasonable range of possible outcomes

(possible future launches)

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OPTIMIZING THE
PORTFOLIO BY RISK
• Test key attributes of a product as early as possible

• Generate information that reduces future uncertainty

• Force early failure

• Minimize the damage from negative outcomes

• Maximize the return from positive outcomes

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LINKING TO STRATEGY

• Linking Portfolio Management To Strategy

– In top - down approach, resources are allocated to areas of the

portfolio and projects are then prioritized within these

– Define the allocation split between early stage and late stage
development projects and then prioritize these separately

– In bottom – up approach, projects are considered in detail and

prioritized at this level

– The strategic fit of projects is addressed by including criteria for

strategic fitness into the project scoring models

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CRITERIA FOR PROJECT
SELECTION
• Financial Models: Preferred Method To Evaluate Projects
– PAY BACK PERIOD (In Years) : ESTIMATED PROJECT COSTS
/ ANNUAL SAVINGS
– RETURN ON INVESTMENT (In %)
– NET PRESENT VALUE (NPV) : Uses Time Value Of Money,
Cash Flows And Profitability

• Non-financial Criteria: Strategic, Less Tangible, Restore

Corporate Image, Enhance Brand Recognition

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TWO MULTI-CRITERIA
SELECTION MODELS
Checklist Model:
– List of questions to review Potential Projects
– Determine acceptance or rejection
Advantage
– Flexibility in selecting different projects with some variations in
questions
Disadvantages
– Fails to answer the relative importance or value of potential
project
– Fails to allow comparison with other potential projects
– Room for power play, politics, manipulation

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EXAMPLE

CRITERION WEIGHTAGE (0-3)

A. STAY WITH CORE COMPETENCIES 2.0
B. STRATEGIC FIT 3.0
C. URGENCY 2.0
D. 25% OF SALES FROM NEW PRODUCTS 2.5
E. REDUCE DEFECTS TO LESS THAN 1% 1.0
F. IMPROVE CUSTOMER LOYALTY 1.0
G. ROI OF 18% + 3.0

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CONTRIBUTION VALUES TO EACH
CRITERION FOR EACH PROJECT

PROJECT A B C D E F G WT. TOTAL

1 1 8 2 6 0 6 5 66
2 3 3 2 0 0 5 1 27
3 3 0 10 0 0 6 0 32
4 1 10 5 10 0 8 9 102

• Highest Priority : Project 4, Then Project 1

• Project Screened Out : Project 2 And 3, If Criterion Is
Weighted Total Should Be More Than 50

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APPLYING A SELECTION
MODEL
• Project classification: Project’s fit to organization’s
strategy
• Selecting a model: Multiple criteria to select the project
• Best use of human and capital resources to maximize
return on investment in the long run
• Researching new technologies, public image, ethical
position, protection of environment, core competencies,
strategic fit

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MANAGING PORTFOLIO
SYSTEM
• Senior Management Input
– Guidance in establishing selection criteria
– Balance available resources with different types of
projects

• Priority Team Responsibilities

– Responsible for publishing the priority of every project
– Periodic priority review keeping organization focus

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ASSESSING PROJECT
PORTFOLIO
DAVID AND JIM MATHESON SCHEME

BREAD AND BUTTER :

• Improvements to current products and services
• Easy to accomplish
• Produce modest commercial value

LOW RISK AND LOW PAY-OFFS

Example: Software Upgrades
Manufacturing Cost Reduction

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BREAD AND BUTTER
PROJECTS
• These are easy-to-do projects that will produce relatively low
value, if successful.

• You need to invest in many of these projects to support

ongoing business needs.

• However, they seldom support high-impact innovation.

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PEARLS

• Low risk development projects with high commercial

payoffs
• Revolutionary commercial advances using proven
technology

LOW RISK AND HIGH PAY-OFFS

Examples: Next Generation Integrated Circuit Chip

Surface Imaging to Locate Oil and Gas

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PEARLS

• These are the relatively easy projects with big returns that the
board wants.

• Pearls usually come from oysters that have proven out.

Unfortunately, not all oysters produce pearls, which is why
you need to include a reasonable number of oysters (high
risk/high value) projects in your innovation portfolio.

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OYSTER PROJECTS

High Risk and High Value Projects

• Technological breakthroughs with tremendous

commercial potential

Examples: Embryonic DNA Treatments

New kind of Metal Alloys

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• These are risky projects

• They are hard to do but have potential to produce game-

changing returns.

• Model companies—those who excel in innovation—will have

a sufficient number of oysters in their portfolios to produce a
few pearls.

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White Elephants Projects

WHITE ELEPHANTS:

• Projects that at one time showed promise but are no

longer viable

Examples: Products for a saturated market

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White Elephant Projects

• These are projects that are hard to do and if successful,

produce relatively low return on the investment.

• Remove them from your portfolio to free resources to apply to

more valuable opportunities.

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BITS Pilani, Pilani Campus
High Complexity Dropped To be selected

Low Complexity Preferred

Low Business Value High Business Value

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