Why orgnaisations choose the wrong projects

1. The 5 Reasons why Organisations choose the Wrong ProjectsDarren CookPrimavera Australia17 Aug 2010 The most comprehensive Oracle applications & technology content under one roof

2. The Five Reasons why Organisations choose the Wrong Projects Capturing the wrong information Decision making Bias Not knowing what metrics to use Focus only on “Should we do this?” not “Can we?” as well Not looking at project selection with a Portfolio focus

3. Why is this important? Leads to.. Situation Results in.. No Capacity View Reluctance to say no to projects Too many projects Over budget Capturing the Wrong Information Projects Late Can’t kill projects Poor execution Business needs not met Projects sold on an emotional basis – not selected Under-estimation of effort and cost Benefits not received No effective review process Overemphasis on ROI Projects not aligned to strategy Lack of confidence in Delivery Process No clear criteria for selection

4. The Five Reasons why Organisations choose the Wrong Projects Capturing the wrong information Decision Making Bias Not knowing what metrics to use Focus only on “Should we do this?” not “Can we?” as well Not looking at project selection with a Portfolio focus

6. Value to the Organisation should be paramount

7. Data for Data capture sake

8. Benefits, Cost, Value, Alignment, Risk.

10. Cost Restraints

12. Health

15. Reason 2 – Decision Making Bias * SDG eBriefing: Garbage In, Garbage Out: Reducing Biases in Decision Making. January 15, 2003

16. Countering Bias Documenting Judgements and Assumptions Use Experts when Required Assess New Initiates Require Probability or Confidence indications As well as existing Investments Look at Future Costs not Sunk Funds

18. Decision making BiasNot knowing what metrics to use Focus only on “Should we do this?” not “Can we?” as well Not looking at project selection with a Portfolio focus

20. Decision making BiasNot knowing what metrics to use Focus only on “Should we do this?” not “Can we?” as well Not looking at project selection with a Portfolio focus

22. Mandatory Initiatives

23. You may need to fund them but do they need to be done now?

24. Limit Scope, Cost, Risk

25. Discretionary Initiatives

27. Which Investments should the Organisation invest in?

28. What initiatives are going to provide the most value to the Organisation?

29. Why you wouldn’t just use Financial Metrics?Companies that rely mostly on financial metrics obtain "unbalanced portfolios" that are not well matched to the strategy of the firm R. Foti, "Priority Decisions," PM Network, 16 April, pp. 24-29

31. Its survey focused on a broad range of industries, large and small, in 30 different countries, which represented 10,640 projects, for a total value of $7.2 billion.

33. A major reason for project failure is that most organizations do not ensure that all projects they implement align with their organization's core strategies.

35. How does this initiative effect the future state?

36. It is not enough to say that this Investment contributes to Operational Excellence

37. Organisations must verbalise their Corporate objectives into current and future state.Example: Call centre performance level >80% (calls answered within 30 seconds) Current State: Current performance is 65% Future State: >80%

38. Alignment to Objectives If you have projects that have already started and are contributing to an objective then any new project must use these future states in the evaluation Proposed Improvement Current Improvement Current State Approved Projects Now End of Cycle New Candidate

39. Financial Contribution Looking at contribution to a target future state

40. Financial Contribution Future State of the Business Current State of the Business Go Decision Value Added by Project No Decision

43. Hurdle Rates

44. Probabilities

45. Portfolio RiskA diversified portfolio of high and low risk investments yield a higher return than a portfolio comprised of solely high risk or low risk investmentsDr Harry Markowitz – Pioneer of Portfolio Management

46. Scoring Value = Alignment * Financial Contribution / Risk Prioritisation = Value + Timing Considerations + Dependencies

48. Decision making Bias

50. Limit Cost

53. Decision making Bias

54. Not knowing what metrics to useFocus only on “Should we do this?” not “Can we?” as well Not looking at project selection with a Portfolio focus

56. If the only projects you are asked to manage were the ones your organisation really required?

57. If you were not asked to manage more than you have the capacity to handle.

59. Budgets – Can we afford to do this? What is the variance between Budget and requested funds?

61. Decision making Bias

62. Not knowing what metrics to use

65. Decision making Bias

66. Not knowing what metrics to use

67. Focus only on “Should we do this?” not “Can we?” as wellNot looking at project selection with a Portfolio focus

69. What happens when you select projects individually?

70. Early project approvals get the resources

71. Portfolio is biased towards small, low value, low risk, short duration projects

72. Benefits can be double counted

73. Little regard to the possible impact of one project to the nextPortfolio Management Approach key to answering the questions above

74. Portfolio Management = PROCESS for evaluation, selection, execution and benefits realization Portfolio - A collection of investments that aims to maximize value while constraining risk. Portfolio Management - The processes, practices and specific activities to perform continuous and consistent evaluation, prioritization, budgeting, and finally selection of investments that provide the greatest value and contribution to the strategic interest of the organization. Through portfolio management, the organization can explicitly assess the tradeoffs among competing investment opportunities in terms of their benefit, costs, and risks. Source: US Army Business Transformation Knowledge Center http://www.army.mil/ArmyBTKC/rc/glossary.htm#p What is Portfolio Management?

76. Project Termination

77. Reprioritization

78. Resource Allocation

79. Value

80. Risk

81. Strategic Alignment

83. Develop Business Case

84. Evaluate Key Metrics (cost, benefit, risk)

85. Individual Projects

86. Current and Trended Performance

87. Overall Portfolio Results

88. Health

89. Risk

90. Performance

91. Value

92. Balanced Portfolio?

93. Growth?

97. Decision making Bias

98. Not knowing what metrics to use

99. Focus only on “Should we do this?” not “Can we?” as well

100. Not looking at project selection with a Portfolio focusTHANK - YOU

101. Questions

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