There are always good reasons. The engineering estimate was overly optimistic. The requirements were not well defined. Your key piece of technology needs a little more “tweaking”. The contractor you hired works too slow and their output needs too much rework. And so on.
Your program manager seems to be an intelligent, personable, and articulate person. He is PMI PMBOK-certified and has great credentials. Yet the surprises keep coming -- this is the third 6-month delay he announced since the start of the program a year ago. Now there is talk from marketing to cut back on scope so you can launch something before the trade show this fall, even if it would be much less than the competition has on the market already.
If you were to believe the new estimates, then your program’s financial model would barely still make sense. And if the surprises were to continue, then your CFO would have a fit since you would either lose money if you would choose to go on, or you would take an immediate hit on the P/L if you were to cancel the program and reverse the capitalization of R&D expenses to date.
At this point, most executives would be tempted to make a “go / no go” decision based on their intuition. And it is possible that they would make the right decision. You could, however, take a more quantitative approach and decide based on facts and numbers, not just “gut feel”. For example, here is how our OnTrack (SM) program appraisal methodology works:
1. Determine the root cause(s) for the delays
a. How were the requirements captured? Was the technical approach selected before the requirements were captured?
b. How were the estimates determined? Top-down or bottom-up? By edict or by consensus? Were they benchmarked against other similar programs as a sanity check?
c. Do all the team members buy into the published estimates? Why or why not?
d. How were the risks captured? Was the impact and probability of each element of risk captured into the project plan?
e. How predictable is your product development process?
f. How capable are your engineers relative to the technical approach chosen? Your contractors?
2. Review and clarify your program’s scope. Tie it to the business value expected from commercialization (new sales or defending market share). Re-prioritize.
3. Review and refine your detailed requirements. Engage your system architects, integrators, and key suppliers. Fill in the gaps where needed.
4. Review your technical approach with your system architects and integrators.
5. Assess your extended team’s capability level – employees and contractors included. Use a defined, quantitative framework (like the SEI CMMI) as a basis for your assessment.
6. Re-examine your project risks. Do you have any key pieces of technology, uniquely skilled employees and contractors, key suppliers or regulators that can preempt or delay your program? If so, define and quantify (impact, branch, and probability).
7. Rework your schedule by taking possible resource bottlenecks into account. A good formal methodology to follow is the Critical Chain Project Management (CCPM) model based on the Theory of Constraints (ToC).
8. Determine your desired and alternate scenarios and the associated probability trees
9. Review your program’s WBS and task lists for completeness and alignment with the technical approach chosen. Break down tasks to a resolution of between 8 and 80 man-hours per task.
10. Re-evaluate your individual task estimates. Engage the people who will have to actually execute. Capture each estimate at 2 levels of probability (50% and 80% are the most common)
11. Apply the capability correction factors determined at step 5 to the estimates determined at step 10 and to the probability trees determined at step 8
12. Assemble a statistical predictive model including all the elements determined above. The output of this predictive model will be outcome probability curves for delivery dates and program cost.
Using these statistical predictive curves, you can now answer the following questions:
- What is the probability that my program will be finished by November 21st, 2011?
- With a 90% confidence level, what will this program cost us?
- With a 85% confidence level, on what date will this program be delivered?
These quantitative answers can now drive your financial model, and you and your team will have the visibility to determine whether continuing to invest in the program makes sense, or stopping the program at this point would bring more value to the firm.
Each program is different, and they all have their own sources of uncertainty. By using our OnTrack(SM) program appraisal methodology, we have saved mid-tier companies tens of millions of dollars in unnecessary spending. If you would like urgent assistance with your specific program, please visit www.priusmedical.com for details.
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