Chapter 3
Project Selection:
Doing the Right
Thing
McGraw-Hill/Irwin
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
Chapter Learning Objectives
When you have mastered the material in this chapter,
you should be able to:
•
Use the project selection funnel as a strategic tool.
•
Establish project goals built on underlying problems,
opportunities, and mandates.
•
Generate and evaluate options for achieving project goals
using financial analysis, as well as team-based methods
such as advantages–disadvantages, factor rating, forcefield analysis, SWOT analysis, and Pareto Priority Index.
•
Create a formal or informal business case for a project.
•
Build real-options concepts into a multistage project plan.
•
Apply a team-based approach to assess a project
portfolio.
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Project Selection: Doing the Right
Thing
“NASA spent millions of dollars developing a
pen that could write in zero gravity conditions.
In contrast, spending not a single ruble, the
Soviets provided their cosmonauts with pencils
that functioned very effectively in zero gravity.”
Mykola Komarevskyy
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Exhibit 3.1
The Project Selection Funnel
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The Business Case
• A document that presents the justification for the
project and recommends whether or not it should
proceed to the initiation stage. The business
case is usually reviewed by the senior decision
makers within the organization.
• Key business case elements include: executive
summary, project drivers, underlying causes,
goal, options for achieving the goal, assessment
of options, conclusion.
• Individuals and organizations can use the
business case elements formally or informally.
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Exhibit 3.2
Components of the Business Case
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Exhibit 3.2
Components of the Business Case
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Project Drivers: Problems, Opportunities
and Mandates
• Problem – a gap between actual
conditions and desired conditions.
• Opportunity – a gap between current
conditions and a desired future
state.
• Mandate – a requirement imposed
by higher levels of management or
external entities or factors (e.g., a
governing board, or legislation).
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Exhibit 3.3
Problem Statement Components and
Examples
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Exhibit 3.4
Opportunity Statement Components
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Causes of Problems and Opportunities
• Once a business case team has a clear
understanding of a potential project’s driving
problem, opportunity, or mandate, its members
should consider the causes that underlie it.
• Types of causal configurations
•
•
Constellation of interacting forces: A situation where
one underlying project cause affects the others,
magnifying the effects that any one had on its own. .
Reciprocal cause-effect relationships or positive
feedback loops: A causal pattern where one or more
causes feed into each other. This creates a positive
feedback loop that can create a potentially unending
cause-effect loop if the system has no selfcorrecting mechanism.
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Exhibit 3.5
Reciprocal Cause-Effect Relationship
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Team-Based Tools for Causal Analysis
• Fishbone Diagrams
• Affinity Exercises
• Influence Diagrams
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Exhibit 3.6
Fishbone Diagram for Emerald Sports
Late-Delivery Problem
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Appendix: Sample Business Case Contents
Fishbone Diagram for Project Drivers
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Exhibit 3.7
Mind Map of Possible Approaches for Solving
the Late-Delivery Problem at Emerald Sports
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Options for Assessing Projects and
Project Options
• Financial Analysis
• List of Advantages and Disadvantages
• Factor Rating
• Force-Field Analysis
• Strengths, Weaknesses, Opportunities,
Threats (SWOT) Analysis
• Pareto Priority Index (PPI)
• Real Options and Decision Trees
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Exhibit 3.8
Options for Assessing Projects and Project Options
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Exhibit 3.8
Options for Assessing Projects and Project Options
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Exhibit 3.9
Examples of Advantages and Disadvantages
Associated with Building a New Distribution
Center (DC) in Eastern Europe
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Exhibit 3.10
Factor Rating Example
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Exhibit 3.11
Force-Field Analysis for Assisting Emerald
Sports’ Current Transportation Provider
with Process Improvement
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Exhibit 3.12
Dimensions for Discussion in a SWOT
Analysis
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Exhibit 3.13
PPI Analysis for Process Improvement
Projects at Avionics Company
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Exhibit 3.14
Decision Tree Adapted for Depicting
Real-Options Dynamic Scenario Planning
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Box 3.3
Eisner’s Gong Show at Disney
During his tenure as Disney CEO, Michael Eisner
applied somewhat unconventional methods for project
selection, one of which was “gong show.” “Once a
week, we’d invite everybody to come to a conference
room, and anyone could offer up an idea or two and,
right on the spot, people would react. We loved the idea
of big, unruly, disruptive meetings; that’s what the gong
show was all about. The Little Mermaid came out of a
gong show, and so did Pocahontas. Lots of ideas came
out of those meetings, and people had a great time.”
Thus, with all we have said about the value of a
systematic selection process, we must recognize that, in
practice, there are other, less formal approaches that
can work effectively.
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Project Portfolios and Portfolio Maps
• The collection of projects underway in an
organization is the project portfolio.
• Before making stand-alone decisions about
which projects to select or drop,
organizations can map their existing (and
future) portfolios as a way of seeing the
bigger picture.
• Organizations should select a conceptual
mapping model that is appropriate to the
kinds of projects under consideration.
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Exhibit 3.15
Project Portfolio Map Based on
Financial Outcomes and Risk
To achieve
strategic
balance, an
organization
should have
a mix of
projects in
the portfolio.
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Exhibit 3.16
Sample Portfolio Matrix
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Chapter Summary
•
It is important to select the right project. All the project management tools in the
world cannot salvage a project if it is not appropriate for the organization to
undertake it.
•
Project managers seldom choose the projects the organization adopts, but
need to understand the logic of the selection process to ask the right questions
and make adjustments, as needed.
•
The business case approach provides a useful framework for guiding project
selection decisions.
•
Tools for project assessment include financial methods, lists of advantages and
disadvantages, factor rating, force-field analysis, SWOT analysis, and PPI.
•
Project selection should not be a onetime decision; early phases often produce
information the team can use to decide on courses of action for later phases.
•
Real-options concepts offer useful frameworks for looking at projects along a
dynamic timeline.
•
Individual projects are not islands unto themselves and should be viewed as part
of a larger portfolio.
•
Upper-level managers will benefit from having a mechanism whereby they
periodically assess portfolio maps and make decisions about project
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continuation, modification, and resource allocation.