ESD.36 System Project Management
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Lecture 13
Project Dynamics Applications and Cases
Instructor(s)
Dr. James Lyneis
November 1, 2012
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Today’s Agenda
Managing Changes
• Case Example – Dispute Resolution
• Case Example – Change Management
Project-to-Project Learning
• Case Example – Risk Management
• Case Example – Bidding and Management
Broader issues – project portfolios, priorities and
market interactions
2
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SD Qualitative Insights – 3
4. Attempts to achieve an infeasible plan
via project control actions lead to
“vicious circle” side effects which
increase project cost and duration.
 On complex projects, these costs usually
exceed the “direct” costs of infeasibility
5. Project “changes,” and risks which
materialize, are fundamentally the
same as an infeasible plan. (Lecture 13)
3
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Using an SD Model in Practice
1. Set up model to represent project plan (the
plan should reflect normal amounts of
rework)
2. Specify exogenous inputs for all changes to
the plan as they occur(ed) (external and
internal, including new policies or processes)
3. Refine parameter and change estimates via
model calibration (usually after project
completion)
4
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Direct Changes to Project Plan
1
1
Delayed Availability
of Staff
Late Vendor
Info; Extra
Mtgs
Project Time
Productivity
+
Scope
Growth
Project Time
Effort
Applied
Original
Work to Do
+
Progress
Progressx
Rework to
Do
Rework
Discovery
-
Project Time
Fraction
Quality 1
Correct
and
+ Complete
Uncertain Specs &
Reqmnts.
Rework
Generation
Rew
ork
Work Done
Undiscovered
Rework
Project Time
Changes
+
Time to Discover Rework
Project Time
Typically many small changes, rather than one large change.
5
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Project
Staffing
Project Behavior: 50 – 100 %
Overrun
Client (?)
Expectation
with
changes
Actual Results
Typical
Plan
Time
6
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Example: Changes Obsolete Work
-
Work Done
Staff Level
Staff
Work Done
100
1,000
Tasks
20% @
“Changes” Month
15
500
250
0
0
6
12
18
Work Done : SD5 Changes
Work Done : SD5 Feasible Plan1
24
30
36
Time (Month)
42
48
54
60
“Changes”
75
People
Plan
750
50
Plan
25
0
0
6
12
18
24
30
36
Time (Month)
42
48
54
60
Staff : SD5 Changes
Staff : SD5 Feasible Plan1
7% Tasks Redone  28% Cost Increase! 4X Multiplier
7
Because of Lower Productivity and
Fraction Correct
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Productivity
Fraction Correct
Fraction Correct and Complete
Productivity
1
Plan
0.9
0.85
Fraction
Task/(Person*Month)
1
0.8
“Changes”
0.7
0.6
0
6
12
18
24
30
36
Time (Month)
Productivity : SD5 Changes
Productivity : SD5 Feasible Plan1
42
48
54
Plan
0.7
“Changes”
0.55
60
0.4
0
6
12
18
24
30
36
Time (Month)
42
48
54
60
Fraction Correct and Complete : SD5 Changes
Fraction Correct and Complete : SD5 Feasible Plan1
8
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Data on “Multiplier"
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D e la y a n d D is ru p tio n R a tio s
100
90
80
70
60
P e rc e n ta g e
50
of
P ro je c ts
40
30
20
10
1
2
3
4
5
6
7
8
R a tio o f T o ta l C o st to D ire c t C o st
9
10
Costs snowball,
increasing nonlinearly with:
 Cumulative
magnitude of
changes;
 Duration and
lateness in project
S o u rc e : P u g h -R o b e rts A sso c ia te s
Data: Ratio of total cost
increase to direct cost
increase 3-5X
9
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
Consequences …
If contractor/client relationship 
Disputes

If internal development 
Risks materialize
10
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Today’s Agenda
Managing Changes
• Case Example – Dispute Resolution
• Case Example – Change Management
Project-to-Project Learning
• Case Example – Risk Management
• Case Example – Bidding and Management
Broader issues – project priorities and market
interactions
11
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How SD in Project Management got
started: Ingalls Shipbuilding vs. US Navy
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
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Ingalls Shipbuilding won contract for 9 LHA’s and
30 DD963 destroyers in 1969 and 1970.
Firm fixed price contract structure
$500 million cost overrun on the programs (Ingalls
and Navy agreed on $150 direct cost – the rest?)


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Navy – bad management
Ingalls – D&D
Ingalls sues Navy claiming design changes caused
delay and disruption
12
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Assessing the Impact of Changes
Step 1: Recreate Program History (Project Plan + Changes)
Customer-Responsible
Events & Conditions
Total Program Labor (Equiv. People)
As-Built
Data
Real Program
T im e
R e m a in in g
Planned
Program
Conditions
S k ill &
E x p e rie n c e
S ta ff
O rg a n iz a tio n a l
S iz e
Changes
M o ra le
T u rn o v e r
H irin g
O v e rtim e
S c h e d u le d
C o m p le tio n
T im e
S c h e d u le
P re s s u re
P ro d u c tiv ity
E q u iv a le n t
S ta ff o n
P ro je c t
Q u a lity
O u t-o f-S e q u e n c e
W o rk
E x p e c te d
A v a ila b ility
C o m p le tio n
o f P re re q u is ite s
T im e
P ro g re s s
Added
W o rk
W o rk Q u a lity
to D a te
W o rk T o
Be D one
W o rk
R e a lly D o n e
Know n
R e w o rk
U n d is c o v e re d
R e w o rk
H o u rs
Expended
to D a te
S ta ffin g
R e q u e s te d
E x p e c te d
H o u rs a t
C o m p le tio n
O b s o le te d
W o rk
R e w o rk
D is c o v e ry
P e rc e iv e d
P ro g re s s
TIME
Company Actions
13
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Assessing the Impact of Changes
Step 2: Remove Direct Impact of Changes – “But for …”
X
Customer-Responsible
Events & Conditions
Total Program Labor (Equiv. People)
As-Built
Data
Absent Customer
Items
Simulation Model
T im e
R e m a in in g
Planned
Program
Conditions
S k ill &
E x p e rie n c e
S ta ff
O rg a n iz a tio n a l
S iz e
Changes
M o ra le
T u rn o v e r
H irin g
O v e rtim e
S c h e d u le d
C o m p le tio n
T im e
S c h e d u le
P re s s u re
P ro d u c tiv ity
E q u iv a le n t
S ta ff o n
P ro je c t
Q u a lity
O u t-o f-S e q u e n c e
W o rk
E x p e c te d
A v a ila b ility
C o m p le tio n
o f P re re q u is ite s
T im e
P ro g re s s
Added
W o rk
W o rk Q u a lity
to D a te
W o rk T o
Be D one
W o rk
R e a lly D o n e
Know n
R e w o rk
U n d is c o v e re d
R e w o rk
S ta ffin g
R e q u e s te d
H o u rs
Expended
to D a te
E x p e c te d
H o u rs a t
C o m p le tio n
O b s o le te d
W o rk
R e w o rk
D is c o v e ry
P e rc e iv e d
P ro g re s s
TIME
Company Actions
Changes removed in reverse chronological order to test
cumulative impact.
14
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Assessing the Impact of Changes
Step 3: Difference is cost “but for” client impacts,
including secondary impacts.
Budget
+ Other Sources of Cost Overrun
+ Direct Cost of Changes
+ Indirect Cost of Changes (1-10 X Direct)
---------------------------------------------
}
Client
Responsible
Costs
Total Project Cost
15
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D&D Results from Impact on Productivity
& Fraction Correct of Unchanged Work
% Impact on Cost Growth for the LHA Program
Delayed/Reduced
Quality of Prior
Construction
14%
Reduced
Drawing
Quality
6%
Other Labor
Impacts
22%
Inadequate
Skill Level
3%
Loss of
Learning
3%
Out-of-Sequence Work
29%
Excessive Schedule
Pressure
23%
16
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The Navy’s starting position
“If you think you’re going to get 10 cents
from us with this black box hocus-pocus
simulation model, you’re nuts.”
But after a review by MIT System
Dynamics Professors …
17
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How it all got started:
Ingalls Shipbuilding vs. US Navy
Case settled out of court for $447
million
Model-generated analysis was the basis
for $200-300 million of the claim.
Source: Cooper, Kenneth G., 1980, Naval Ship Production: A
Claim Settled and a Framework Built. Interfaces. 10(6)
(December), 20-36.
18
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Since the beginning ...

More than 50 contract disputes

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In excess of $4 billion in dispute, with
average recovery of 75% vs. 40% with
traditional methods
All disputes have settled out of court,
avoiding lengthy litigation
More than 150 “proactive” applications


In excess of $25 million in consulting fees
Conservatively saved clients $5 billion on
cost and schedule performance
19
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Managing Changes Proactively:
Schedule Slip Mitigates Impact
Staff
100
Changes,
Add Staff;
Cost +28%
People
75
50
Plan
25
0
0
6
12
18
24
30
36
Time (Month)
Staff : SD5 Changes Slip Schedule
Staff : SD5 Changes
Staff : SD5 Feasible Plan1
Changes, Slip
Schedule;
Cost +16%
42
48
54
60
7% of total scope directly redone (some multiplier
inevitable b/c of technical interdependence)
20
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Why, in face of changes, don’t firms consider
schedule slip (or price for full impact)?
21
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Today’s Agenda
Managing Changes
• Case Example – Dispute Resolution
• Case Example – Change Management
Project-to-Project Learning
• Case Example – Risk Management
• Case Example – Bidding and Management
Broader issues – project priorities and market
interactions
22
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Case Example: Fluor Corporation
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“Architect to Industry” ($20 billion annual revenue)
 Highly centralized
 Resistant to change
 Business line specific cultures
 Highly diversified
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Energy (production, refining, chemicals, power)
Commercial (hotels, office buildings, concert halls, food products)
Industrial (mining, pharma/bio, manufacturing, consumer goods)
Infrastructure (airports, hospitals, highways, high speed & light rail,
ports)
Federal Government - DOD, DOE (nuclear fuel cycle), DOS
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“Improving change impact management is
vital to corporate performance”*

Waiting to recover for owner-induced change impacts
via a dispute process is risky, expensive, and
precludes impact mitigation

“Project changes represent the single largest source of
project productivity impact” (2002 Fluor survey)

Changes do not increase project profits, but in fact are
a source of profit reduction
*Greg Lee, Senior VP
24
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Change Impact Revenue Loss %
Proprietary Information
25
Cost Impacts of Change – Results in
+
Profitability Loss from Planned Rates
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10 mos.
80%
Engineering Impact
70%
(% of budget)
60%
50%
8 mos.
6 mos.
40%
Longer
changes
80%
Craft Impact
70%
(% of budget)
60%
50%
40%
30%
4 mos.
30%
20%
2 mos.
20%
10%
10%
0%
0%
5%
10%
15%
20%
Engineering Changes' Direct Impacts
25%
0%
0%
5%
10%
15%
20%
25%
Engineering Changes' Direct Impacts
More changes
Learning Point: More and later changes create not just more impact, but
disproportionately more impact.
Note: while these results are from a simulation model, an analysis of actual project results by Greg Lee of
Fluor clearly demonstrated that projects which experienced more and/or longer change suffered reduced
profitability from planned levels. “Changes” are not advantageous.
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Fluor Now Uses SD Model as Basis for
Change Management
Model set up and tailored to each engineering
& construction project
Used to:
 Foresee future cost & schedule impacts of project
changes & events
 Explain “secondary impact” to clients
 Price changes to include the full and cumulative
impact for appropriate cost recovery
 Find mitigating actions to reduce client costs


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Avoid late changes
Resolve proposed changes quickly
Delay start/end of construction
27
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Forecast Accuracy -- Fluor
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Quotes for project teams:
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
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“The tool simulated our staffing almost perfectly.”
Another team described how, contrary to
expectations, the model foretold a different pace
of engineering progress yet to come, an outcome
that occurred just as simulated.
Yet another project team told of the “uncanny
accuracy” from the simulation as the project
progressed.
28
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Cumulative project applications and
benefits are growing strongly
Hundreds of project managers and planners have been trained
in the ongoing internal use of the system.
29
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Cost impact savings come from
different mitigations
Over $1,600 million savings from…
Shifted
construction
start time
33%
31%
Reduced
change
resolution time
36%
Shifted construction
end time
(All schedule shifts tested were less than or equal to
the amount of engineering delay caused by changes)
30
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Award-Winning Work
Designation by Engineering
Construction Risk Institute (ECRI) as
“Industry Best Practice”

2009 System Dynamics Society
Applications Award & 2011 Edelman
Laureate

31
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Today’s Agenda
Managing Changes
• Case Example – Dispute Resolution
• Case Example – Change Management
Project-to-Project Learning
• Case Example – Risk Management
• Case Example – Bidding and Management
Broader issues – project priorities and market
interactions
32
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


Project-to-Project Learning
Improve estimation and planning
Assist in risk identification and
quantification
Determine effective processes and
management actions
33
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




Useful Estimating & Planning
Information
Scope (tasks done)
Rework
Undiscovered rework profile
Rework discovery profile
Pattern of productivity and fraction
correct
34
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Data for estimation and control
Productivity
Fraction Correct
Work To
Be Done
Rework
discovery can be
measured and
used to estimate
split after the fact
Known
Rework
Progress
Undiscovered
Rework
Rework
Discovery
Progress Can
be Measured
(with some
delay?)
Staff and
Overtime
Cumulative
effort
Work
Really Done
But, the split
cannot be
determined
as it is
happening
Cumulative
work done
35
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Risk Assessment
Analyze what happened on prior projects …
Changes to Plan
Total Program Labor (Equiv. People)
As-Built
Data
Real Program
T im e
R e m a in in g
Planned
Program
Conditions
(Plan)
S k ill &
E x p e rie n c e
S ta ff
O rg a n iz a tio n a l
S iz e
Changes
M o ra le
T u rn o v e r
H irin g
O v e rtim e
S c h e d u le d
C o m p le tio n
T im e
S c h e d u le
P re s s u re
P ro d u c tiv ity
E q u iv a le n t
S ta ff o n
P ro je c t
Q u a lity
O u t-o f-S e q u e n c e
W o rk
E x p e c te d
A v a ila b ility
C o m p le tio n
o f P re re q u is ite s
T im e
P ro g re s s
Added
W o rk
W o rk Q u a lity
to D a te
W o rk T o
Be D one
W o rk
R e a lly D o n e
Know n
R e w o rk
U n d is c o v e re d
R e w o rk
H o u rs
Expended
to D a te
S ta ffin g
R e q u e s te d
E x p e c te d
H o u rs a t
C o m p le tio n
O b s o le te d
W o rk
R e w o rk
D is c o v e ry
P e rc e iv e d
P ro g re s s
TIME
Management Actions
Large data bases of project performance histories;
Scientific assessment of project performance: What
happened and why, using “claims” process?
36
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Data for Risk Assessment
1
1
Delayed Availability
of Staff
Late Vendor
Info; Extra
Mtgs
Project Time
Productivity
+
Scope
Growth
Project Time
Effort
Applied
Original
Work to Do
+
Progress
Progressx
Rework to
Do
Rework
Discovery
-
Project Time
Fraction
Quality 1
Correct
and
+ Complete
Uncertain Specs &
Reqmnts.
Rework
Generation
Rew
ork
Work Done
Undiscovered
Rework
Project Time
Changes
+
Time to Discover Rework
Project Time
 Accumulate a data base of exogenous impacts
37
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Identifying Risks for Future Projects
Identify, quantify & “remove” direct
impact of all changes
X
Changes to Plan
Total Program Labor (Equiv. People)
As-Built
Data
Absent Changes
to Plan
Simulation Model
T im e
R e m a in in g
Planned
Program
Conditions
S k ill &
E x p e rie n c e
S ta ff
O rg a n iz a tio n a l
S iz e
Changes
M o ra le
T u rn o v e r
H irin g
O v e rtim e
S c h e d u le d
C o m p le tio n
T im e
S c h e d u le
P re s s u re
P ro d u c tiv ity
E q u iv a le n t
S ta ff o n
P ro je c t
Q u a lity
O u t-o f-S e q u e n c e
W o rk
E x p e c te d
A v a ila b ility
C o m p le tio n
o f P re re q u is ite s
T im e
P ro g re s s
Added
W o rk
W o rk Q u a lity
to D a te
W o rk T o
Be D one
W o rk
R e a lly D o n e
Know n
R e w o rk
U n d is c o v e re d
R e w o rk
H o u rs
Expended
to D a te
S ta ffin g
R e q u e s te d
E x p e c te d
H o u rs a t
C o m p le tio n
O b s o le te d
W o rk
R e w o rk
D is c o v e ry
P e rc e iv e d
P ro g re s s
TIME
Management Actions
38
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Identifying Effective Policies
Changes to Plan
Total Program Labor (Equiv. People)
As-Built
Data
Simulation Model
?
T im e
R e m a in in g
Planned
Program
Conditions
S k ill &
E x p e rie n c e
S ta ff
O rg a n iz a tio n a l
S iz e
Changes
M o ra le
T u rn o v e r
Absent Management
Actions
H irin g
O v e rtim e
S c h e d u le d
C o m p le tio n
T im e
S c h e d u le
P re s s u re
P ro d u c tiv ity
E q u iv a le n t
S ta ff o n
P ro je c t
Q u a lity
O u t-o f-S e q u e n c e
W o rk
E x p e c te d
A v a ila b ility
C o m p le tio n
o f P re re q u is ite s
T im e
P ro g re s s
Added
W o rk
W o rk Q u a lity
to D a te
W o rk T o
Be D one
W o rk
R e a lly D o n e
Know n
R e w o rk
U n d is c o v e re d
R e w o rk
H o u rs
Expended
to D a te
S ta ffin g
R e q u e s te d
E x p e c te d
H o u rs a t
C o m p le tio n
O b s o le te d
W o rk
R e w o rk
D is c o v e ry
P e rc e iv e d
P ro g re s s
X
TIME
Management Actions
Identify, Quantify & Remove
39
+
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Estimation: What Would Project Have
Cost?
X
Changes to Plan
Total Program Labor (Equiv. People)
As-Built
Data
Absent Changes &
Mgt Actions
Simulation Model
T im e
R e m a in in g
Planned
Program
Conditions
S k ill &
E x p e rie n c e
S ta ff
O rg a n iz a tio n a l
S iz e
Changes
M o ra le
T u rn o v e r
H irin g
O v e rtim e
S c h e d u le d
C o m p le tio n
T im e
S c h e d u le
P re s s u re
P ro d u c tiv ity
E q u iv a le n t
S ta ff o n
P ro je c t
Q u a lity
O u t-o f-S e q u e n c e
W o rk
E x p e c te d
A v a ila b ility
C o m p le tio n
o f P re re q u is ite s
T im e
P ro g re s s
Added
W o rk
W o rk Q u a lity
to D a te
W o rk T o
Be D one
W o rk
R e a lly D o n e
Know n
R e w o rk
U n d is c o v e re d
R e w o rk
H o u rs
Expended
to D a te
S ta ffin g
R e q u e s te d
E x p e c te d
H o u rs a t
C o m p le tio n
O b s o le te d
W o rk
R e w o rk
D is c o v e ry
P e rc e iv e d
P ro g re s s
X
Management Actions
TIME
Note for projects: this is the
process you might use for a
post-mortem SD model
40
+
Example – Automotive Development
-
Post-mortem assessment of 11 projects using SD model –
major sources of risk ranked in terms of impact on
schedule and delivered:
1. Late information and/or changes
2. Resource availability


3.
4.
5.
Slow ramp up, lower peak, forced ramp down to meet budget
Inadequate skills mix
New processes, missing enablers, or new materials
Organization &/or geographic changes
Aggressive program assumptions

Compressed timing, inadequate budget, lean allowance for
prototypes
Model used to price out mitigation savings for
typical risks
41
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Today’s Agenda
Managing Changes
• Case Example – Dispute Resolution
• Case Example – Change Management
Project-to-Project Learning
• Case Example – Risk Management
• Case Example – Bidding and Management
Broader issues – project priorities and market
interactions
42
+
The Peace Shield Program


Air defense system developed by Hughes AC
System dynamics model was used for:
 Bid support and risk assessment;
 On-going project management (assessing
impact of process and staffing changes)


Program successfully completed on
time and on budget
Post-project learning and policy
assessment
43
+
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Post-project learning ...
Cumulative
Effort
1800
Staff Levels
Past
Program
1600
1400
1200
1000
Past Program
800
600
Peace Shield
Peace
Shield
400
200
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
0
44
+
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What caused the differences between
Peace Shield and Past Program?
l
Differences in work scope?
l
External Conditions?
l
Management policies and processes?
And how can a company learn from these
differences, and therefore
l
Bid better?
l
Plan better?
l
Manage better?
45
+
-
The same model with different exogenous “change” and
“management” inputs accurately replicated Peace Shield
Simulated
Data and Plans
in mid-1993
0
1991
1992
1993
1994
1995
46
+
-
… and the Past Program
Data
Simulated
0
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
47
+
-
Major external differences
Peace Shield - Lower scope and fewer changes
 Fewer vendor delays & hardware
problems
 Better hiring conditions (less delay)
(Some of these are sources of risk)
48
Removing external sources of
difference from the past program ...
+
-
Cumulative
Effort
1800
Past
Program
1600
1400
1200
1000
Past Program
External
Removed
800
600
External
Differences
Removed
0
1
2
3
4
5
6
7
8
9
400
200
10
11
12
0
49
Removing external sources of
difference from the past program ...
+
-
Cumulative
Effort
Peace Shield
Schedules
1800
Past
Program
1600
1400
1200
1000
Past Program
External
Removed
800
600
External
Differences
Removed
0
1
2
3
4
5
6
7
8
9
400
200
10
11
12
0
50
+
Management differences
-
Peace Shield - Adopted teaming structure, including
customer involvement in design reviews
 Lower productivity, faster rework discovery

Different phase overlap & staffing strategy:
Assigned staff “rolling off” to QA
 Delayed start of downstream work
 Minimize “Errors on Errors” dynamic even if

reported progress is lower
51
+
-
Shorter Rework Discovery Times on Peace
Shield: Reduced “Errors on Errors” dynamic
• Teaming
Rework Discovery Delay
(Months)
24
• Delayed
Roll-off of
Staff
22
20
18
16
14
Past Program
12
• Customer
involvement
in Design
Reviews
10
8
6
Peace
Shield
4
2
0
1
2
3
4
5
6
7
Program Year
8
9
10 11
52
+
-
Lesson: Recognize the rework cycle
and minimize its consequences
Productivity
+
Original
Work to Do
Rework to
Do
+
-
Progress
Rework
Generation
Progressx
Rew
ork
Rework
Discovery
-
Reduce
Increase
Effort
Applied
Fraction
Quality
Correct and
Complete
Undiscovered
Rework
+
Time to Discover Rework
Work Done
Build Errors
Into
Downstream
Work
Overestimates
of Progress
53
+
-
Removing management differences ...
Cumulative
Effort
Peace Shield
Schedules
1800
Past
Program
1600
1400
1200
1000
Past Program
800
600
Peace
Shield
0
Peace
Shield
External
Differences
Removed
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
400
200
0
54
+
-
Where Did The Cost Improvement Come
From?
Policies & Processes 56%
Teaming & Other
Improvements
13%
Staff Assigned to QA
24%
Delayed Ramp-Up
19%
External Conditions 44%
Scope Differences &
Fewer Customer Changes
22%
Fewer Vendor &
Hardware Problems
19%
Better Hiring
Conditions
3%
These are “free” cost savings!
55
+
-
Sources & Additional Reading
Ingalls: Cooper, Kenneth G., 1980, Naval Ship Production:
A Claim Settled and a Framework Built. Interfaces.
10(6) (December), 20-36.
Fluor:
http://www.kcooperassociates.com/files/SD_Paper_for_
Reprint_V3.pdf
Peace Shield: James Lyneis, Kenneth Cooper, and Sharon
Els, “Strategic Management of Complex Projects,”
System Dynamics Review, Fall 2001 (on the course site)
56
+
-
Why Do Organizations Seem So Poor at
Learning Lessons From Prior Projects?
57
+
-
Project-to-Project Learning Requires a
Framework (Model/Data/Process)
Analyze what happened on prior projects …
Changes to Plan
Total Program Labor (Equiv. People)
As-Built
Data
Absent Management
Actions
Simulation Model
?
T im e
R e m a in in g
Planned
Program
Conditions
S k ill &
E x p e rie n c e
S ta ff
O rg a n iz a tio n a l
S iz e
Changes
M o ra le
T u rn o v e r
H irin g
O v e rtim e
S c h e d u le d
C o m p le tio n
T im e
S c h e d u le
P re s s u re
P ro d u c tiv ity
E q u iv a le n t
S ta ff o n
P ro je c t
Q u a lity
O u t-o f-S e q u e n c e
W o rk
E x p e c te d
A v a ila b ility
C o m p le tio n
o f P re re q u is ite s
T im e
P ro g re s s
Added
W o rk
W o rk Q u a lity
to D a te
W o rk T o
Be D one
W o rk
R e a lly D o n e
Know n
R e w o rk
U n d is c o v e re d
R e w o rk
H o u rs
Expended
to D a te
S ta ffin g
R e q u e s te d
E x p e c te d
H o u rs a t
C o m p le tio n
O b s o le te d
W o rk
R e w o rk
D is c o v e ry
P e rc e iv e d
P ro g re s s
TIME
Management Actions
Rework cycle and feedback effects provide one
framework for assessing dynamics similarities.
58
+
-
You’re Uncomfortable With Quantifying
All These Effects. What Are Your Options?
1. Ignore effects and estimate (simulate)
impacts as if they did not exist

But that’s the only value you know is wrong!
2. Use your experience/intuition/ “mental
model” instead (no simulation)

I.e., try to account for effects simultaneously in your head
that you can’t do individually in a computer model
3. Use computer model with educated
estimates …



Test sensitivity of results to exact values
Gather data (and calibrate where warranted)
Assemble a data base from prior projects
59
+
-
Today’s Agenda
Managing Changes
• Case Example – Dispute Resolution
• Case Example – Change Management
Project-to-Project Learning
• Case Example – Risk Management
• Case Example – Bidding and Management
Broader issues – project portfolios, priorities and
market interactions
60
+


Broader Issues
Issues in product portfolios
Market and Customer Dynamics -setting the mission dimension as a part
of corporate strategy
61
+
-
Issues in Product Portfolios
Portfolio interactions - staffing and other resources
 technical interdependencies
What happens on one project has
significant knock-on effects to
other projects. Aggressive project
assumptions (“inconsistent
mission”) adversely affect more
than the one project.
62
+
Portfolio Resourcing Issues

Constraints on Shared Resources



Late and over-budget projects delay rampup of downstream projects
Shared resources (e.g. test facilities) can
also create bottlenecks
Staff working simultaneously on multiple
projects create inefficiencies and delays
Typically dealt with via exogenous inputs to
single-project models, or via portfolio models
63
+
-
Phasing of Project Staffing
Project
Staffing
Project 2
Project 1
Typical
Plan
Time
64
+
-
What happens when Project 1 fails
to meet plan?
Project
Staffing
Typical
Plan
Time
65
+
Project
Staffing
Phasing of Project Staffing
Project 1
Project 2
Typical
Plan
Time
66
+


“Tipping Point” / “Fire-fighting” Research
Not only are resources constrained, but
because of technical interdependencies,
failure to adequately complete the first
“project” causes more work and rework
on the second “project”, etc.
In a situation of limited resources, this
can lock the organization into a
permanently low mode of performance
67
+
Two Examples
-
Temporary shortages of resources can …
Available
Resources
Available
Resources
+
Resources on
Concept
Development
Resources Needed for
Downstream
Development
-
+
Completeness &
Quality of Concept
Development
+
Resources on
Development
Resources Needed for
Client Support and
Maintenance
+ Completeness & Quality of
Development ("bugs" in
delivered product)
… lock organization into “low” mode of “quality”
68
+
Temporary Resource Shortage
-
Can “tip”
system to
low quality
mode.
69
+



“Tipping Point” Case Examples
“Understanding fire fighting in new product
development,” The Journal of Product Innovation
Management 18 (2001) [posted on the course site]
Black, L. J. and N. P. Repenning. Why Firefighting Is
Never Enough: Preserving High-Quality Product
Development. System Dynamics Review Vol. 17, No.
1, Spring 2001.
Rahmandad, H. and Weiss, D 2009. "Dynamics of
concurrent software development." System Dynamics
Review 25(3): 224-249.
70
+
Corporate Strategy for the Project
-
Determining the fit of the project to business
objectives (the “mission”)
features / scope
 schedule milestones (time to market)
 delivered quality (defects)
 resources & budget
And the mix/timing of “projects” necessary to
achieve corporate strategy

What gives when project gets in
trouble?
71
+
-
% Specifying 1st or 2nd Choice
What You Do?
Add People
Longer Hours
Intensity
Slip
Cut Scope
Other
Total
At 30%
40.8%
24.3%
21.4%
5.8%
7.8%
0.0%
100.0%
At 65%
34.7%
23.5%
19.4%
11.2%
11.2%
0.0%
100.0%
72
+




Control & Flexibility Actions Involve
Tradeoffs
Project resources: “haste makes
waste,” fatigue, experience dilution, …
Slip schedule: penalties, loss of market
share (Lecture 13)
Cut “scope”: loss of market share, need
to upgrade later (Lecture 13)
Ship with “bugs”/incomplete testing:
loss of market share, diversion of
resources to maintenance (Lecture 13)
73
+
-
1.
2.
Do you ever ship a project with known
bugs in order to meet the schedule?
Yes
No
74
+
-
Why the focus on resource
responses?
75
+
-
Consequences of Adding Resources to Meet Scope and
Schedule Largely Constrained to Project Itself
Trigger
(changes, scope
growth, etc.) Work
Remaining
?
Product Cost
Resources
+
Responsibility
of project
manager?
1. Add Resources
+
Resources
Needed
-
Time Remaining
+
Scheduled
Completion Date
76
+
-
Whereas slipping schedule
impacts time-to-market
?
Product Cost
Resources
+
Work
Remaining
1. Add Resources
Resources
Needed
+
-
-
+
Feasible
Completion Date
Time Remaining
2. Slip Schedule
+
Revenue and
market share
loss
+
Scheduled
Completion Date
+
Time-to-Market
77
Cutting scope impacts product
capability and features
+
-
?
Product Cost
Resources
+
3. Cut Scope
+
Project Scope
+
+
Work
Remaining
1. Add Resources
Resources
Needed
+
-
-
+
Feasible
Completion Date
Time Remaining
2. Slip Schedule
+
+
Product Capability
and Features
Revenue and
market share
loss
+
Scheduled
Completion Date
+
Time-to-Market
78
Shipping when out of time
means delivered quality low
+
-
?
Product Cost
Resources
+
3. Cut Scope
+
Project Scope
+
+
Work
Remaining
1. Add Resources
+
Ship Product
-
+
Resources
Needed
-
-
4. Ship When
Out of Time
Time Remaining
Feasible
Completion Date
+
2. Slip Schedule
+
+
Product Capability
and Features
+
+
Bugs in Shipped
Product
Scheduled
Completion Date
+
Because
consequences
of other
control actions
extend beyond
the project
and are
difficult to
measure,
primary
response is to
add resources.
Time-to-Market
79
+
-
Evaluating market impacts requires a
different model …
Revenue and Profit Drivers …
Market Demand
+
+
Market Share
Sales
+ Revenue
+
Profit
-
Price
+
Costs
80
+
-
“Mission” Elements Affect
Attractiveness
Market Demand
+
+
Sales
+
+
-
Market Share
Revenue
Profi t
-
Pri ce
+
+
Costs
Product
Attractiveness
+
Quality
+
Scope
Product
Newness
-
+
Time to Market
81
+
-
“Mission” elements have
negative impacts as well …
Market Demand
+
+
Sales
+
+
-
Market Share
Revenue
Profit
-
Price
+
+
Warranty Costs
+
Costs
+
Product
Attractiveness
?
+
Quality
+
Scope
Product
Newness
-
+
Developement
Cost
Time to Market
Mission
Tradeoffs
82
+
-
Market Model with feedbacks
through profit and budget
Market Demand
+
+
Sales
+
+
-
Market Share
Revenue
Profit
-
Price
+
+
Warranty C osts
+
Costs
+
Product
Attractiveness
+
Quality
+
Scope
Product
Newness
-
+
Developement
Cost
+
Development
Budget
Time to Market
Mission Tradeoffs;
Product Portfolio
83
+
-



Selling System Dynamics
(Modeling)
Must be a persistent and costly dynamic problem
Illustrate causes (use rework cycle and feedback
examples)
Provide an example of use relevant to your
organization
“SDM students are hereby granted permission
to use any of my lecture slides for internal
company presentations, with appropriate
attribution.” James M. Lyneis, 11/1/2012
84
+
SD Qualitative Insights -1
-
1. A feasible plan is essential, including:




Estimates of rework, undiscovered rework,
and delays in discovering that rework
Estimates of productivity loss dealing with
rework
Adequate buffers and reserves for rework
[Rework increases with project uncertainty
and complexity]
85
+
-
SD Qualitative Insights – 2
2. A feasible plan recognizes the “iron
triangle”; there will be multiple
“feasible” plans depending on
priorities.
3. Tradeoffs in the plan can often be
improved by changes in project
structure and organization to reduce
rework and delays in discovering
rework.
86
+
-
SD Qualitative Insights – 3
4. Attempts to achieve an infeasible plan
via project control actions lead to
“vicious circle” side effects which
increase project cost and duration.
 On complex projects, these costs usually
exceed the “direct” costs of infeasibility
5. Project “changes,” and risks which
materialize, are fundamentally the
same as an infeasible plan. (Lecture 13)
87
+
-
SD Qualitative Insights – 4
6. Project managers need buffers and/or
flexibility (e.g., slip schedule, cut scope, ship
with “bugs”) to respond to changes and
uncertainties. These have costs that need
to be evaluated; the importance of different
tradeoffs differs by project. (Lecture 13)
7. The costs of project control can be
minimized by understanding the sources of
the vicious circles. The timing, magnitude,
and duration of different controls affects
performance.
88
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ESD.36 System Project Management
Fall 2012
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