23rd International Conference of the TOC Practitioners Alliance - TOCPA www.tocpractice.com
21-22 March, 2016, Tennessee, USA
Critical Chain Project Management: Assessing the Efficacy & Feasibility
Daniel P. Walsh, Exepron, USA March, 2016
After a successful career in leading large organizations including Director of Operations for a five billion dollar enterprise and CEO for a $750 million company, in 1996 Daniel Walsh founded Vector Strategies, a Theory of Constraints, (TOC) focused company. He is the co-founder of Exepron™ a 21st Century project management, SaaS cloud based, real time collaborative, critical chain software solution. He is a recognized expert in developing and implementing powerful strategies that quickly and dramatically improve market presence and profitability. He has worked with companies in the shipbuilding, pharmaceutical, construction, engineering; software, manufacturing, aerospace & defense industries. Numerous Fortune 100 companies are among his clients, including Textron, IBM, Boeing, Lockheed and the U.S. Department of Defense.
Daniel Walsh is a sought after lecturer, coach, strategic thinker and is a trusted advisor to many senior corporate executives including TOC consulting expert for the Institute for Defense Analysis. In addition he co-authored the seminal Theory of Constraints Handbook and written numerous articles and papers. He currently is a member of numerous corporate boards and in addition is the former Chairman of the Theory of Constraints International Certification Organization Board, the global professional organization dedicated to setting the standards, testing and certifying competency in the Theory of Constraints.
2
State of Utah MRO Aerospace. 12 months of backlog scheduled in 10 days of engagement. 700 Developers on Exepron
3
Traditional PM Methods PMI Report 2014 Annual Survey of 1,100 accredited member respondents
Only 38 percent of projects finish on time and within budget, according to new research by Project Management Institute (PMI). “Organizations continue wasting $109 million for every $1 billion invested in projects and programs,” according to Mark A. Langley, president and CEO of the Project Management Institute. Within the last year, only half of projects finished on time and 55 percent finished within their initial budgets, according to the 2,800 project management leaders surveyed.
4
Traditional PM Performance
Price Waterhouse Coopers Survey
10,649 projects 200 Companies 30 Countries 50% failure Rate
PricewaterhouseCoopers, which reviewed 10,640 projects from 200 companies in 30 countries
5
https://podio.com/site/budget-busters?mkt_tok=3RkMMJWWfF9wsRolsqvKZKXonjHpfsX67ugtUae1lMI%2F0ER3fOvrPUfGjI4FT8pmI%2BSLDwEYGJlv6SgFQrHDMa15ybgJWBQ%3D
Monumental Budget Busters % Over Budget
Years Late
Over Budget US$
6
CCPM Awareness is High PMI Report 2014 1,100 member respondents to the annual survey.
7
Cost Versus Throughput Cloud The best way to lower global cost is to lower local cost
… because :
… we must …
Control Costs
Focus on high local efficiencies, e.g. manage variances
In order to … In order to …
Successfully run our business
… we must …
Conflict In order to … … we must …
… because :
Source: Eliyahu Goldratt
… we must …
Focus on meeting customer schedules
Maximize Throughput
It is NOT possible to maximize throughput performance by achieving high local performance everywhere
8
Cost Versus Throughput Cloud Local Impact IS equal to the impact on the organization
… because :
Control Costs
… we must …
Evaluate according to the local impact
In order to … In order to …
… we must …
Manage Well
Conflict In order to … … we must …
… because :
… we must …
Protect Throughput
Not evaluate according to local impact
Local Impact is NOT equal to the impact on the organization
Source: Eliyahu Goldratt 9
Cost Versus Throughput Cloud We are using Throughput measurements to make operational and financial decisions
… because :
Control Costs
… we must … In order to …
Have one set of metrics to make global and local decisions
In order to …
Manage Well In order to … … we must …
… because :
To What to Change ?
Protect Throughput
We are using Throughput measurements to make operational and financial decisions
10
The Problem
The 3 Pillars of Project Management Solution • Schedule – Throughput World metrics • Scope – Throughput World metrics • Cost – Throughput World metrics Cost creates a Dilemma for CCPM 11
The Problem • CCPM will (conceptually) positively impact cost by significantly improving management of Schedule and Scope … Maybe! • CCPM methodology is a Throughput focused solution and was not intended to manage Cost World Metrics • Attempts at applying Throughput techniques to reconcile Cost World methodology with Throughput methodology in CCPM have failed
WHY? 12
The Problem Conventional Approach The Cost & Duration allocated at the task level consists of: • The Touch Time work hours to complete the task • Embedded Protection against Variability • An industry recognized efficiency factor • Total Time Task Duration Total Cost CCPM Approach The Cost & Duration allocated at the task level consists of: • The Touch Time Duration to complete the Task • Extract Safety from tasks
CONFLICT 13
CCPM Paradox Inertia – Since CCPM is Throughput focused then all metrics must be Throughput metrics • Many professional organizations, companies and individuals believe CCPM is a half baked solution • Many companies will not even consider CCPM • Conflict with Cost Metrics during Implementation • Blocks support from many stakeholders • Jeopardizes Sustainability - Source of Many failed implementations
WHY?
14
The Scorecard • CEO, Board, CFO, Comptroller, Treasurer, Auditors; Contract Administrators, Financial Analysts and Customers using the ‘Official’ metrics to evaluate project performance • Even if Schedule & Scope is on track, may be in conflict with Financial Oversight and Compliance requirements • CCPM not providing Critical Cost Information needed by Decision Makers 15
Earned Value Management Past
Future
Budget at Completion
Cost Variance Schedule Variance
Cost
Cost World
Planned Value Actual Cost
Todays Date Earned Value
Time
Delay Time
16
Role of Metrics
Throughput World
Source: www.Exepron.com
Different Needs – Need Different Metrics 17
Role of Metrics Have one set of metrics to make global and local decisions
• Assumption: Since CCPM is a Throughput Solution then all metrics must be Throughput metrics •
Assumption must be challenged
18
SIMPLICITY
Einstein on Simplicity: “Everything should be made as simple as possible, but not simpler.”
Ockham's Razor “Among competing hypotheses that predict equally well, the one with the fewest assumptions should be selected.” William of Ockham (c. 1287–1347), an English Franciscan friar, scholastic philosopher and theologian.
19
The Solution
• Must Have Throughput Metrics • Must have Cost Metrics • Must be Integrated into the Solution • For the first time, CCPM solution will have interactive Operational and Performance metrics: providing Holistic view of Portfolio of Projects
20
Mobius Effect
A
A
A Cost World and Throughput World inside the the same CCPM solution 21
Cost Versus Throughput Cloud … because :
We are using Throughput and Cost measurements to make operational and financial decisions
Control Costs
… we must … In order to …
Have one set of metrics to make global and local decisions
In order to …
Manage Well In order to … … we must …
… because :
To What to Change ?
Protect Throughput
We are using Throughput and Cost measurements to make operational and financial decisions
22
Solution • “Render unto Caesar the things that are Caesar … “, instead of perpetuating and challenging the universally accepted precepts of cost accounting, rather embrace them and incorporate into CCPM thinking. • The CCPM tools must develop this capability, reconciling and mapping all of the costs and earned value directly to a specific task in the project’s CCPM schedule. This becomes an integral part of the: Planning phase – Scheduling phase – Execution phase. Source: CCPM: Assessing the Efficacy and Feasibility, Daniel P. Walsh; www.exepron.com 23
Collaborative Business Solution • CCPM must not be limited to just Planning, Scheduling and Execution of the work content • Must expand and embrace the Financials – Cost and Revenue • Offer value to all of the Stakeholders • CCPM must become a TOTAL Business Solution • CCPM has the unique potential to permeate throughout the entire Enterprise
24
Metcalf’s law
Network Usefulness
The value of a network is proportional to the square of the number of users of the system (n2)
Real Time Information Across the Enterprise
Network Nodes 25
Solution The cost and earned value are calculated in the Cost world and maps to the schedule that is calculated in the Throughput world • We now can now mange the three pillars. The cost data can be directly mapped back to the CCPM task. It might be helpful visualizing two parallel requirements that will have to be updated in execution. • We will update the cost, earned value, (revenue) and update the time remaining in the task. The additional effort is very minimal and the benefits enormous.
So, what shall we call this addition to the CCPM approach? Let’s call it CCPM Pro. 26
Solution
CCPM PRO©
Throughput Metrics
Cost Metrics 27
