Helsinki University of Technology Department of Industrial Engineering and Management © Karlos...

Helsinki University of TechnologyDepartment of Industrial Engineering and Management

© Karlos Artto / HUT 2000

Systematic Project Management: Aspects on Uncertainty and on

Assigning ResponsibilitiesKarlos Artto

HUT / Department of Industrial Engineering and Management

S-72.124 Product Development ofTelecommunication Systems



Systematic Project Management: Aspects on Uncertainty and on

Assigning Responsibilities - Lecture Content:

• Maintaining the Strategic Perspective on the Project Product during the Project Life Cycle

• Taking Uncertainty into Account: Risk Identification and Risk Analysis Applications (Case)

• Organizing for Communication and Responsibility Assignments (Risk Management as a Communication Tool)

• Examples and Cases, Risk Management Applications in Industry



PRODUCT DEVELOPMENT

• NEW PRODUCT PLATFORMS

DELIVERY PROJECTS

BODY OF PRODUCT KNOWLEDGE

• PRODUCT PLATFORMS

PRODUCT ARCHITECTURES AND VARIATIONS

MODEL DRAWINGS AND SPECIFICATIONS

DESIGN RULES ETC.

FEEDBACK SUPPORT

COMPANY PRODUCTS

PROJECT PRODUCTS

COMPANY LEVEL

PROJECT LEVEL

Analogy between product development, and a delivery of an unique project

Source: Meklin, Lahti, Kovanen, Arenius, Artto 1999



Goals and Methods Matrix

Methodswell

defined

Goals well defined

No

Yes

Type 2:Product

Development

Type 4:Research &

OrganizationalChange

Type 1:Engineering

Type 3:Systems

Development

Yes No



Approaches to Manage the Basic Types of Projects

Research projects: Setting goals and measuring progress against those goals.

New product development (NPD) projects: Managing a diverse group of technical specialists, focus on quality and time.

Change, organizational reengineering projects: Team building and refinement of objectives.

Information technology (IT), information system (I/S) projects: Tight project control and readiness to adapt to changing requirements from the customer.

Building construction projects: Control of labor hours and cost control is important.



Milestones 1

Activity entity 1

Activity entity 2

Activity entity 3

Milestones 2

Milestones 3

Maintaining the Focus on the Progress of the Project Product: The Milestone Plan



Th e P rocesses :D efin in g /In it ia t in g ,P lan n in g ,E xecu tin g ,C on tro llin g ,C los in g

P ro jec t P h ases an d th e P ro jec t L ife C yc le ,P ro jec t S takeh o ld ers , S oc ioecon om ic in flu en ces ,O rg an iza tion a l In flu en ces ,K ey G en era l M an ag em en t S k ills

Th e P ro jec tM an ag em en t

C on text

P ro jec tS cop e

M an ag em en t

P ro jec tT im e

M an ag em en t

P ro jec tC os t

M an ag em en t

P ro jec tQ u a lity

M an ag em en t

P ro jec tH u m an

R esou rceM an ag em en t

P ro jec tC om m u n ica tion s

M an ag em en t

P ro jec tR isk

M an ag em en t

P ro jec tP rocu rem en tM an ag em en t

P ro jec tIn teg ra tion

M an ag em en t

P ro jec tM an ag em en t

Project Management (Areas)



Risk Management Overview

R iskId en tifica tion

R iskQ u an tifica tion

R esp on seD eve lop m en t

R iskC on tro l

P ro jec t R iskM an ag em en t

According to PMI PMBOK



Risks of Different Magnitude

Probability

Cost

Low Risk

Medium Risk

High Risk



RISK ITEMS (1 - 6) OF THE PLANT DELIVERY Risk impacts on the basic estimate:The following risk items are identified as items that Minimum Most Maximumaffect the overall baseline concept of the turnkey Probabledelivery. ($ million) ($ million) ($ million)Risk impacts are estimated in monetary values asindependent impacts on the $200 million basic estimatethat corresponds to the original risk-free baseline.

1 TECHNICAL RISKS 1.1 Reduced output 0,0 0,0 0,01.2 Reduced efficiency 0,0 0,0 0,01.3 Scope of supply risks, main contractor -0,1 1,0 2,01.4 Scope of supply risks, others -0,1 0,5 1,0

Considerations at a detailed level ofdependent delay items 2.1 - 2.5

2 SCHEDULE RISKS Minimum Most prob. Maximum2.1 Delays due to offshore works 0,0 1,0 15,02.2 Delays due to process or commissioning problems 0,0 1,0 5,02.3 Delays due to problems in building construction 0,0 0,5 3,02.4 Problems originated by accidents 0,0 0,0 5,02.5 Strikes 0,0 0,0 2,0

2.1 - 2.5 J oint estimate of delay effects 0,0 2,5 25,0

3 CONTRACTUAL RISKS WITH MAIN CONTRACTOR3.1 Claims by the contractor 0,5 1,0 3,03.2 Force Majeure 0,0 0,0 5,0

4 REGULATIONS RISKS4.1 Delays due to authorities 0,0 0,5 2,04.2 Environmental problems 0,0 0,5 2,0

5 PRODUCTION START RELATED PROBLEMS 0,0 1,0 2,0

6 WARRANTY PERIOD6.1 Spare parts 0,0 0,0 0,06.2 Maintenance 0,0 0,0 0,06.3 Availability 0,0 0,5 5,06.4 Additional decrease of efficiency 0,0 0,0 2,0

COMBINED RISK ESTIMATE (PERT)Total risk impact, mean value 13,2Total risk impact, standard deviation 4,4

RiskAnalysis

Case



COMBINED RISK IMPACT ESTIMATE(Risk items 1 - 6)

0

100

0 5 10 15 20 25

Cost ($ million)

Risk Analysis Case cont’d



MAGNITUDES OF RISKS (by standard deviation)

0,0

4,5

1.1

Reduc

ed o

utpu

t

1.2

Reduc

ed e

fficien

cy

1.3

Scope

of s

upply

risk

s, m

ain c

ontra

ctor

1.4

Scope

of s

upply

risk

s, o

ther

s

2.1

- 2.5

Join

t es

timat

e of

dela

y eff

ects

3.1

Claim

s by

the

cont

ract

or

3.2

Force

Maje

ure

4.1

Delays

due

to a

utho

rities

4.2

Enviro

nmen

tal p

roble

ms

5 PRODUCTIO

N STA

RT RELA

TED PRO...

6.1

Spare

par

ts

6.2

Main

tena

nce

6.3 A

vaila

bility

6.4 A

dditio

nal d

ecre

ase

of e

fficien

cy

Risk Items

Mag

nit

ud

e o

f R

isk

(Sta

nd

ard

dev

iati

on

) $

mill

ion

Risk Analysis Case cont’d



An Analogy in ‘Critical Chain’ -method:Team Focus on Buffers



The Team Aspect Reconsidered: Risk Analysis Day of HUT TAI Research Centre

Pre-assignment

Individual opinions of important risks

Risk Analysis Day

Results

Open Communication

Response Development and Responsibilities

Increased Awareness

Integration:1) Within the team2) Within the risk management process3) Responses to company’s responsibility areas

Documentation, reports



Conclusions

- Lecture Content was:

• Maintaining the Strategic Perspective on the Project Product during the Project Life Cycle

• Taking Uncertainty into Account: Risk Identification and Risk Analysis Applications (Case)

• Organizing for Communication and Responsibility Assignments (Risk Management as a Communication Tool)

• Examples and Cases, Risk Management Applications in Industry

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