Project Management Opportunities

Background

This article is an extract from a book we are working on that has not been published yet. It is about a solution for organisations centred around the project management function.  

The Proposed Solution

This book proposes a solution as the starting point to achieve impactful strategy implementation and transform the project management state of practice. It is not limited to creating a division (organisational unit) or enhancing project management offices.  

Therefore, what is this solution, and how can we achieve it? 

The solution could have many elements, but we must start with two integrated parts: 

1. Building and sustaining an effective Project Management Function (PMF): A PMF is much broader than the flavours of PMO we have experienced in our community. A PMF is much more than a service provider. Accordingly, a strategic PMF requires organisational recognition and acceptance. It includes linking strategy formulation with implementation, building the Organisational Project Management System (OPMS), and leading the 4PMs (Integrated Delivery). 
2. Integration to Deliver Value. It is crucial for establishing the PMF and developing the OPMS. This includes “vertical” and “horizontal” integrations. Vertical integration is related to linking the 4PMs¹, and horizontal integration is a model like the Value Delivery Methodology (VDM). The VDM focuses on value delivery from ideation to initial operations. This would be done by following a well-defined methodological process that respects the diversity of our practice through adaptive standards (tailoring). 

What Is the Outcome?

Repeating what we shared earlier, we aim to help organisations² maximise shareholders’ and stakeholders’ value by optimising performance and implementing impactful strategies. Our purpose is to elevate competence and performance. Organisational success depends on many factors, but one vital area is linked to the performance of the portfolio of projects³. Accordingly, we must transform project management to optimise performance since it is the mechanism and the engine of project success.  

In this case, the value would result from a higher rate of success of the various change initiatives and the entire portfolio. We recognise that organisations can achieve excellent value from their operations and innovation. However, our book focuses on project management as the engine to achieve the outcome of change initiatives and innovation.  

Reflecting on what we already mentioned, despite the advancement of technology, software tools, various professional associations, and millions of professionals with one or more certifications, we do not see a notable change in performance. Therefore, we know that we must transform project management. 

We want to take you back to re-read the Hidden Battles from Chapter 1. Reflecting on that context, change initiatives can follow different paths. The two most common paths are: 

• Bottom-up: This can be authentic and grassroots but slow in influencing upward. 
• Top-down: Fastest and most effective, if genuine. 

What Are the Benefits?

Numerous studies, including those by the University of California Berkeley  ​(Ibbs & Reginato, 2000)​, Independent Project Analysis ​(Barshop, 2016)​, PMI and others, have demonstrated that organisations with higher levels of project management maturity and those that use proper methodological processes can achieve significant benefits. The benefits include: 

• A significant increase in speed to market, up to 30% ​(Stage Gate International, 2024)​.  

• Also, 2.5x more likely to be on a budget and on time ​ (Stage Gate International, 2024)​.  

• Independent Project Analysis benchmarking data show that following the proper methodological process⁴ could lead to a 5% increase in the expected net Present Value (NPV) versus a reduction of up to 45% if no method is followed.  

• Other studies show comparable results. 

Below, we present a University of California Berkeley study that links the organisation’s project management maturity with project performance.  

A quick explanation of the study producing Figure 1 gives us two vital findings:  

1. With increased project management maturity, project performance (cost and schedule) significantly improves, and  
2. The cost of managing projects in the organisation will decrease once the organisation achieves Level 3.  

Quantifying the Benefits

Imagine an organisation with US$10 million in annual project spending. Also, assume 10% cost savings (up to 20% is possible). Let us ignore time savings or opportunities gained from speed to market. The benefit is $1 million.  

Further, many organisations working on capital-intensive projects (facilities) could have a capital program worth $100 million⁵. How about those with budgets in the billions of dollars? Can you imagine the savings and opportunities gained from faster market entry and cost reduction? On one mega project we worked on, the opportunity gain was $1M+ per day! 

Here is an example that demonstrates the findings of the benchmarking study by the Independent Project Analysis ​(Barshop, 2016)​. A project is expected to generate $10M in net present value (NPV).  

• If they do not follow a proper project management method, the project NPV can experience up to a 45% reduction, i.e., the actual NPV will drop to $5.5 million ($4.5 million reduction). 
• If the same project follows an effective method, it could achieve a 5% increase in NPV, or $10.5 million. 
• The 5% might seem low, but we should compare $10.5 to $5.5 million. A $5M difference is huge. 

Here is a quick exercise for you: 

• Figure out your annual capital budget, 
• Find the anticipated NPV for these projects, 
• Calculate your potential impact (gain).  
• If you think the 45% reduction is too high, try with 30%, 20%, or 10%. 

Reference Literature: 

1. 4PMs = Project, Program, Product, and Portfolio Management. 

2. In this context, “organizations” refer to companies (small and large), government entities, non-governmental organizations, and not-for-profit organizations.

3.  A relevant video: https://youtu.be/wQrl9HvV1Xs 

4. Such as a project life cycle / stage gate model. 

5. An operating facility (industrial, utility, power) could have an annual capital program of $50 to 100 million. Whereas a chemical or industrial company (such as oil and gas) could have a budget of a few billion dollars.