What is a ‘project’?

1. What is a ‘project’? • “The entire process required to produce a new product, new system or other specific result.” [Archibald, 1992] • A narrowly defined activity which is planned for a finite duration with a specific goal to be achieved.” [General Electric] Project Management, Management of Technological Innovation, KV Patri

2. Project Management Project Management, Management of Technological Innovation, KV Patri

3. Project Management Project Management, Management of Technological Innovation, KV Patri

4. Types of Projects Derivitive Projects—involving small changes to existing products and systems (incremental innovation). Breakthrough Projects—those which create new markets or products and require significant resources and a strategic view (e.g. digital camera). Platform Projects —projects which involve significant incremental improvements but still linked to same basic platform (e.g. VCR) Project Management, Management of Technological Innovation, KV Patri

5. R&D Projects—future oriented, speculative but exploring where the company might be in five years or more (NASA). • Alliances—cross-company projects, designed to share costs and risks, but also posing problems of cooperation and coordination (e.g. Concord) Project Management, Management of Technological Innovation, KV Patri

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9. Companies may exploit learning effect when launching innovations by setting the initial price below current production costs. They could then increase their market penetration. • The method will succeed only if - continuing learning improvements are maintained, and - the anticipated sales are indeed realized (perform risk analysis), and - the continued exploitation of learning effects from a successful product is not allowed to constrain technological flexibility. Project Management, Management of Technological Innovation, KV Patri

10. Purchasing lead time distribution Project Management, Management of Technological Innovation, KV Patri

11. Lead time cumulative distribution Project Management, Management of Technological Innovation, KV Patri

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13. C = Ct .Ch . a where Ct = total project cost Ch = holding cost proportion of total cost a = proportion of purchased items contained in the total cost • P = Ct . Cp where Cp = penalty cost proportion of total cost Hence, F(t*-T*) = Cp / (Cp + Ch . a) = 1 / {1 + a . (Ch/Cp)} Project Management, Management of Technological Innovation, KV Patri

14. In mass production, usually, a is very large (say, 90%). Hence we can assume that a = 1. • Further, Ch is much larger than Cp. • Hence F(t*-T*) approaches 0. • Hence, in mass production, it is good practice to delay purchasing as much as possible. In other words, JIT is good in mass production. Project Management, Management of Technological Innovation, KV Patri

15. In R&D, a is small, typically around 10%. • Hence, suppose, we assume that a is approaching 0. • Hence F(t*-T*) approaches 1. • This means that purchase orders must be placed at the earliest possible opportunity (I.e. JIT is inadvisable). • Hence, not surprisingly, managers in real-life R&D often feel that an order for a component should have been placed “yesterday”. Project Management, Management of Technological Innovation, KV Patri

16. Project Management Structures • Functional Structure—a traditional hierarchical structure where communication between functional areas is largely handled by functional managers and according to standard and codified procedures. • Lightweight Product Manager Structure —again a traditional hierarchical structure but where a product manager provides an overarching coordinating structure to the internal functional work (popular in HK). Project Management, Management of Technological Innovation, KV Patri

17. Heavyweight Product Manager structure—essentially a matrix structure led by a product (project) manager with extensive influence over the functional personnel involved but also in strategic directions of the contributing areas critical to the project. By its nature this structure carries considerable organizational authority. • Projection Execution Teams—A full time project team where functional staff leave their work areas to work on the project, under project leader direction. Project Management, Management of Technological Innovation, KV Patri

18. Professional Group • An organizational unit concentrating human and capital resources that are specialized and dedicated to a specific professional activity (e.g. mechanical engineering, mechatronic engineering, design for manufacture, electronic circuit design). • Permanent in nature. • The same specialists perform similar professional tasks for a number of projects. • The structure enables accumulation of expertise and experience, which in turn elevates the professional level of the group. Project Management, Management of Technological Innovation, KV Patri

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20. R&D Project Steering Committee Members (Senior Management) Controlling/Accounting Marketing/Sales Production/Logistics Quality Assurance R&D Technical Services Project Managers (Temporary) To decide on Prioritization of Projects Major Project Decisions (e.g., Milestones/Gate Go/No Go Start/Stop Project) Conflicts between projects Major risks in projects Project Management, Management of Technological Innovation, KV Patri

21. 4 Roles of a Project Team • Person to Make Decisions • In-charge of resources • Approves plans • Makes strategic decisions • Approves milestones/gates • Relieves project teams at the end • Person to Give a Mission • Starts the project • Defines a rough goal • Will benefit from the project • Project Manager • In-charge of organizing, planning and coordinating all necessary tasks • to reach the project’s goals. • Member (Project Team) • Actively involve in the lay-outing and planning of the project • In-charge of doing specific tasks in accordance with project objectives and plan • Brings departmental know-how to the project Project Management, Management of Technological Innovation, KV Patri

22. 4 Views of a Project • Guidance • Freedom • Creativity • Marketing & Sales • All features are needed • Immediately available • Best possible price • R&D • Hi-tec • Unlimited time/budget? • Changes are okay • “Good” mistakes • Production • No-changes! • Proven technologies • Day-to-day priorities • No errors R&D Project Team • Controlling • Highest price • Lowest cost • Lowest investments • Guidance • Discipline • Regulations Project Management, Management of Technological Innovation, KV Patri

23. Composition of a Cross-Functional Team Project Manager Core Team (4-6) Sub-Team 4-6 Sub-Team 4-6 Project Management, Management of Technological Innovation, KV Patri

24. Who does what, where, and when in a Cross-Functional Team? The Team needs to have: Cooperation Rules Communication rules Definition of Phases and Gates and Understood and Agreed Project Goals Project Management, Management of Technological Innovation, KV Patri

25. INTERFACES IN A PRODUCT DEVELOPMENT PROCESS Output Working Progress to be applicable Human Interfaces Market Interfaces Technology Interfaces Process Interfaces Time Lag Input P-R1 Start Finish Pre-Results to be available Task P-R3 Random Conditions to be met P-R2 Project Management, Management of Technological Innovation, KV Patri

26. WORK-BREAK DOWN STRUCTURE (e.g. Computer) Controller-PCB Chip-set Device Driver Hard-Disk Project Management, Management of Technological Innovation, KV Patri

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31. Critical Path and Project Duration • The Critical Path is the path through the network that requires the longest time. • Most PERT software enable the determination of the critical path automatically once the PERT network has been encoded. • Project duration should be set at at least the duration of the critical path. Project Management, Management of Technological Innovation, KV Patri

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33. Project members must be made aware of the queuing problem • Tasks are performed by individuals or machines at the request of others. Let us call the task as the service and the person requesting it as the customer. • Consider a single service station. A customer arriving at the station is served immediately if the server is free. If the server is busy, the customer joins a queue.When the server finishes serving a customer, this customer leaves the service station and the next customer in line, if one is waiting, enters service. Project Management, Management of Technological Innovation, KV Patri

34. The Ideal Queue-less Situation • Suppose the customers arrive in a perfectly synchroinized and deterministic way; that is, each customer arrives at the service station exactly at the moment the service has been completed for the previous customer. Clearly, there are no customers waiting in line and the server is always busy. No time is wasted by the customer or by the server. • In mass production, this ideal situation may be achieved by careful line balancing (a popular IE task). • In batch production, this is difficult. But, one can work towards the goal by applying the ‘Just In Time’ (JIT) technique. • But, a project is a one off exercise. Project Management, Management of Technological Innovation, KV Patri

35. The situation with projects is non-deterministic. Now suppose customers arrive, as they usually do, without prior coordination; that is, they arrive at the service station at random. Although arrival times vary randomly, the average arrival rate is  arrivals per unit time. Similarly, the duration of service each customer gets varies randomly with an average service rate of  customers served per unit time. Can you see that queues can be built up and their length can fluctuate randomly. The problem is not deterministic. We need to apply the Theory of Probability. Project Management, Management of Technological Innovation, KV Patri

36. Applying Probability Theory to the Queuing Problem • Usually, arrival and service times are assumed to follow the Poisson Distribution: f(x) = x exp(- )/x! • Then the following expressions can be derived: Project Management, Management of Technological Innovation, KV Patri

37. LF = loading factor = ratio between the average arrival rate and the average service rate = / • L = the average number of customers in the station = (/)/(1- /) = LF/(1-LF) • W = the average amount of time customer spends in the station = 1/(- ) • Lq = length of queue = the average number of customers waiting in line = /(- ) Project Management, Management of Technological Innovation, KV Patri

38. Wq = the average amount of time a customer spends waiting in line = /(- ) • P0 = the probability of finding the server idle = 1- / for  = 1-LF Note that • arrival rate  has to be smaller than the service rate . • the bigger the loading factor, the larger will be the number of customers at the station, the longer will be the waiting lines and the waiting time. • if the loading factor is smaller than 1, the server must remain idle for periods of time. Project Management, Management of Technological Innovation, KV Patri

39. Exercise Suppose the mean arrival rate is 1 every 10 minutes, and the mean service rate is 1 every 8 minutes. Calculate a. the number of customers at the station b. the average amount of time a customer will stay in the station c. the probability of finding the server idle d. the magnitude of the probability of finding the server idle if we want on average only one customer in the station. (Ans.: 4, 40 min, 20%, 50%) Project Management, Management of Technological Innovation, KV Patri

40. Cost of Waiting in Line: The number of projects running in parallel in a high-technology company during a given financial year was 30. The average number of critical working packages (WP)s delayed per project in this period was 5. On average the number of days a critical package had to wait in line during this period was 12. The average cost per day suffered by idle project teams while waiting for critical work packages was 10 employees*8 hours/day*$200/hour = $16,000/day. Calculate the cost of waiting line. Project Management, Management of Technological Innovation, KV Patri

41. Solution The average cost per project for waiting in line = $16,000 per day*12 days*5 times = $960,000 The total cost added to the company by all the projects running in parallel during the year = $960,000/project*30 projects= $28,800,000. Project Management, Management of Technological Innovation, KV Patri

42. Cost of Underutilization of Capacity: Exercise The number of professional groups in a high technology firm is 20. The average hourly cost in 6 of the groups is high and amounts to $500. The average hourly cost in 6 of the groups is moderate and amounts to $200. The average hourly cost in 8 of the groups is low and amounts to $50. During the financial year approximately 600 work hours were wasted, on average, in each of the high-cost professional groups, because of periodic lack of adequate work load. The numbers for the moderate-cost and low-cost professional groups were 500 and 700, respectively. Calculate the cost of underutilization of capacity. Project Management, Management of Technological Innovation, KV Patri

43. Solution The cost of underutilization of capacity in the high-cost professional groups = $500*600*6=$1,800,000. The cost of underutilization of capacity in the moderate-cost professional groups = $200*600*6=$600,000. The cost of underutilization of capacity in the low-cost professional groups = $50*600*6=$320,000. The total cost of underutilization of capacity = $2,920,000 Project Management, Management of Technological Innovation, KV Patri

44. Cost of Delayed Projects: Case Study In a high-technology company running 30 projects in parallel, the number of projects delivered after the promised date last financial year was 12. The contractual penalty for one of the projects was 0.1 per cent of the contract value of $30 million for each day of delay, with a ceiling of $500,000. This project was late 45 days and would have cost the company a direct penalty of $30,000/day*45 days = $1,350,000. Thanks to the ceiling clause in the contract, the direct penalty was limited to $500,000. Project Management, Management of Technological Innovation, KV Patri

45. Another project worth $10 million missed the due date for the end of the year hoilday season. The products were sold at a discount rate of 20 per cent, causing the company a loss of $2,000,000. The average penalty and lost opportunity cost for the remaining 10 projects amounted to approximately $150,000 per project, giving a yearly cost of 10*150,000 =$1,500,000. For the total company, the cost of delayed projects =$4,000,000. Project Management, Management of Technological Innovation, KV Patri

46. The queuing penalty is the most important cause for delays and cost overruns in multiproject/product, high technology organizations with substantial research and development content. Contrary to the accepted thinking that the cost and delivery of an R&D project are hard to predict because of the inherent uncertainty of the duration (and cost) of the individual work packages, the examples show that this kind of thinking is doubtful, if not completely wrong. Project Management, Management of Technological Innovation, KV Patri