Chapter7-ProjectInitiation.pptx

Project Initiation

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Project Management
Chapter 7: Project Initiation

1

Project Initiation
Purpose of initiation phase
Comparing project options
Total cost of ownership
The project charter

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Project Management
Chapter 7: Project Initiation

The Initiation Phase
problem or opportunity defined
Solution is defined
Project is formed

case created
Project team appointed

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Project Management
Chapter 7: Project Initiation

The Case
Problem or opportunity: Detailed description
Introduction
Problem/opportunity statement
Assumptions and Constraints
Alignment with organizational objectives
solutions
AnalyList of alternative sis of benefits, costs, and issues
Description of the preferred solution
Main project Requirements
Potential risks
Summarized plan for implementation
Schedule
Financial analysis

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Project Management
Chapter 7: Project Initiation

Comparing Options
Weighted Decision Matrix

Criteria Weight SJS Enterprises Game Access DVD Link

Educational 15% 90 0 0

Sports-related 15% 90 90 90

Secure payment 10% 90 50 50

(rows left out here—see textbook)

Weighted Project Scores 100% 56 14.5 12.5

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Project Management
Chapter 7: Project Initiation

Financial Considerations
Can compare projects based on
Net present value
Internal Rate of Return (Return on Investment or ROI)
Payback Analysis

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Project Management
Chapter 7: Project Initiation

Net Present Value Analysis
Considers the time value of money
Costs for future years must be discounted to the present time
Tangible benefits also discounted to the present time
Must identify an appropriate discount rate
Take risk into consideration

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Project Management
Chapter 7: Project Initiation

NPV Calculation
t is the time of the cash flow
Rt is the cash flow at time t
i is the interest rate

Apply the above formula to each annual inflow and outflow of cash
Add all terms together to get the NPV
Rt
(1 + i)t

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Project Management
Chapter 7: Project Initiation

NPV Analysis

If… It means… Then…

NPV > 0 the investment would add value to the firm the project may be accepted

NPV < 0 the investment would subtract value from the firm the project should be rejected NPV = 0 the investment would neither gain nor lose value for the firm indifferent in the decision This project adds no monetary value. Decision should be based on other criteria, e.g., strategic positioning or other factors not explicitly included in the calculation. This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Rate of Return Can be used to compare different options Organization may have a minimum acceptable rate of return for projects (Total benefits – Total costs) / Total costs This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Payback Analysis Compares cumulative costs to cumulative benefits Easiest to see in graphical format Time on horizontal axis, money on vertical This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Payback Analysis This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation The Project Charter This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation 13 Purpose of the Project Charter When signed off, you have approval to proceed to detailed planning, followed by carrying out your project. This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Organizational Process Assets Is there a standard format for project charters? Is there a standard process for developing and getting approval for a project charter? What can the PMO do for you? What does the PMO require of you? Are there applicable “lessons learned” available from other projects? If you are inexperienced, is there a mentor available? Etc. This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Project Charter – Typical Contents Identification section Project purpose or justification Measurable project objectives and related success criteria High-level requirements Assumptions and constraints High-level project description and boundaries High-level risks Summary milestone schedule Summary budget Stakeholder list Approvals This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Identification Name of the project—make it meaningful Name, title, department of project sponsor Name of project manager This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Clear Objective SMART Specific Measurable Acceptable Realistic Time based This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Need or Opportunity A concise statement of how the project’s deliverables will contribute to organizational objectives This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Scope Clearly defines what is in and out of the project Major Milestones Identifiable points in time Target dates will be added LATER This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Major Deliverables Break down the overall objective into smaller measurable units Assumptions Things you are not certain of but can proceed if you behave as if they are true This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Constraints Anything that limits your ability to deliver or the range of acceptable solutions Preliminary Cost Estimates How will the costs be defined and controlled This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Risks High-level statement about risks identified so far Include the risk of NOT doing the project This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Stakeholder List The stakeholders identified so far, including their roles Approval A place for the project sponsor and the project manager to sign This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Project Initiation: Summary The first phase Relationship of project to business objectives is key Compare alternatives using weighted matrix Financial analysis: NPV, ROI, payback Project Charter is the primary output; it includes the stakeholder list Completion of Project Initiation is the signal that the project has approval to proceed to the project planning phase. This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation Questions? This work is licensed under a Creative Commons Attribution 3.0 Unported License (CC-BY). Project Management Chapter 7: Project Initiation 26