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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

Business problem or opportunity defined

Solution is defined

Project is formed

Business case created

Project team appointed

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Project Management

Chapter 7: Project Initiation

The Business 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.

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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

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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

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Project Management

Chapter 7: Project Initiation

Payback Analysis

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Project Management

Chapter 7: Project Initiation

The Project Charter

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Project Management

Chapter 7: Project Initiation

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Purpose of the Project Charter

When signed off, you have approval to proceed to detailed planning, followed by carrying out your project.

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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.

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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

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Project Management

Chapter 7: Project Initiation

Identification

Name of the project—make it meaningful

Name, title, department of project sponsor

Name of project manager

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Project Management

Chapter 7: Project Initiation

Clear Objective

SMART

Specific

Measurable

Acceptable

Realistic

Time based

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Project Management

Chapter 7: Project Initiation

Business Need or Opportunity

A concise statement of how the project’s deliverables will contribute to organizational objectives

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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

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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

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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

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Project Management

Chapter 7: Project Initiation

Risks

High-level statement about risks identified so far

Include the risk of NOT doing the project

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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

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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.

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Project Management

Chapter 7: Project Initiation

Questions?

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Project Management

Chapter 7: Project Initiation

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