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23rd International Conference of the

TOC Practitioners Alliance - TOCPA


www.tocpractice.com

21-22 March, 2016, Tennessee, USA

Critical Chain Project Management:


Assessing the Efficacy & Feasibility

Daniel P. Walsh, Exepron, USA


March, 2016

After a successful career in leading large organizations including Director of Operations for a five billion
dollar enterprise and CEO for a $750 million company, in 1996 Daniel Walsh founded Vector Strategies, a
Theory of Constraints, (TOC) focused company. He is the co-founder of Exepron a 21st Century project
management, SaaS cloud based, real time collaborative, critical chain software solution.
He is a recognized expert in developing and implementing powerful strategies that quickly and
dramatically improve market presence and profitability. He has worked with companies in the
shipbuilding, pharmaceutical, construction, engineering; software, manufacturing, aerospace & defense
industries. Numerous Fortune 100 companies are among his clients, including Textron, IBM, Boeing,
Lockheed and the U.S. Department of Defense.

Daniel Walsh is a sought after lecturer, coach, strategic thinker and is a trusted advisor to many senior
corporate executives including TOC consulting expert for the Institute for Defense Analysis. In addition he
co-authored the seminal Theory of Constraints Handbook and written numerous articles and papers. He
currently is a member of numerous corporate boards and in addition is the former Chairman of the
Theory of Constraints International Certification Organization Board, the global professional organization
dedicated to setting the standards, testing and certifying competency in the Theory of Constraints.

State of Utah
MRO Aerospace. 12 months of backlog
scheduled in 10 days of engagement.
700 Developers on Exepron

Traditional PM Methods
PMI Report 2014
Annual Survey of 1,100 accredited member respondents

Only 38 percent of projects finish on time and within


budget, according to new research by Project
Management Institute (PMI).
Organizations continue wasting $109 million for
every $1 billion invested in projects and programs,
according to Mark A. Langley, president and CEO of
the Project Management Institute.
Within the last year, only half of projects finished on
time and 55 percent finished within their initial
budgets, according to the 2,800 project management
leaders surveyed.

Traditional PM Performance

Price Waterhouse Coopers Survey

10,649 projects
200 Companies
30 Countries
50% failure Rate

PricewaterhouseCoopers, which reviewed 10,640 projects from 200 companies in 30 countries

https://podio.com/site/budget-busters?mkt_tok=3RkMMJWWfF9wsRolsqvKZKXonjHpfsX67ugtUae1lMI%2F0ER3fOvrPUfGjI4FT8pmI%2BSLDwEYGJlv6SgFQrHDMa15ybgJWBQ%3D

Monumental Budget Busters


% Over Budget

Years Late

Over Budget US$

CCPM Awareness is High


PMI Report 2014
1,100 member respondents to the annual survey.

Cost Versus Throughput


Cloud
The best way to lower global
cost is to lower local cost

because :

we must

Control
Costs

Focus on high local


efficiencies, e.g. manage
variances

In order to
In order to

Successfully
run our
business

we must

Conflict
In order to
we must

because :

Source: Eliyahu Goldratt

we must

Focus on
meeting customer
schedules

Maximize
Throughput

It is NOT possible to maximize throughput


performance by achieving high local
performance everywhere

Cost Versus Throughput


Cloud
Local Impact IS equal to the
impact on the organization

because :

Control
Costs

we must

Evaluate according to the


local impact

In order to
In order to

we must

Manage
Well

Conflict
In order to
we must

because :

we must

Protect
Throughput

Not evaluate according to


local impact

Local Impact is NOT equal to the


impact on the organization

Source: Eliyahu Goldratt


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Cost Versus Throughput


Cloud
We are using Throughput measurements to
make operational and financial decisions

because :

Control
Costs

we must
In order to

Have one set of


metrics to make
global and local
decisions

In order to

Manage
Well
In order to
we must

because :

To What to Change ?

Protect
Throughput

We are using Throughput measurements to


make operational and financial decisions

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The Problem

The 3 Pillars of Project Management Solution


Schedule Throughput World metrics
Scope Throughput World metrics
Cost Throughput World metrics
Cost creates a Dilemma for CCPM
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The Problem
CCPM will (conceptually) positively impact cost by
significantly improving management of Schedule and
Scope Maybe!
CCPM methodology is a Throughput focused solution
and was not intended to manage Cost World Metrics
Attempts at applying Throughput techniques to
reconcile Cost World methodology with Throughput
methodology in CCPM have failed

WHY?
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The Problem
Conventional Approach
The Cost & Duration allocated at the task level consists of:
The Touch Time work hours to complete the task
Embedded Protection against Variability
An industry recognized efficiency factor
Total Time
Task Duration
Total Cost
CCPM Approach
The Cost & Duration allocated at the task level consists of:
The Touch Time Duration to complete the Task
Extract Safety from tasks

CONFLICT
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CCPM Paradox
Inertia Since CCPM is Throughput focused then
all metrics must be Throughput metrics
Many professional organizations, companies and
individuals believe CCPM is a half baked solution
Many companies will not even consider CCPM
Conflict with Cost Metrics during Implementation
Blocks support from many stakeholders
Jeopardizes Sustainability - Source of Many failed
implementations

WHY?

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The Scorecard
CEO, Board, CFO, Comptroller, Treasurer, Auditors;
Contract Administrators, Financial Analysts and
Customers using the Official metrics to evaluate
project performance
Even if Schedule & Scope is on track, may be in
conflict with Financial Oversight and Compliance
requirements
CCPM not providing Critical Cost Information needed
by Decision Makers
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Earned Value Management


Past

Future

Budget at Completion

Cost
Variance
Schedule
Variance

Cost

Cost World

Planned
Value
Actual
Cost

Todays
Date
Earned
Value

Time

Delay
Time

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Role of Metrics

Throughput World

Source: www.Exepron.com

Different Needs Need Different Metrics


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Role of Metrics
Have one set of
metrics to make
global and local
decisions

Assumption: Since CCPM is a Throughput Solution


then all metrics must be Throughput metrics

Assumption must be challenged

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SIMPLICITY

Einstein on Simplicity:
Everything should be made as
simple as possible, but not simpler.

Ockham's Razor
Among competing hypotheses that predict equally well, the
one with the fewest assumptions should be selected.
William of Ockham (c. 12871347), an English Franciscan friar,
scholastic philosopher and theologian.

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The Solution

Must Have Throughput Metrics


Must have Cost Metrics
Must be Integrated into the Solution
For the first time, CCPM solution will have
interactive Operational and Performance metrics:
providing Holistic view of Portfolio of Projects

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Mobius Effect

A
Cost World and Throughput World
inside the the same CCPM solution
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Cost Versus Throughput


Cloud
because :

We are using Throughput and Cost measurements to


make operational and financial decisions

Control
Costs

we must
In order to

Have one set of


metrics to make
global and local
decisions

In order to

Manage
Well
In order to
we must

because :

To What to Change ?

Protect
Throughput

We are using Throughput and Cost measurements to


make operational and financial decisions

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Solution
Render unto Caesar the things that are Caesar , instead of
perpetuating and challenging the universally accepted precepts of
cost accounting, rather embrace them and incorporate into CCPM
thinking.
The CCPM tools must develop this capability, reconciling and
mapping all of the costs and earned value directly to a specific task
in the projects CCPM schedule. This becomes an integral part of
the:
Planning phase Scheduling phase Execution phase.
Source: CCPM: Assessing the Efficacy and Feasibility, Daniel P. Walsh; www.exepron.com
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Collaborative Business
Solution
CCPM must not be limited to just Planning, Scheduling
and Execution of the work content
Must expand and embrace the Financials Cost and
Revenue
Offer value to all of the Stakeholders
CCPM must become a TOTAL Business Solution
CCPM has the unique potential to permeate
throughout the entire Enterprise

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Metcalfs law

Network Usefulness

The value of a network is proportional to the


square of the number of users of the system (n2)

Real Time Information


Across the Enterprise

Network Nodes
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Solution
The cost and earned value are calculated in the Cost world and
maps to the schedule that is calculated in the Throughput world
We now can now mange the three pillars. The cost data can be
directly mapped back to the CCPM task. It might be helpful
visualizing two parallel requirements that will have to be
updated in execution.
We will update the cost, earned value, (revenue) and update the
time remaining in the task. The additional effort is very minimal
and the benefits enormous.

So, what shall we call this addition to the CCPM


approach? Lets call it CCPM Pro.
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Solution

CCPM
PRO

Throughput
Metrics

Cost
Metrics
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