Organizational project management is, at its heart, about increasing revenue. It’s the same kind of thinking as, say, a marketing division: we want to increase sales. But project-management professionals generally take this a step further. They understand that, once a project is started, the expected rate of return on investment (ROI) declines sharply. This makes sense. A project has a finite lifetime, and unless it has some kind of guaranteed revenue stream, once it’s finished, you no longer have a reason to work on it. It’s a big risk to start a project, but an even bigger risk to finish one.
Obviously, you want to make a profit on a finished project. But you also want to make a profit on every phase of the project. As the project progresses, it gains value, which gets captured as project revenue. Each stage of a project generates value, and each stage has a finite lifetime.
We call this “manufacturing value.” Every phase of a project generates value, and that value gets captured as revenue. The revenue gets spent, and that becomes project cost. The net result: revenue minus cost, or profit.
You can make more profit by improving your design or more effectively managing the project, but the biggest benefit is capturing more revenue. If you can do that, the project is profitable, no matter what else is going wrong.
A project management tools help you do this. It lets you estimate how much revenue each stage generates. So, for example, you can estimate how much revenue each stage of a complex product, like a PC or a car, will generate. Then you can estimate how much revenue each stage of your project is expected to generate, and you can compare that to the value you spent.
What makes projects successful?
Projects fail because organizations lack the skills to manage them, not because they don’t try. Some things are harder to manage than others. Projects tend to be hard. One common failing is that a project is pursued because it seems interesting and worthwhile, not because it makes any sense. For example, one of the projects we worked on was a book. It was an interesting book, but there were no customers for it. To blame? Maybe. (It didn’t help that the book was wildly overpriced.) But more probably, the project failed because the people who should have been working on it weren’t.
The discipline of project management was invented because projects were intractable. When Samuel Morse invented the telegraph, it took a long time for anyone else to figure out how to use his invention. When the Wright brothers invented the airplane, it took a long time for anyone else to figure out how to fly it. The same was true of the telephone and the television. These inventions took a long time for people to appreciate.
Managing projects is hard, because projects tend to fail. The problem is not that they are too hard; the problem is that they are too hard to manage.
More importantly, projects aren’t just hard. They are hard to manage because they aren’t easy. You can’t tell how a project is going to turn out until it’s done, and the project itself makes it hard to measure whether it’s going in the right direction. Projects are fuzzy, like science. Projects have feedback loops. They can’t be managed like clockwork. And because projects aren’t easy, they are hard even to manage. The project management discipline is the art of making fuzzy things fuzzy. Our book project failed for the same reason that lots of projects fail: the people who should have been working on it weren’t
Project revenue report
A project revenue report shows how much work you’re getting paid for and how much work you’re actually getting done. A project revenue report shows how much money you’re making, and how much money you’re spending. A project revenue report is written by a person who is not paid by the project. The person writing the report is trying to get paid for doing work, and is trying to get paid for the work he or she is doing now, not for the work he or she did in the past.
This person usually doesn’t know what the project is supposed to be, or what the customer wants. The person has to make guesses, and most of the time the guesses are wrong. But the person has to make guesses anyway. The person writing the project revenue report has to keep the customer happy, and to keep the customer happy, the person has to give the customer what the customer wants. So if the customer doesn’t want a report, the project manager has to make one.
So a project revenue report is a record of guesses.
A project manager has to decide how much revenue the project should make. That usually means thinking very hard about how much the customer will pay. The project manager has then to decide on a revenue target, the amount of money the project should make. This is where PMS tools prove to be very helpful.
The project manager has to make guesses about how much money the customer will pay, and guesses about what it will cost to make the project, and guesses about how much work is actually being done. The project manager has to guess about how long the project will take, and guess about how many team members will be needed. The project manager has to guess that some guesses will be right and some guesses will be wrong. The project manager has to guess, in other words, about the project itself. So a project revenue report is a kind of record of guesses.
Advice to project managers
A project is a long-term commitment, and there’s no way to know for sure that the project will pay off. That’s why online project management software is so important. In the real world, projects that are launched with no particular project management system are doomed to fail. Project management isn’t rocket science, but it requires discipline. A project manager has three jobs:
1. Decide what the project will do.
2. Decide how the project will be done.
3. Decide how the project will be measured.
The project manager has to track all three because it can be easy for any one element to slip, which is what happened in the Concorde project. The Concorde project was one of many engineering projects launched by the British government in the 1970s. The Concorde project was originally a project to build an aircraft that would fly eight times the speed of sound.
That turned out to be impractical, so the project switched to building a jet that could go twice the speed of sound. That also turned out to be impractical, so the project switched again to building a large aircraft that could go four times the speed of sound. That also turned out to be impractical, so the project switched again to building an aircraft that could travel twice the speed of sound.
By the time the project finished, no airline was interested, and the British government terminated the program.
The Concorde project could easily have been saved. The Concorde team could have followed a plan that would have kept them focused on a single goal, while eliminating unnecessary costs. The project manager’s job isn’t just to decide on what the project will do. The project manager has to make sure that everyone on the project has the right mix of skills.