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PROJECT ROI - Part XIII: Return on Requirements
In last week's VirtualBEACON we introduced the British Office
of Government Commerce (OGC) gateway system. To recap: The OGCs
gateway process has six gates; Gate 0: Strategic assessment, Gate
1: Business Justification; Gate 2: Procurement Strategy; Gate 3:
Investment Decision; Gate 4: Readiness for Service; and Gate 5:
Benefit evaluation. The purpose of the gateway process is to insure
project value for the British Taxpayer. The gateway system provides
for a peer review and feedback of health projects. If a project
is in trouble the peer review will indicate a red light; if challenged
a yellow light; and a green light if it is healthy. OGC can not
stop a red lighted project, but it can provide pressure for the
agency to consider their motivations for going forward.
What is a healthy project versus an unhealthy project? Return on
investment is a good place to look at the health of a project. As
we also showed in last week's VirtualBEACON, 65% of companies use
simple ROI. Projects are made up of features and functions. So concentrating
on the scope with regards to return is an interesting concept, since
all features and functions will have their own ROI. By understanding
the ROI of each feature and function, scope can be changed by priorities
for the maximum return. Some functions may have no return at all
- so why do them?
The cost part of the ROI formula starts when the project begins
and ends when the project is completed. But where does the return
start? In most cases the return will begin when the project is completed
and implemented. Is there a way to start the return early? Yes,
by looking at the features and functions with the highest return
and implementing them early, then ROI starts early and the project
could become healthier. In fact you may never implement low ROI
features and functions as new and more valuable items are identified.
This could also be true for projects. Projects with higher business
value need to be prioritized by their return on investment and business
value. The Holy Grail of project management would be to go one step
further and view these projects as you would for a portfolio of
assets. Just like a stock portfolio, you need to introduce the element
of risk. While high-flying stocks can give you a magnificent return
they could, and often do, fail. This is true on individual projects
and the features and functions within a project. By measuring the
risk/reward ratio at each of your gates you can then start to see
a truly useful project management portfolio.
Click
here for more information of the OGC's gateway system
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