Do all organizations plan? How formal are the processes? Are they effective? These and many other questions sets the stage for us to look at the process of planning. This chapter looks at how the operative steps can be used to improve the probability of success of a commercialization project.

To appreciate the context for this, consider again airplane pilots and the sophistication of the planes they fly. The early barnstormers didn’t plan their flights very methodically. Their human-machine interface was perfect in that there was a direct coupling between the pilot and aircraft controls. Perhaps a thumb to the wind might have been in order. On the other hand, the chief pilot of a Boeing 787 is utilizing sophisticated computer-driven data complete with weather information from around the world. The earlier airplane can only go 100 miles (if you’re lucky); the other is capable of circumnavigating the globe. Which model fits best?

Why Planning?

The simple answer to “why plan?” is that it can improve the probability of success of a project and promises to reduce losses and inefficiency. In the modern world of increased global competition and accelerating rate of change, improving the odds of success is the desired goal.

Planning exists in the space between project uncertainty and improved positive outcomes. The degree of formality, detail, and depth are also determined by the maturity of the organizational context in which the project exists. Whatever the level of project planning sophistication employed, an overriding benefit of the process is the internal communication of goals, organizational interdependence, and measurable outcomes that are positive attributes of the process. Let’s look at the details to better understand this.

The Details

A well-thought-out feasibility analysis offers direction as to how best to proceed to a viable commercialization outcome. It also reveals a common weakness in how some folks approach this. It is that there is an organization presumption that there is a favored pathway to market. In many organizations, for example, it is common to exploit new ideas with starting a new company, yet this may be the most unlikely path in terms of risk and market penetration capacity.

Multiple alternatives should be constantly examined to see which path best serves the particular project. A partial list is shown in Table 6-1.

Although this is a partial list, it reveals that each pathway has different dynamics and responsibilities let alone outcomes. Some of the decisions are clearly industry specific. An example is the pharmaceutical industry, which has long favored the duality of internal R&D and licensing. How do we decide?

Deciding

There are certain broad metrics that control decision making at this stage of the process. As the journey toward commercialization evolves and additional information becomes available, it may offer a point to review and even retrace the initial steps. The positive aspect of this type of planning is that few expenditures of human and/or financial capital have been invested. Some of the early considerations include:

• Corporate vision. Clearly the culture and goals of the sponsoring organization achieve first consideration. There are exceptions, of course, as with the rogue group of 17 engineers and staff from IBM who stood in the face of the then corporate identity of only making large mainframe computers to develop the PC as we know it today. They rented a garage in Boca Raton, FL, procured parts from a local electronics parts store believed to be Radio Shack, and began their work. This anecdotal story is offset by many “counterculture” projects that failed.
• Industry mores. The folks who work in the fast food and retail industries operate in a different culture than those working in the computer mainframe or scientific hardware businesses. Can that defining constraint be ignored? Certainly, crossover products and market disrupters occur frequently. When viewed on the basis of final probability of success, one ponders at how large a cultural price can be absorbed.
• Human capital. Possibly the most critical factor and most commonly ignored. Careful assessment of the people required to successfully achieve project goals needs to be done early. It takes time to find and assimilate the skills and experience required to begin and then prevail in the market. There are professional outside firms that can be hired if internal human resource functions aren’t available.
• Financial resources. Both careful analysis of the requirements and a review of the alternatives is required. In larger, public-traded entities there are alternatives for funding that come from professional resources such as public offerings of liquidity that takes time to acquire.
• CAPEX. Long-lead items such as the acquisition capital equipment and space take time and require careful scrutiny. It is tightly couples to the acquisition of capital. The “make-buy” decisions that surround this have now led to sourcing from China and the other countries of the Far East.

Drilling Down

As the detail of the planning process unfolds, a series of “information layers” is created. They literally become the chapters of the formal document. They include:

• Project objectives. In the multiple steps of the commercialization cycle, there is an ongoing connection to the overall vision of the company.
• In the decisions about opportunity recognition, for example, the vision statement is actually quantified and used to weight the functional evaluations. The result is a “weighted average” response that yields high resolution.
• Assuming that the corporate vision becomes the basis for measuring the overall organizational performance, aligning a given project to those goals enhances the overall performance metrics. Given that, there are two caveats:
  • Possibly the greatest benefit of the linkage to the corporate vision is the level of communication required to ensure a match to the goals of the central vision process. This requires significant dialogue and connecting the project objectives to the central plan. There are many benefits, including the alignment of efforts needed to ensure that adequate resources are allocated to the project. It allows the members of project team to engage at the highest level of the organization.
  • All this is not without issues. Strict adherence to the central corporate goals limits the energy of disruptive and bold (innovative?) change. Some percentage of new products and new market creation require this. Nowhere is this more apparent than the expensive world of technical innovation, where the rate of change is constantly increasing. Sometimes a “dashboard” approach that monitors an agreed amount of measurable disruption is utilized to show allowed deviations from the central themes.
• Concept definition. With the strategic issues aligned and articulated, an important next step begins. It is where the actual boundaries are defined. Some of the areas include the definition of the team, initial cost constraints, budgets, cost/benefit arguments, make/buy decisions, schedules, deliverables, risk factors, and success metrics. Tools such as written software specifications, detailed bills of materials, and process flow charts become invaluable.
• Approach. There are several methods of planning that are broadly characterized by the degree of formality and timing they utilize. Certain aspects such as financial modeling follow those groupings. In a low risk, somewhat predicable environment, Net Present Value (NPV) is as good a financial modeling tool as any. NPV is a calculation whereby the value of money in a future time period is brought back to a current time.
• Martha Amram, in her book entitled Value Sweep: Mapping Growth Across Assets, argues that more complex and fast-changing projects require a decision-tree format that compares alternative approaches. The “tree” model allows comparisons that are more useful for upper management decision making, as it gives management more timely comparative information.
• Methods that are in use include:
  • Traditional project planning. Uses linear multistep planning for the overall project.
  • Incremental planning. As its name implies, it breaks the project into phases and delivers them sequentially. This reduces the risk of delivering everything at once and becoming inaccurate as the data and assumptions change over time.
  • Iterative. Allows the project to absorb information in a timely manner and then have the project evolve. Susceptible to loss of focus and urgency as outside conditions or internal teams change.
  • Adaptive. Also allows the project to change over time and as information quality increases. In this case, it is planned with multiple phases of effort in advance.
  • Extreme. As implied, this category allows constant scrutiny by various stakeholders, such as customers and management. It’s susceptible to loss of direction and requires close team coordination.

Over and Under

The previous section points out that there are many levels of planning and tools that may be employed. They vary in detail, scope, and frequency of review. In common, they focus on a set of deliverables that map out the direction of a given project.

The style of planning varies most with the stage of growth of the parent organization. Clearly a startup or early stage company will employ a more concise, less elaborate format. A more mature organization will necessarily allow a more detailed, more thoroughly reviewed process. Each has its positive and negative attributes. What they must have in common is the ability to guide the organization in an orderly manner that allows it to prevail in its chosen commercial space. The outcomes can certainly be measured and the choice of process can thus be modified to achieve best results as measured in market success.

Whatever process is employed, they are susceptible to common foibles. The most common is when the planning process takes on a life of its own and becomes a bureaucratic function that only allows marginal results in terms of commercial success. There are several insidious issues that threaten the success of a given process. They include:

• Scope creep. Changes in project scope happen all the time. When the project becomes more complicated than needed, this form of creep threatens its success and possibly interferes with its outcomes.
• Hope creep. This is where the ultimate human behavior of hiding or distortion enters the dialogue. Inevitable and quantifiable measurement of progress becomes important to counteract this. Good project management becomes critical.
• Effort creep. When the task becomes more complicated than anticipated. Individuals tend to invest more hours but measurable goals fall behind.

In a thoughtful article published at the Kelley School of Business (Elsevier 2013 titled “Lies, Dammed Lies and Project Plans: Recurring Human Errors That Can Ruin the Project Planning Process,” Jeffery Pinto enlarges this idea by citing that “Project-based work has become a critical component of global industrial activity. Unfortunately, the track record for project development has not been strong.” He further defines failure as discontinuation of the project or even cancellation and cited cost and time overruns. More often than not the project teams are tasked with trying to salvage value and profitability. Somewhat of a grim scenario!

He further lists the “seven deadly sins” of human behavior that contribute to those negative outcomes. They range from external changes (such as a sales team forecast promoting the product early) to unrealistic timelines, poor change control to adapt the project underway, poor project management training, and so on. The article concludes the need for better skills training, curtailing systemic errors, and broader allowance for rework cycles as future directions.

In an article titled “How to Fail in Project Management (Without Really Trying)” Pinto and co-author Om Kharbndo elaborate on the failure modes of project management and challenge the readers to be willing to learn from their own mistakes.¹ The list is extensive and includes:

• Ignore the external environment and stakeholders
• Push new technology too quickly
• Don’t bother building fallback plans
• When problems occur, shoot the most visible
• Let ideas starve to death from inertia
• Don’t bother to conduct feasibility studies
• Never admit a project is a failure
• Never conduct post-failure reviews
• Never exercise tradeoffs
• Make sure a project is run by weak leaders

He concludes by observing that past failure (or success) is not a predictor future outcome. There are lessons to be learned, but only if we are willing to find and examine the problems.

The Tools

Beyond the basic measurement tools of financial performance, such as Return on Investment (ROI), which measures the overall ratio of investment and returns, there are other measures. The Net Present Value normalizes items to return over time so that multiple projects can be compared independent of the time to realize their benefits. The Internal Rate of Return (IRR) is useful to quantify the rate by which cash resources flow through an organization. This last tool becomes important when you’re considering large capital expenditures such as plants and equipment.

There are a litany of tools such as milestone charts, market share analysis, and ratios of headcount to costs that become important parameters. Perhaps the most significant of all these tools derives from the field of project management. Three significant ones include:

• The Gantt chart. Formulated by Henry Gantt in 1910, it is still commonly used today. Companies like Microsoft offer software products like Project to derive and control this method. The Gantt chart is a listing of tasks, the individual(s) who will implement them, and the budget implications of these assignments. It allows you to visually monitor the progress of the deliverables. It is not uncommon to see these charts enlarged and posted on project centers as their graphical features are useful.
• The Critical Path Method (CPM). Created by DuPont and The Remington Rand Corporation in the 1950s as a tool to monitor and control maintenance tasks. It allows the actual time to perform the tasks to be determined by the time reported to complete them.
• Program Evaluation and Review Technique (PERT). Also developed in the 1950s by the Booz Allen Company and the U.S. Navy to monitor and control complex defense projects. It graphically portrayed time-based tasks and their interdependence to related tasks.

There were many attempts to consolidate these tools and present a common format. In 2006, the American Association of Cost Engineers released the Total Cost Management Framework. It has not been universally adapted. As the world continues to move to a global context, there became international standards offered for use. The International Project Management Association (IPMA), for example, defined the IPMA Competence Baseline (ICB) tool to help standardize the terms and context utilized in international project planning.

When I queried Google with the words “project planning,” 109 million entries were reported. Cleary, this is an indirect measure of the size of the task. It amplifies the importance of adapting the planning process to the needs of a given organization.

To Plan or Not

Perhaps it’s a bit dramatic to paraphrase the line from Shakespeare’s Hamlet where the lead character (Hamlet) contemplates the value of life and potential suicide. Planning reaches beyond the polarity of whether or not to perform a planning discipline as part of a commercialization effort to define which process serves the decision process best. It is clear that insufficient planning effort exposes the projects under consideration to risks of outright failure, cost overruns, unexpected delays, missed deliverables, and poor internal communication of goals among the participants in the process and missed market opportunities. It also provides a road map to the expectations of the deliverables and resources required. Critical among these are the long lead items that can bedevil projects by the light of time required to obtain them. You can’t “push a string” in attempt to correct the time-based issues.

Further, whatever path a planned project embraces, it is clear that there is a need to match levels of detail, sophistication, and documentation to the needs of the enabling organization.

The penalty of squandering precious resources like money and talent are that windows of market opportunity may pass. There are fewer resources available to pursue more promising avenues. Softer issues like weakening the brand name, employee morale, and softer balance sheet financials can take years to overcome. The incentive is to do it right the first time.

Whatever the nature of the planning process that’s identified and executed, the required functional elements that ensure the success of the project must be assembled in place. Perhaps the most complex of these is to look at the issues surrounding the marketing of the product or services. Let’s look at that in the next chapter.

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¹Business Horizons, July–August 1996.