For want of a nail

how critical components analysis can save your project from failure

Aaron Shenhar

Diamond Leadership Institute, SPLWIN, Verona

Ori Orhof

Technion, Israel Institute of Technology, Department of Industrial and Management Engineering

Dov Dori

Technion, Israel Institute of Technology, Department of Industrial and Management Engineering Massachusetts Institute of Technology

Critical path and critical chains are well-established project planning methods. This paper presents a third technique to enhance the quality of planning—critical components analysis (CCA).

Clearly, any large and complex project will only succeed if all its building blocks (or components) are completed successfully and in time before project completion. Even a small part may delay or severely risk an entire project launch. Yet so far there has been no systematic way to assess this situation or prevent it from happening. Based on recent research, CCA was developed to address these problems.

Different components exhibit specific characteristics based on two dimensions: challenge—the difficulty in successfully completing the component, and vitality—the importance of the component to the final product's success. A component is considered critical if it is simultaneously important to success and difficult to achieve.

This paper presents the conceptual framework of CCA, which is built to identify a project's critical components and offer appropriate mitigation actions. The paper presents a case study to demonstrate the method in action.

Introduction to Critical Components Analysis (CCA)

“Project success” is an elusive concept. Traditionally, project success has been measured against the “triple constraint” or the “iron triangle”—performance, schedule, and budget—but this definition proved itself to be partial and sometimes misleading (Lipovetsky, Tishler, Dvir, & Shenhar, 1997; Shenhar, Dvir, D., & Levy, 1997; Williams, 2005). A project manager trying to meet the performance on time and within budget might be taking the risk of producing a totally useless product that would be rejected by potential customers. In view of the limitations of the Iron Triangle criteria, a better, more comprehensive approach to project success had to be established, taking into consideration the project's success as it is perceived by different stakeholders and during different phases of the project's life cycle. The current concept of project success is comprised of two sets of criteria: efficiency and effectiveness. Efficiency in projects can be defined as the project's success in keeping up with its original schedule and budget, while its effectiveness is defined as the success of the product created by the project—the project outcome and customer satisfaction with the end product (Ika, 2009; Khan, Turner, & Maqsood, 2013; Wai, Amin, Syuhaida, & Ng, 2012).

Traditional methods of project management are decomposing a project into its basic components using the process of creating a work breakdown structure (WBS), where the different components of the project can be at the level of a deliverable, work package, or subproject (phase). Stretching the effectiveness-efficiency notion of project success into the subproject level, it can be assumed that the criticality of a component to the overall success of the project is closely related to its effect on project efficiency (finishing the project on time and on budget) and end-product effectiveness (the customer's satisfaction).

Clearly, though, large and complex projects are comprised of many components, and at least some of them can be very large, more risky, or more difficult to complete than others. A project succeeds if all its components are built successfully and are integrated into a final functioning system or product. Thus, one unfinished or flawed component can result in complete or partial failure of the project. It is conceivable that not all project components are equally important to the project's success. Failure to successfully complete certain components in time will only have a minor impact on the final product, while others are likely to be more difficult or challenging to complete due to different factors, such as uncertainty, technology, or lack of resources.

We define two major aspects that are related to efficiency and effectiveness: challenge and vitality. The challenge is characterized by the difficulty of completing the specific component on time and budget (thus affecting the project's efficiency), while the vitality is related to the importance of the component to the success of the product (thus affecting the product's effectiveness).

The challenge associated with a component could be determined by factors that are internal or external to the project, which together impact the difficulty in accomplishing the specific component.

The internal factors are often based on levels of technological uncertainty, which is the extent of use of a new or even a non-existing technology for the design or building of that component. The newer or less developed the technology, the more difficult it is to successfully complete the component.

External factors are the constraints to the component imposed by factors that are exogenous to the project, including:

  • Regulation (e.g., legal restrictions imposed by the government, such as FDA approval for drugs, social norms, industry standards, or company policies);
  • Excessive bureaucracy (either inside or outside the organization); and
  • Limited resources of time, budget, professionals, and management.

For simplicity, we suggest setting the level of challenge on a three-tier scale of high, medium, and low, defined as follows:

  • Low challenge—Minor or non-significant difficulty to complete the component.
  • Medium challenge—Some difficulties with completing the component may exist due to internal or external factors; the medium level is typical of the majority of components.
  • High challenge—Great difficulties to the completion of the component may exist due to internal or external factors.

To consider the vitality aspect, we note that not all components of a project are equally important to the project's success. Some components, such as a roof in a new house, are “must-haves” at project completion, while others, such as a garden for the new house, can be accomplished later with minimal or no impact to the project's success.

As in the case of challenge, vitality may be impacted by both internal and external factors. Internal factors include the functionality of a specific component within the final product. For example, the screen of a smartphone is an essential component to the functionality of the phone. Having no screen renders the product unusable. In sharp contrast, a stylus has only a marginal functionality impact, and a smartphone can be fully functional without one. The external factor is the perceived value of the component to the customer and the competitive advantage it provides over the competition. A high-resolution, high-saturation, bright screen will have a higher perceived value than a standard screen that does not have those features. The bright screen therefore provides a competitive advantage (or better value) to the smartphone over competitors’ products. Conversely, even a fully functional stylus does not add much value or competitive advantage for the product.

As in the case of challenge, a three-level scale of high, medium, and low vitality can be defined as follows:

  • Low vitality—Failing to achieve the specifications of the component may have insignificant effect on the final product's appeal to the customers, or may have slight functionality impact.
  • Medium vitality—Failing to achieve the specifications of the component may seriously jeopardize the final product's appeal to the customers, or result in functional degradation of the final product.
  • High vitality—Failing to achieve the specifications of the component is unacceptable to the user, rendering the final product unusable.

Combining the levels of challenge and vitality, each component can be defined by a 3×3 matrix (Exhibit 1), which defines its criticality. The combined challenge-vitality value will determine the criticality of the component to the overall success of the project, comprised of the product's success (effectiveness—vitality) and project management success (efficiency—challenge). In order to be defined as “critical,” the component must have high level in one of the aspects and at least medium level in the other. A critical component is now defined as a work package at the subproject level, which imposes exceptional risk to the success of the project, where its absence or partial availability may cause substantial damage to the completion of the project or to the product's success.

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Exhibit 1: The criticality factor of a component.

To demonstrate the concept of a critical component, we use the well-known case of Denver airport's Baggage Handling System (BHS). The BHS was a highly innovative system in a realm of traditional terminal systems like electricity and plumbing. The BHS was so innovative that it should have been regarded as an R&D project (de Neufville, 1994). The BHS project turned out to be too complicated to be completed on time. Numerous unexpected problems with hardware and software components, mostly algorithms of load balancing on the feeding lines of the BHS, delayed the delivery of the system from its original date of October 1993 until February 1995, a delay of 16 months and a cost overrun of over $500 million. Exhibit 2 presents a partial WBS of the Denver project where the BHS is presented at the same level as other terminal systems for a CCA comparison.

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Exhibit 2: A partial WBS of the Denver International Airport BHS project.

A critical components analysis (CCA), demonstrated in Exhibit 3, reveals why the BHS is a critical component: It has high technological challenge and high vitality to the airport's functionality. Electricity and plumbing systems are highly important to the airport's functionality (vitality), but exhibit no specific difficulty (challenge). The parking lot management system provides income to the airport (vitality), but it presents no special difficulty.

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Exhibit 3: The criticality of the components (Denver International Airport's BHS).

The Managerial Implications of the CCA

Once the critical components have been identified, it is important to apply to them a specific managerial style that is aligned with their specific contingencies. We suggest that each critical component exhibits four dimensions (contingencies) derived from the aspect of challenge (internal and external) and the aspect of vitality (internal and external). Exhibit 4 summarizes the aspects of the challenge and vitality, presenting them in the corresponding internal and external dimensions.

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Exhibit 4: Internal and external dimensions of challenge and vitality.

Exhibit 5 presents the four dimensions of the subproject level, where the aspect of vitality holds the upper-right quadrant, and the challenge holds the lower-left one. To assess the value of each of the four dimensions, a three-tier scale is utilized, featuring low, medium, and high levels. As we demonstrate next, the managerial type is derived from the levels of the four contingencies.

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Exhibit 5: The four dimensions of the subproject.

Managing critical components with high value level (must-have), should take the following actions:

  • Commence the work on the component as early as possible to leave enough buffers for accommodating requirements change,
  • Customer testing and feedback to evaluate the component,
  • Constant marketing involvement to evaluate how the component being developed complies with the customer needs (for value to the customer) or the organization demands (for competitive advantage), and
  • Product prototyping to assess the new component.

Managing critical components that exhibit high functionality (essential) should:

  • Start as early as possible to work on the component,
  • Finish the component as early as possible, and
  • Subject the component to intense testing to verify its functionality.

Managing critical components with high constraints level (binding), should take the following actions:

  • Start as early as possible to allow enough time to mitigate hurdles,
  • Closely manage the constraints initiators (stakeholders, regulators),
  • Perform constant risk management to monitor the constraints, and
  • Allow time and budget buffers (slacks) to cope with over-time and over-budget consequences of constraints.

Managing critical components that exhibit high level of solution uncertainty (unknown-unknowns) requires the following activities:

  • Start as early as possible in order to engage the unknowns as soon as possible, leaving enough time and resources to mitigate them.
  • Execute functional modelling of the component to define the inputs, outputs, internal processes, and interfaces of the component. The modelling should be executed with a standard tool such as OPM (Object Process Methodology—ISO 19450), which is a system conceptual modeling methodology (Dori, 2002; Mordecai & Dori, 2014; Sharon & Dori, 2009). An OPM model of the component can assist the project management to understand better the actions it has to take in order to achieve the component.
  • Perform proof-of-concept and prototyping if required.
  • Late design freeze (Shenhar & Dvir, 2007)—Allow changes in design until a relatively late stage of the project.
  • Learning and selectionism (Pich et al., 2002)—Start developing in a few alternative routes (selectionism) and select the best solution, strive to understand and learn about unknown events (learning), and tune the project administration to efficiently cope with unknown events if and when they materialize.
  • Perform frequent reviews (design reviews, managerial progress reviews, etc.).
  • Allow time and budget buffers (slacks) to cope with over-time and over-budget consequences of unforeseen events.

Exhibit 6 summarizes the managerial implications of the four dimensions of the subproject contingencies.

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Exhibit 6: The managerial implications of the subproject dimensions.

Discussion

No project management team can apply a specific management type to each individual component, and most components do not need that. However, specific components might bear exceptional risks to the project success and demand special attention and adapted management style. The compromise we suggest is that specific types of management will be applied only to critical components. This approach increases the likelihood that the most critical components will be managed according to their specific contingencies, contributing to the project's chances to succeed. To reduce project management complexity, the remaining components will be handled according to the type of management defined for the entire project.

As demonstrated on the Denver BHS case, a critical component such as the BHS should have been identified as such and should have been managed according to its specific characteristics.

The Critical Components Analysis (CCA) framework features the following four stages:

  1. Analyze the components of the project for critical components using the challenge-vitality criticality analysis (Exhibit 1), and identify the critical components that demand a specific type of management.
  2. Define the four contingency dimensions of each critical component (value, function, constraints, and solution uncertainty), as presented in Exhibit 4.
  3. Adapt a specific managerial type for each critical component based on the levels of the four contingencies, as demonstrated in Exhibit 5 and Exhibit 6.
  4. Manage the noncritical components according to the suggested managerial type of the whole project.

Adopting the CCA framework can significantly improve project management by considering the components at the subproject level individually and applying appropriate managerial styles for the ones identified as critical based on their characteristic contingencies.

de Neufville, R. (1994). The baggage system at Denver: Prospects and lessons. Journal of Air Transport Management, 1(4), 229–236.

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Khan, K., Turner, J. R., & Maqsood, T. (2013). Factors that influence the success of public sector projects in Pakistan. Proceedings of IRNOP 2013 Conference, June 17–19, 2013, BI Norwegian Business School, Oslo, Norway.

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Wai, S. H., Aminah, M. Y., Syuhaida, I., & Ng, C. A. (2012). Reviewing the notions of construction project success. International Journal of Business Management, 7(1), 90–101.

Williams, T. (2005). Assessing and moving on from the dominant project management discourse in the light of project overruns. IEEE Transactions on Engineering Management, 52 (4), 497–508.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2015, Shenhar, Orhof, Dori
Originally published as a part of the 2015 PMI Global Congress Proceedings – Orlando, Florida, USA

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