Project Management Institute

Opportunity management

the secret ingredient

A case study from NCR shows how it's possible to plan for that ultimate plan-buster: the moment when reality sets in.

by Lable Braun and Gene Kowalczyk

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RICHARD BACH'S BOOK Illusions (Doubleday, 1997) should be mandatory reading for every project manager. In the story the protagonist meets a godlike figure who teaches him about the nature of reality. The lessons mainly take the form of living everyday life in the presence of this enlightened individual, but there is also a magical book involved. (How would reality be tolerable without, at least, some magic?) Now, this book is itself a model of reality in that the protagonist can't look ahead. He must open the book and only then do the words magically appear as he reads them, and the words always contain a lesson germane to the situation at hand. At the very end of the story, when the godlike figure has gone off to wherever godlike figures go, the protagonist opens the book one last time for his final lesson in the nature of reality. As he reads, the following words appear on the page: “Everything in this book may be wrong.”

That, in a nutshell, is reality: messy and unpredictable—and everything we think we know for sure may be wrong. As Huston Smith, the great authority in comparative religion, says: “To confuse reality itself with our model of it is like trying to eat a menu.”

Project managers also have a model of reality—the project plan, the work breakdown structure, the PERT charts, and so forth. All these documents model reality as we'd like to believe it will happen. It almost never follows the plan, though. Delivery efforts have a major exposure to failure if they don't start out with the realization that everything in their neat models of reality may be wrong. Project managers must, therefore, plan accordingly. There are three major tools to prepare for the eventuality of finding out that our models of reality are incomplete, inaccurate, or just plain wrong: validation, qualification, and risk assessment.

Unfortunately, these tools are not foolproof. They fail for three reasons: they are never used; they are used too late in the game; or they are used too early in the game.

The “Everything May Be Wrong” Methodology

We are managers of Professional Services within Integrated Systems Consulting Group (ISCG) and NCR, respectively. At NCR we have successfully implemented a methodology to ensure that the reality models for delivery projects are constructed to survive the inherent risk that everything in them may be wrong.

The methodology has general application beyond the scope of its use within our Professional Services organizations. For the “Opportunity Pursuit Phase,” substitute the “Concept Phase” of most standard project lifecycles and you will have no problem applying this methodology to your environment.

We call the methodology we have implemented “Opportunity Management” (or more informally, the “Everything-We-Think-We-Know-May-Be-Wrong Methodology”), and the group we have established to be the focal point and facilitators for the execution of the methodology is called the Opportunity Management Center (OMC). Note that when we refer to Opportunity Management or the OMC we focus on the methodology and not the group. If after reading this article you want to implement our methodology, which is reproducible over a wide range of applications, it would be a mistake to simply establish an OMC and then wait for the results. Establishing an OMC is not even the first step. The first step is to establish an Opportunity Management Process. The next step is to establish an organization with appropriate stakeholder groups for the advocacies modeled in the process. Then and only then can an OMC be successfully established.

In this model Function, Cost, and Schedule contend with each other for influence on the project. This is basically a contention model, in which the strongest force wins

Exhibit 1. In this model Function, Cost, and Schedule contend with each other for influence on the project. This is basically a contention model, in which the strongest force wins.

When applied to the pursuit of an opportunity, the contention model opposes the variables of Value, Profit, and Revenue against each other for influence on the proposal being produced

Exhibit 2. When applied to the pursuit of an opportunity, the contention model opposes the variables of Value, Profit, and Revenue against each other for influence on the proposal being produced.

The Vector Dynamics Model

Why have an Opportunity Management Process at all? The answer to that question requires a shift in conceptual paradigm for most project managers.

In the standard model for project dynamics (depicted in Exhibit 1), a constellation of forces is acting on a project as it progresses, influencing both the project's interim and final shape. The forces usually number three, and the three forces, while they may vary, usually boil down to some incarnation or other of those depicted in the exhibit. Regardless of the number of forces, or the exact names they bear, the nature of the model remains the same. It is essentially a Vector Model of pressures exerted by contending forces. When we start with such a model, we shouldn't be surprised when our experiences with real-world projects are pressure-filled, contentious, and full of constantly shifting priorities.

Exhibit 2 shows what the Vector Model would look like if it were applied to our opportunity pursuits.

The Mediation Dynamics Model

For those who often think there must be a better way, there is! It is the Mediation Model used by our Opportunity Management methodology, as depicted in Exhibit 3.

This model incorporates the understanding that forces that appear to be in contention can actually be balanced when mediated by a third force. This is an application of the philosophical principle of Dialectical Materialism, established nearly 200 years ago by Georg Wilhelm Friedrich Hegel: Antithesis applied to Thesis results in Synthesis. What may seem like forces banging their heads together actually is the birth of a third force through the interaction of two apparently opposed forces, and that third force mediates between the two. Philosophy and logic have made use of this insight for over 150 years. Isn't it time that project management made use of it as well? The paradigm shift is subtle, but extremely important: “Value” isn't a force constantly contending with “Revenue” and “Profit.” Rather, Value is both the result and fulcrum of the interaction of Revenue and Profit.

The great strength of this paradigm is its flexibility. We only have to decide what we desire the result to be, and that becomes the fulcrum for balancing the other factors. It becomes, simply, a business decision. (The model will work with more than three variables. It just becomes a bit more complicated.)

Reading Exhibit 4 from left to right, our Mediation Model allows for any of the following three paradigms to guide the project as it progresses:

1. The balancing of available Resources and desired Functionality results in a Schedule, which can then be used to keep the other two in balance for the duration of the project.

2. The balancing of Time constraints and available Resources results in a Function set, which can then be used to keep the other two in balance for the duration of the project.

3. The balancing of desired Functionality and Time constraints results in a resource Cost, which can then be used to keep the other two in balance for the duration of the project.

Implementation. Now that we are philosophically attuned with Hegel, let's bring the discussion back to the real world. How is this conceptual framework implemented? We must ensure that all terms in the model are well understood, as this will drive how we approach the execution of the steps in the methodology. The terms Revenue and Profit are fairly well understood. The “fuzzy” term in the equation is Value. What makes it even trickier is that the meaning of the word can change from opportunity to opportunity. So one of the first steps in executing the methodology is to come to a common understanding of the meaning of Value in reference to a particular opportunity. Typical components of Value for our organization include, but are not limited to:

Revenue and Profit.

Business value to the customer. If our approach to an opportunity does not provide business value to a customer, we will not be in business very long, regardless of how much revenue and/or profit we derive from the opportunity.

Establishment, improvement, or maintenance of a customer relationship.

Establishment of a market for a new service offering, or expansion of market share for an existing service offering.

Supporting an internal sales organization.

Validation. In order to understand which components of Value are operative in a particular opportunity, the first steps are Validation and Qualification. Validation asks the question, “Is the opportunity real?” If not, why do it?

The questions we ask to validate the opportunity are business-case questions. What's the dollar value of the benefits provided? How much effort is required to provide those benefits? What's the payback period? Which people/organizations must buy into the concept in order to actualize the benefits? Do we have the commitment of those organizations? In our Opportunity Management Methodology, these validation questions are asked upfront. When they are not asked early in the game, the answers can often come as surprises later in the process, leading to cost overrun or outright failure. When this happens it is usually accounted as a project management failure. In reality, it's an opportunity management failure. In other words, the projects fail because our four-volume project plans, 700-task work breakdown structures, $2 million budgets, and stack of requirements documents led us to automatically assume that we had a model of something that has a true purpose in the world of reality—without taking into account that everything we think we know may be wrong!

In determining the validity of an opportunity or concept, it is crucial to follow the Mediation Model. The question of whether the opportunity or concept is real can only be asked in terms of the desired outcome. It's fruitless to check the viability of the schedule in isolation if the desired outcome is the functionality, just as it is equally fruitless to measure only the feasibility of the functionality if the desired outcome is delivery within a certain time period. Once the fulcrum parameter is established, the validity test checks whether it can be achieved when the other parameters are in balance. In the case of our environment, for example, the question simply becomes: Is there a solution set in which the desired Value is achieved where Revenue and Profit are in balance?

In this model, the contention among the variables is removed. Instead, decisions are geared to optimize the most important variable. The optimization of the prime variable (in this case Value) mediates decisions in balancing Revenue and Profit

Exhibit 3. In this model, the contention among the variables is removed. Instead, decisions are geared to optimize the most important variable. The optimization of the prime variable (in this case Value) mediates decisions in balancing Revenue and Profit.

On a project, any one of the three variables of Functionality, Cost, or Schedule can be the prime variable. Rather than setting these variables in contention with one another, the prime variable should always be used to mediate decisions that keep the other two variables in balance

Exhibit 4. On a project, any one of the three variables of Functionality, Cost, or Schedule can be the prime variable. Rather than setting these variables in contention with one another, the prime variable should always be used to mediate decisions that keep the other two variables in balance.

In our organization, we have established stakeholder advocacy groups that represent the various components of Revenue, Profit, and Value. The OMC facilitates among these stakeholders to validate the existence of a true opportunity right at the very start of the process.

Qualification. After determining that we have a real opportunity, the next step is to determine the nature of the opportunity. We work with our advocacy/stakeholder groups to understand not only what the customer is asking for but also what the customer's business challenges and opportunities are. We want to ensure, before we are part of a major disaster, that the services we provide actually do match the customer's business needs. The Mediation Model is used once again: When we apply Revenue and Profit concerns to the solution set for the customer's business needs, do we derive value? The OMC facilitates among these stakeholders to qualify an understanding of the business needs, the candidate solution offerings, and the value proposition right at the very start of the process.

Why aren't these validation and qualification steps, so crucial to delivering successful projects, always used by other organizations? Often, they are perceived as too time-consuming and expensive. This is not the case in our methodology.

The OMC addresses the validation and qualification of opportunities in triage mode. Most opportunities pass through the validation and qualification process within 24 hours. This is possible because the OMC does not have to completely establish the value proposition of the opportunity. This will be done during risk assessment and proposal generation. At this point, all that is required is to ascertain that a value proposition actually exists.

In terms of expense, the OMC is not staffed by senior personnel, since strong business and technical skills are not required at this point. Facilitation and tracking skills are the key ingredients at this point of the process. The OMC coordinates the strong business and technical skills already extant within the advocacy/stakeholder groups for quick, efficient validation and qualification. Because these processes are coordinated by the OMC, resources are not wasted. Only opportunities that pass triage tests provided by checklists and standard question sets survive to be validated and qualified by more expert personnel. Further OMC coordination ensures that only the required resource set addresses an opportunity—three experts do not qualify an opportunity when one will do.

Coordinated investigation of whether everything may be wrong is not time-consuming or expensive, especially when one takes into account the potential consequences during project delivery.

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Establishing the Strategy

Now that the opportunity has been validated and qualified, the organization is ready to arrive at a strategy for addressing the customer's business needs. The OMC facilitates sales experts and solution experts working together to design a strategy.

After arriving at a strategy internal to our organization, we must again take into account that everything we think we know may be wrong—therefore, Opportunity Management requires that the strategy be sanity-checked with our most important advocacy/stakeholder group—the customer.

Once we have reached agreement both internally and externally on a strategy, we are almost ready to produce our proposal. Almost, but not quite. The only thing that stands between us and letting our proposal writers exercise their creativity (which, unfortunately, is the first step in most organizations) is risk assessment, the very core of our Opportunity Management Methodology.

Risk Assessment – Part 1. Most sales organizations shrink in mortal terror at the mention of risk assessment because it is viewed as a deal-killer. Not ours. Our purpose is not to throw stones at the deal, but to convene a stakeholders meeting of all advocacy groups in the Mediation Model to assess how everything we think we know may be wrong. Discovering a risk doesn't necessarily lead to the demise of the deal. Rather, it points out the need for a mitigation strategy, which the risk team as a whole (all stakeholder/advocates) designs and agrees to. The entire purpose of the risk review is to maximize the win-ability and deliver-ability of the opportunity, not to consign it to the scrap heap. Only when no mitigation strategy can be devised for a critical risk do we consider either addressing risk through pricing (e.g., contingency pools) or, in the most severe cases of non-mitigable risk, walking away from an opportunity altogether.

Rejection of an opportunity is a rare occurrence indeed. Through building mitigation strategies we are able to pursue and successfully deliver opportunities that we might otherwise have had to abandon. We have found that once doubters and naysayers are dragged into a risk review by the OMC they often request risk reviews even when they could get away without one. This is because they have seen the process breathe new life into moribund opportunities.

We do our first risk review at this point because it is too late to assess risk after the proposal has been produced and too early to do it before a strategy has been arrived at.

Once significant effort has been invested in creating a proposal, and the time left to deliver the proposal to the customer is short, we have found that the investment and the urgency itself causes important risk factors to be ignored. That leads to delivery disaster.

We have also found that to do a risk assessment before a strategy is on the table is also an exercise in futility. What is there to assess? There is no meat as yet to chew on at the risk assessment. When a risk assessment is performed earlier in the process, the organization might pat themselves on the back and tell themselves that they have followed the risk process. They will then wonder why reality consistently clobbers them at delivery time. Knowing the opportunity itself is not enough. The approach to the opportunity must be on the table before an assessment can be made of whether everything we think we know is wrong.

After the strategy is determined and before the proposal is created, the OMC facilitates a meeting of stakeholders to investigate the risk of an opportunity and devise appropriate mitigation strategies. The question at this point is whether or not to invest in a proposal. We treat it as just that—an investment decision. This helps to ensure not only efficient and effective use of our capital and people resources but also the success of the delivery effort down the line. This increased potential for success can only be achieved when risk assessment is done neither too late nor too early in the process.

Creating the Proposal. When the risks have been mitigated to the degree possible and the stakeholders have agreed to pursue the opportunity, a proposal manager is assigned to put together a proposal team. (The desired result, of course, is that the proposal manager will eventually become the project manager for the delivery effort.)

The proposal is managed as any other project, with a schedule, a budget, and expected deliverables. The proposal manager does not necessarily write the proposal, but is responsible for creating a proposal team. The OMC coordinates the provision of resources and subject matter experts to the proposal team, as well as providing the factory for proposal development, i.e., documentation services, reusable materials, proposal input coordination, and so forth. By remaining involved through facilitation during proposal development, the OMC can ensure that the mitigation strategies determined during risk assessment are incorporated into the proposal. By building the proposal team from the various advocacy/stakeholder groups, the OMC ensures that all stakeholder viewpoints are incorporated into the proposal. The balancing of profit and revenue by value continues during proposal development.

Once the proposal is complete, we are almost ready to present our model of reality to our customer. Almost, but not quite. You guessed it. It's time for risk assessment again.

Risk Assessment – Part 2. Once a proposal is ready for presentation to the customer, we don't stop worrying that everything we think we know may be wrong. The OMC facilitates another risk assessment meeting so that all stakeholders can review the opportunity one more time before the organization commits to the customer. Whereas the question at the previous risk assessment was whether or not to invest in a proposal, the question now is whether or not to commit to the proposal. The options are to decline the opportunity (very rare at this stage of the game), send the proposal for rework, or send it on to the customer as is. Usually, some minor rework, at least, is required.

Now it's up to the salesperson to close the deal with proposal/project manager support.

Once the deal is closed, the OMC works with the project manager to coordinate with the resource providers to staff the project. Once the deal is closed and resources are being assigned, we're almost ready to begin delivery. Almost, but not quite. It's time for another risk assessment.

Risk Assessment – Part 3. This last risk assessment is different from the others in that it does not involve a stakeholders' meeting. Rather, as the final arrangements for the project are being nailed down, the OMC facilitates a review of project plans, quality plans, work breakdown structures, staffing plans, to ensure that the project is poised to start on the right foot. Now, finally, we are ready to begin delivery, assured that we've done as much as possible to check whether everything we think we know may be wrong. But that doesn't mean that the OMC disengages at this point.

Audit. During the delivery of our projects, the OMC is responsible for performing audits. OMC audits are not designed to be punitive any more than risk assessments are designed to be threatening. The purpose of the OMC Audit is threefold:

Discover areas in which the project might require assistance, and then facilitate the provision of those resources.

Ensure that the mitigation strategies designated to ensure that the mediation model drives project implementation are being used.

Provide closed-loop corrective action by making lessons-learned available to future opportunity pursuits. For example, if the mitigation strategies prove effective, make them “Best Practices.” If they do not prove effective, make sure that new mitigation strategies are used the next time.

OPPORTUNITY MANAGEMENT MAY SEEM, at first glance, to add overhead and delay to opportunity pursuit, but we have found the exact opposite to be true. Facilitation and coordination by the OMC ensures timeliness and efficiency. Opportunity pursuits that make use of the Opportunity Management Methodology run smoother, are more effective, and use less overhead.

The proof, they say, is in the pudding. In a field where the great majority of projects never make it through to implementation and where major cost overruns are the order of the day, our organization is very proud of the fact that there have been absolutely no project write-downs during the time we have been using the Opportunity Management Methodology. In great measure, this is due to our highly skilled resources and very able project management organization. However, it is Opportunity Management that gives these excellent people the chance to succeed instead of facing hopeless odds right from the start of delivery. Indeed, we have found that Opportunity Management is the secret ingredient for successful delivery.

Of course, as Richard Bach points out in Illusions, everything in this article may be wrong. However, we have yet to find that to be the case. ■

Lable Braun is director of client services for Integrated System Consulting Group's New Jersey Business Unit, managing delivery of Information Technology Solutions to the pharmaceutical Industry.

Eugene J. Kowalczyk has held various executive positions, including executive director of customer and field operations for Bell Atlantic Mobile Systems and chief operating officer at Cellcom Corp. He is currently vice president in NCR's Communications Industry Division.

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.

PM Network • November 1998

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