Reducing Risk by Managing Chunks

Reducing Risk by Managing Chunks

Breaking projects into smaller, more manageable chunks reduces the risk of failure and allows companies to better align their project portfolios with corporate strategies

Reprinted with permission of Harvard Business School Press. Excerpted from Connecting the Dots: Aligning Projects with Objectives in Unpredictable Times. Copyright 2002 by Cathleen Benko and F Warren McFarlan.

If the past couple of years have taught us anything, it is that the business environment in which we function is extremely unpredictable. For companies struggling to get ahead in this uncertainty, this book has some intriguing advice on how to align your project portfolio with your corporate strategy in a dynamic way designed to flex with the shifting realities. In the chapter excerpted here, called "The Alignment Workshop", authors Cathleen Benko and F Warren McFarlan give detailed advice on several tools aimed at helping companies manage their project portfolios and align with overall IT and business goals. One of these methodologies is an approach called project chunking, a rules-based way to reduce the high risk of project failure. Read on to discover how that tool breaks projects into more easily managed chunks or steps, which reduce the size of projects, allow later project phases to more readily learn from earlier ones, deliver standalone benefits, and give project managers the ability to more easily obtain funding and change direction and scope.

The Information Frontier's increased velocity has dramatically heightened expectations. [Editor's note: In this book, the authors describe the phrase "information frontier" as a metaphor for the current, unpredictable business environment.] Businesses are expected to deliver results ever faster and ever better. Project chunking responds to these rising expectations. It breaks projects into manageable chunks, each of which delivers incremental benefits. This tactic has several merits. First, risk is reduced because projects are smaller and less complex; moreover, later chunks learn from earlier ones and thus have faster response times to new information. Second, incremental benefits are realised earlier and more reliably (which is, of course, the flip side of lower risk/ better return). Finally, project chunking provides more frequent choice points, making it easier to change project direction, scope or budget when needed. In this way, it makes the portfolio more flexible.

Over time, the benefits accrue and (expectedly) exceed the initial investment. With each phase of the project, the investment-to-benefit ratio changes. Projects usually have one to several phases of net investment before net benefits are realised.

[Editor's note: To understand how chunking does all that, consider the typical approach to a project. Under this method, an ambitious, large-scale project is scheduled in a traditional phased approach during several time periods, with, as with most projects, some period of up-front investment.]

So what's wrong with this picture? Well, nothing really. It's a picture of a well-designed project that has properly scoped phases and will achieve benefits over time. But the loftier the project goal and the longer the time to implement, the greater the risk. Remember that we're talking about life on the information frontier, where unpredictability lurks around every turn.

So what is the alternative? An incremental or "chunked" approach.

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