Saturday, February 20, 2021

Appearances matter

Appearances matter
You've heard the expression: 'dress for success'
Well, how about this tale:
"This asteroid (B-612) has only been seen once through a telescope. That was by a Turkish astronomer in 1909. On making his discovery, the astronomer had presented it to the International Astronomical Congress, in a great demonstration. But he was in Turkish costume, and so nobody would believe what he said....

Fortunately, however, for the reputation of Asteroid B-612, a Turkish dictator [Kemel Ataturk] made a law that his subjects, on pain of death, should change to European costume.

So, in 1920, the astronomer gave his demonstration all over again, dressed in impressive style and elegance. And this time, everybody accepted his report"

Quoted by Niall Ferguson in "Civilization"

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Wednesday, February 17, 2021

By the numbers

Numbers are a PM's best friend
Is this news?
I hope not; I wrote the book Quantitative Methods in Project Management some years ago. (Still a good seller)

So, here's a bit of information you can use:
Real numbers: (**)
  • Useful for day-to-day project management
  • 'Real numbers' are what you count with, measure with, budget with, and schedule with.You can do all manner of arithmetic with them, just as you learned in elementary school.
  • Real numbers are continuous, meaning every number in between is also a real number
  • Real numbers can be plotted on a line, and there is no limit to how long the line can extend, so a real number can be a decimal of infinite length
  • Real numbers are both rational (a ratio of two numbers) or irrational (like 'pi', not a ratio of two numbers)

Random numbers

  • Essential for risk management subject to random effects
  • Not a number exactly, but a number probably
  • Random numbers underlie all of probability and statistics, and thus are key to risk management
  • Random numbers are not a point on a line -- like 2.0 -- but rather a range on a line like 'from 1.7 to 2.3'
  • The 'distribution' of the random number describes the probability that the actual value is more likely 1.7 than 1.9, etc
  • Mathematically, distributions are expressed in functional form, as for example the value of Y is a consequence of the value of X.
  • Arithmetic can not be done with random numbers per se, but arithmetic can be done on the functions that represent random numbers. This is very complex business, and is usually best done by simulation rather than an a direct calculus on the distributions. 
  • Monte Carlo tools have made random numbers practical in project management risk evaluations.

Rational numbers:

  • A number that is a ratio of two numbers
  • In project management, ratios are tricky: both the numerator and the denominator can move about, but if you are looking only at the ratio, like a percentage, you may not have visibility into what is actually moving.
 Irrational numbers
  • A number that is not a ratio, and thus is likely to have an infinite number of digits, like 'pi'
  • Mostly these show up in science and engineering, and so less likely in the project office
  • Many 'constants' in mathematics are irrational .... they just are what they are
 Ordinal numbers
  • A number that expresses position, like 1st or 2nd
  • You can not do arithmetic with ordinal numbers: No one would try to add 1st and 2nd place to get 3rd place
  • Ordinal numbers show up in risk management a lot. Instead of 'red' 'yellow' 'green' designations or ranks for risk ranking, often a ordinal rank like 1, 5, 10 are used to rank risks. BUT, such are really labels, where 1 = green etc. You can not do arithmetic on 1,5,10 labels no more than you can add red + green. At best 1, 5, 10 are ordinal; they are not continuous like real numbers, so arithmetic is disallowed.
Cardinal numbers and cardinality
  • Cardinality refers to the number of units in a container. If a set, or box, or a team contains 10 units, it is said it's cardinality is 10. 
  • Cardinal numbers are the integers (whole numbers) used to express cardinality
  • In project management, you could think of a team with a cardinality of 5, meaning 5 full-time equivalents (whole number equivalent of members)
Exponents and exponential performance
  • All real numbers have an exponent. If the exponent is '0', then the value is '1'. Example: 3exp0 = 1
  • An exponent tells us how many times a number is multiplied by itself: 2exp3 means: 2x2x2 (*)
  • In the project office, exponential growth is often encountered. Famously, the number of communication paths between N communicators (team members) is approximately Nexp2. Thus, as you add team members, you add communications exponentially such that some say: "adding team members actually detracts from productivity and throughput!"
  • Got a graphics project? You may have vector graphics in your project solution
  • Vectors are numbers with more than one constituent; in effect a vector is a set of numbers or parameters
  • Example: [20mph, North] is a two-dimensional vector describing magnitude (speed) and direction
  • In vector graphics, the 'vector' has the starting point and the ending point of an image component, like a line, curve, box, color, or even text. There are no pixels ... so the image can scale (enlarge) without the blurriness of pixels.
(*) It gets tricky, but exponents can be decimal, like 2.2. How do you multiply a number by itself 2.2 times? It can be done, but you have to use logarithms which work by adding exponents.
(**) This begs the question: are there 'un-real' numbers? Yes, there are, but mathematicians call them 'imaginary numbers'. When a number is imaginary, it is denoted with an 'i', as 5i. These are useful for handling vexing problems like the square root of a negative number, because iexp2 = -1; thus i = square root of -1. 

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Sunday, February 14, 2021

Economic viability

You just got that dreaded call: your finance officer wants to talk to you about your project

The subject is "economic value add" aka EVA. 
You're thinking: Didn't that come and go as the flavor of the month a decade ago?
Perhaps, but it's still relevant for for-profit projects

So, here's what you need to know:
  • It costs money to raise the capital funds to pay for your project.
  • If not for your project, those funds might have been earning profits on something else.
  • Is, or was, your project a better opportunity?
  • Did your project improve the financial position of your company?

In simple terms, here's what your finance officer is talking about:

  • Perhaps the 'cost of capital' (CoC) for your project's funds was 6% of the money raised, for example (interest paid out on bonds sold for capital funds, or interest on loans, etc)

  • And -- as dubious as it may be -- the finance officer can establish a firm cause-and-effect between increased business profit -- say 10% return on the money borrowed (ROI) or $1M by example -- and the success in the market of your project. (*) 

  • The EVA is then just a calculation: 'Increased profit' x (ROI - CoC)
    In this case: $1M (10% - 6%) = $40K

Thanks for that! Your project actually improved cash flow and added to business financial success!

A better opportunity?

If there was another opportunity competing for the capital funds, then it would have to do better than return $40K on $1M raised the capital markets. The CoC might have been lower; or the ROI greater in order to best your project. 

And the risk attendant with making $1M in profit would also be evaluated with discounted cash flow analysis. Maybe your project is given a more favorable discount rate.

The finance officer makes all those assessments as input to the decision process to fund your project or not.


(*)  I say dubious because cause-and-effect is notoriously difficult to prove, to wit: there may have been other business changes during your project's time frame that also influenced profit. How do you disentangle that?

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Thursday, February 11, 2021

Compete -- Innovate -- Advance

"They say" that competition fuels innovation (necessity is the mother of invention, etc).
"They say" that without competition, there's no motivation to innovate.
"They say" that without innovation, societies stagnate and fail; they do not advance.

"They" may have it somewhat wrong, or perhaps it's better to say "they" may have it somewhat incomplete.

From history
Renowned historian Niall Ferguson -- in his masterwork "Civilization" -- makes the point that competition within a closed system -- where "best achievement" is measured by how well the rules of the game are applied and utilized -- does not throw off much in the way of innovative inventions or changes. 
Furthermore, if the closed system is dogmatically protective of norms, and will tolerate no challenge to the status quo, inevitably 'protection' becomes the reason for being.

Indeed, 'going rogue', even if successfully innovative, in a closed and dogmatic system is usually not rewarded; such may be penalized instead.

As an example -- admittedly a bit dated -- Ferguson points out that:
  • In 17th century western Europe:
    • The church was not also the State, and religious diversity was tolerated
    • Books were being printed
    • Literacy was motivated by books, and 
    • "Natural philosophers" (scientists of the day) were not bound by either the dogma of church or state
    • There was nothing short of amazing innovation in physics, mathematics, astronomy, and biology.

  • In 17th century Ottoman Empire -- essentially eastern Europe, the Middle East, and North Africa:
    • The church was the State
    • Church dogma actually banned the printing press
    • Printed books were burned; and 
    • Philosophers who disagreed with the church were dealt with harshly. 
    • There was no discernible innovation, in spite of the fact that a millennia earlier -- before the Ottoman's -- this area was the very cradle of advanced knowledge.
And so: where is Europe today? Where is the Ottoman Empire today?

What you need to know:

  • To advance requires innovation
  • To innovate requires freedom of not only thought but action
  • To compete in an open framework is the surest way to innovation

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Monday, February 8, 2021

About rules

Admiral Hyman Rickover, father of naval nuclear powered ships and boats, on rules:
"More than ambition, more than ability, it is rules that limit contribution; rules are the lowest common denominator of human behavior. They are a substitute for rational thought"

Of course, he was speaking of Navy rules; when it came to his own personal rules, that was another matter!

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Friday, February 5, 2021

Link and buffer

"Link and Buffer" is a leadership concept for a leader positioned between a governing board, to whom they must link the project, and a project team which must be buffered from the whims and biases of the board.

Fair enough
But it's not that easy.
In the "link and buffer" space live various skills:
  • Vision and practicality: to the board, the project leader talks strategically about outcomes and risks; and about the strategic direction of the project. But, to the team, the leader talks practically about getting on with business. All the tactical moves are effectively smoothed and buffered into a strategic concept which the board can grasp

  • Tempers and angst: When there's trouble, tempers fly. Buffering is a way to decouple. The board's angst does not directly impinge on the project if properly decoupled by the project leader.

  • Personality translation: Few on the project team will know or understand intimately the personalities on the board. Taking the personality out of the direction and recasting instructions into a formula and format familiar to the project team is part and parcel of the buffering.

  • Culture translation: In a global setting, the board may be culturally removed or distant from the project team. Who can work in both cultures? That of the board, and that of the project team? This is not only a linkage task but a translation task to ensure sensitivities are not trampled.

Examples of "link and buffer" abound in military history. Perhaps the relationship between Admiral Ernest King and Admiral Chester Nimitz is most telling. King was in Washington during WW II and was Nimitz superior in the Navy chain of command. Nimitz was in command of the Pacific Ocean Area from his HQ in Hawaii.  
King was responsible for a two ocean Navy in a world war; Nimitz more limited. Nimitz was the link and buffer from the tactical fighting admirals at sea, and the strategic war leaders in Washington.  No small matter!

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Tuesday, February 2, 2021

The Principle of Calculated Risk

"In carrying out the task assigned .... you will be governed by the principle of calculated risk ... which you shall interpret as avoidance of [risk] exposure ... without good prospect ... as a result of such exposure ...  of greater [benefit]" (*)

Admiral Chester Nimitz
to his subordinate admirals,
Battle of Midway, June, 1942

"You will be governed by the principle of calculated risk"
What does that really mean?
"Calculated risk" is a bit defensive; such a calculation is typically designed to protect a scarce or endangered asset or outcome. To that end, there are these constituents:

  • First, a risk assessment based upon a cost vs benefit analysis and calculation
  • Second, the calculation is mostly dependent on a knowledge base, assumptions of knowledge accuracy and timeliness, and a heads-up that there may be knowledge gaps.
  • Next, doctrine, ideology, or rules-of-thumb are made subordinate to the calculation
  • If there is an adversary or nemesis, game-theory may be useful to estimate reactions (walk a mile in their shoes, etc .... )
  • And last, if there is no scarcity which requires the protection of a risk calculation, then the principle is unnecessary, though still useful nonetheless. 

Fair enough

What happens when it comes to actually facing the risk in a real project situation?

  • Cool heads will be needed; emotion will be left at the door, hopefully
  • Random effects will almost certainly intervene and perturb the knowledge-base calculations
  • Updates to game theory assumptions we be needed along the way.
  • And, revisits to the knowledge base to update the risk calculation (the calculation may be rather dynamic in the doing ...) will be needed.

Plan B:

In spite of cool calculations, in the heat of the moment managers may blunder through the guardrails. Then what?

There should be a framework for Plan B on the shelf. Facts at the time will fill in the framework.

Ah, but who's in charge of Plan B? 

Someone should always be hanging back to grasp the strategic picture while tacticians deal with the here-and-now. And, that someone should have supreme executive authority to step in and make corrections.


(*) A Naval War College essay dissecting the Nimitz principle of calculated risk is found here.


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