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(solution) The Keflavik Paper Company is a case with the problem of

The Keflavik Paper Company is a case with the problem of determining a project management process for new product development. Answer the following questions:

What does this case demonstrate about the effect of poor project screening methods on a firm?s ability to manage projects effectively?

How would project portfolio management help to improve the situation at Keflavik?

If you think about it, all business problems are case studies. To effectively evaluate the situation, you must approach the problem in a methodological manner. A proven technique to do this is to

list the facts;
identify the issues;
based on the facts of the case and your knowledge, analyze the issues of the case;
prepare recommended solutions and their possible outcomes;
implement the optimal solution (not always the one with the best outcome, since the cost or other things could be impractical); and
monitor the implementation and the outcomes.
So when you read and prepare to respond to this case, please follow the above guidelines. I don't necessarily expect you to perform steps 4?6, but I do expect your response to be based on the facts and your knowledge.

Keflavik Paper Company


In recent years, Keflavik Paper Company has been having problems with


its project management process. A number of commercial projects, for


example, have come in late and well over budget, and product performance


has been inconsistent. A comprehensive analysis of the process has traced


many of the problems back to faulty project selection methods.


Keflavik is a medium-sized corporation that manufactures a variety of


paper products, including specialty papers and the coated papers used in


the photography and printing industries. Despite cyclical downturns due to


general economic conditions, the firm?s annual sales have grown steadily


though slowly. About five years ago, Keflavik embarked on a project-based


approach to new product opportunities. The goal was to improve


profitability and generate additional sales volume by developing new


commercial products quickly, with better targeting to specific customer


needs. The results so far have not been encouraging. The company?s


project development record is spotty. Some projects have been delivered


on time, but others have been late; budgets have been routinely overrun;


and product performance has been inconsistent, with some projects


yielding good returns and others losing money.


Top management hired a consultant to analyze the firm?s processes and


determine the most efficient way to fix its project management procedures.


The consultant attributed the main problems not to the project management


processes themselves, but to the manner in which projects are added to


the company?s portfolio. The primary mechanism for new project selection


focused almost exclusively on discounted cash flow models, such as net


present value analysis. Essentially, if a project promised profitable revenue


streams, it was approved by top management.


One result of this practice was the development of a ?family? of projects


that were often almost completely unrelated. No one, it seems, ever asked


whether projects that were added to the portfolio fit with other ongoing


projects. Keflavik attempted to expand into coated papers, photographic products, shipping and packaging materials, and other lines that strayed far


from the firm?s original niche. New projects were rarely measured against


the firm?s strategic mission, and little effort was made to evaluate them


according to its technical resources. Some new projects, for example, failed


to fit because they required significant organizational learning and new


technical expertise and training (all of which was expensive and timeconsuming). The result was a portfolio of diverse, mismatched projects that


was difficult to manage.


Further, the diverse nature of the new product line and development


processes decreased organizational learning and made it impossible for


Keflavik?s project managers to move easily from one assignment to the


next. The hodgepodge of projects made it difficult for managers to apply


lessons learned from one project to the next. Because the skills acquired


on one project were largely nontransferable, project teams routinely had to


relearn processes whenever they moved to a new project.


The consultant suggested that Keflavik rethink its project selection and


screening processes. In order to lend some coherence to its portfolio, the


firm needed to include alternative screening mechanisms. All new projects,


for instance, had to be evaluated in terms of the company?s strategic goals


and were required to demonstrate complementarity with its current


portfolio. He further recommended that in order to match project managers


with the types of projects that the company was increasingly undertaking, it


should analyze their current skill sets. Although Keflavik has begun


implementing these and other recommendations, progress so far has been


slow. In particular, top managers have found it hard to reject opportunities


that offer positive cash flow. They have also had to relearn the importance


of project prioritization. Nevertheless, a new prioritization scheme is in


place, and it seems to be improving both the selection of new project


opportunities and the company?s ability to manage projects once they are




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