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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