Lingo Explained : ROI, NPV, IRR

When talking about projects, you often see the following terms popping up ; ROI, NPV & IRR. Yet what do they mean?

ROI

• Abbreviation : Return On Investment
• In Short : The ROI will give you an indication how fast you will have a return on your investment. It’s mostly expressed in a period of years, when calculating with costs related to a year.
• Wikipedia : http://en.wikipedia.org/wiki/Return_on_investment
• Formula :
  

  return on investment = (gain from investment – cost of investment) / cost of investment

• Video : Youtube

NPV

• Abbreviation : Net Present Value
• In Short : NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account.
• Wikipedia : http://en.wikipedia.org/wiki/Net_present_value
• Formula :
  

  

• Video : Youtube

IRR

• Abbreviation : Internal Rate of Return
• In Short : The IRR will indicate the “interest” you get from an investement. It’s often used as a metric to see if money shouldn’t be kept with the finance institution instead of within a (risky) investment.
• Wikipedia : http://en.wikipedia.org/wiki/Internal_rate_of_return
• Formula :
  

  Check here…

• Video : Youtube

And how does that related to decision making?

Project Management Best Practices

TechRepublic featured a good article about “the 10 best practices for successful project management“. These steps give you a good outline of the things you should cover. Have fun reading!

Werewolves anyone?

I truly enjoyed the “Managing werewolves” article by Michael Lopp.

This isn’t role-playing: this is life or death

Werewolf is a game and games are fictionalized simplifications of life that allow you to explore extremes of social interactions in ways you normally cannot. In real life, there’s a subtle but detectable flow to how a group of people interact. People adopt standard roles and act according to discernible rules. Unfortunately, it’s an impossibly long set of rules, because the rules vary as much as each person is different. In Werewolf, on the other hand, there’s a very small set of rules:

• Villagers, kill Werewolves as best you can.
• Werewolves, kill Villagers as best you can.
• Sleep when you’re told to.
• Survive.

Interwoven within these rules is the actual game, and therein lies the brilliance of a solid game of Werewolf: It’s a crucible of people dynamics, improvisation, and intellectual combat. In just a few short hours of game play, you realistically experience some of the worst meeting scenarios imaginable—and the motivation to handle these scenarios with care and agility because, well, you don’t want to die. I’m optimistic and, sometimes, realistic. I don’t actually believe someone will deliberately lie under normal circumstances, or that they are purely evil. There are those who have agendas that don’t align with mine, which gives them incentive to work against my interests, but they’re not just out to screw me—they’re out to succeed. Just like me. In reality, most meetings aren’t high-pressure, survival-of-the-fittest lynchfests. Many meetings are well structured affairs with hardly a drop of blood spilled. But each time you speak in a meeting, you get a moment in the spotlight to demonstrate that yes, you understand what’s going on, you are clear about the rules of this particular game, and you’re in it to win.

Project Types

Infrastructure: Defined as all base systems necessary to run the day to day operations of the company. Things like Operating System Upgrades for the PCs or network build out or database clustering or UPS or backup system, etc. From an operational IT perspective, these projects should be low risk because you have the skill sets to do this day in and day out. The low risk classification means that the success of the project is anticipated to be near 100%. No delays, minimal change requests and original budget should be spot on. These infrastructure projects are of the least value to the organization as well. They do not contribute to revenue. You may get some productivity gains or long term cost avoidance, but that’s about it. RISK: LOW (95%-100% success rate) VALUE: LOW (0%-10% contribution)

Transactional: Transactional systems like ticketing systems for entertainment venues, catering systems, eCommerce transaction processing systems, etc. Any system that manages a transaction I would classify here. The risk is somewhat low for these systems because ideally, these represent the processes that already exist within your company. Requirements should be pretty well known and a success/no success evaluation can be completed very easily. Success, as defined above, should be around 85%. That means change orders are also minimal. Specialty skill sets will likely be needed to implement these systems. Dealing with vendors, consultants and various other unknowns all contribute to the added risk of implementing these systems. Also, transactional systems are the heart of a company. If they go down, you could be losing thousands each minute. The value the system brings to the company is listed as moderate. The process is already on going so contribution of the system could be minimal, but ideally, these systems are being implemented to allow for more transactions, faster transaction, more secure transactions, larger transactions, etc. RISK: LOW to MODERATE (70%-85% success rate) VALUE: MODERATE (30%-40% contribution)

Informational: These are your decision support systems, reporting systems, Customer Relationship Management (CRM) systems, etc. Basically informational systems are data-based systems that turn data into information. These typically carry a higher level of risk but are very important to the company. Very specialized knowledge is needed to understand data and turn it into information that can be used by management or the company as a whole. There will be a lot of business rules and heavy input from the business will be required. These systems are pretty expensive as well. RISK: HIGH (40% success rate) VALUE: MODERATE to HIGH (40%-70% contribution)

Strategic: These are systems that are game changers. Systems that will give the company a competitive advantage, or systems required to enter into a new business. The anticipated return on these projects is huge but so is the risk. These are things you, your team and your company have never done before. The number of resources needed for these projects tend to be significant and many of the skill sets would vary widely as well. RISK: VERY HIGH (10% success rate) VALUE: VERY HIGH (100%-500%+ contribution)

Source : Use these four classifications to align projects in your company

Avoiding project estimating mistakes

Simply put; you can avoid common costing mistakes by being well prepared up-front. Yet here are three tips for sidestepping project estimating mistakes.

• Never assume anyting, get confirmation! : Often people assume that things get done, but in reality things have a different outcome. Realise that you don’t have a view on people’s mind and full agenda.
• Expect the unkown, prepare for it! : Each project will uncover unkown things. Being utterly prepared narrows down that risk, yet it doesn’t remove it…
• Write a clear scope! : Miscommunication is easy. Specify exactly what you will and won’t do.

Source : Three tips for avoiding project estimating mistakes

The Road from Project Manager to Agile Coach

Source by Lyssa

What does it take to be a Project Manager?

The article “Project Management: Do You Have What It Takes?” from Gloria C. Brown was recently published at PMHUT. It’s a good read for those who are thinking about Project Management as a possible carreer path!

Becoming a project manager is not for the faint of heart. In short, to be successful, you must also be an expert planner, problem-solver, diplomat, communicator, leader, learner, and manager. Plus, you must understand the policies, procedures, and politics of the organization in which you manage projects. Enter this profession only if you have the skills and knowledge indicated above, along with a willingness to continually learn more about this exciting and ever-changing field.

How to make your project fail!

Check out the following presentation at Parleys: Project anti-patterns. How to make your project fail

This presentation shifts the concept around abit . You’re generally used to getting presentations on how you should do certain things. The principal technology officer of Cap Gemini tries a different approach to identify the issues of failed projects.

Where Leadership Styles meet Tuckman

You might remember the Tuckman stages for group development. If you’ve checked up on this, you might have wondered how to manage this.

• Forming: The group comes together and gets to initially know one other and form as a group. During this phase you’ll have to be very direct in your goals, and stay close.
• Storming: A chaotic vying for leadership and trialling of group processes. Here you’ll be applying a coaching attitude.
• Norming: Eventually agreement is reached on how the group operates (norming). You should take part of the group, yet you should only guide them.
• Performing: The group practices its craft and becomes effective in meeting its objectives. You’re comfortable to delegate things, as they are at their peak.

Project Cartoon

We all know the classic project cartoon outlining the difference between what the customer wanted and what was delivered… Know you can create your own @ projectcartoon.com!