What is Project Initiation?
The business might drive the need for a project, customers might demand changes to
products, or legal requirements might create the need for a new project. According to the
PMBOK® Guide, projects come about as a result of one of seven needs or demands. Once
those needs and demands are identified, the next logical step might include performing a
feasibility study to determine the viability of the project.
1. Needs and Demands for Project Management Initiation Phase:
Before understanding how to start a project, it is important to know the needs and demands
required for project initiation. Needs and demands represent opportunities, business
requirements, or problems that need to be solved. Management must decide how to
respond to these needs and demands, which will more often than not initiate new projects.
According to the PMBOK® Guide, projects come about as a result of one of the following
seven needs or demands:
Market Demand.
Strategic Opportunity/Business Need.
Customer Request.
Technological Advance.
Legal Requirement.
Ecological Impact.
Social Need.
Project management is the fastest-growing field, and skilled professionals are required in
almost every industry. The above lecture is a part of AIMS’ career-oriented Best Online
Project Management Certification and MBA with Project Management (online
learning) programs.
A. MARKET DEMAND:
The demands of the marketplace can drive the need for a project. For example, the project
management initiation phase in a bank offers customers the ability to apply for mortgage
loans over the Internet because of a drop in interest rates and an increase in demand for
refinancing and new home loans.
B. STRATEGIC OPPORTUNITY/BUSINESS NEED:
An organization may respond to an internal need that could eventually affect the bottom
line. For example, this may include addressing company growth, or even the need to
downsize.
C. CUSTOMER REQUEST:
Customer requests run the gamut. Generally speaking, most companies have customers,
and their requests can drive new projects. Customers can be internal or external to the
organization.
D. TECHNOLOGY ADVANCEMENT:
New technology often requires companies to revamp their products as a way of taking
advantage of the latest technology. The introduction of satellite communications is an
example of a technological advance. Because of this introduction, cell phone manufacturers
revamped their products to take advantage of this new technology.
E. LEGAL REQUIREMENT:
Both private industry and government agencies generate new projects as a result of laws
passed during every legislative season.
F. ECOLOGICAL IMPACTS:
Many organizations today are undergoing a “greening” effort to reduce energy consumption,
save fuel, reduce their carbon footprint, and so on. These are examples of environmental
impacts that result in projects.
G. SOCIAL NEED:
The last need is a result of social demands. For example, manufacturing or processing
plants voluntarily remove their waste products from water prior to putting the water back into
a local river or stream to prevent contamination.
All of these needs and demands represent opportunities, business requirements, or
problems that need to be solved. Management must decide how to respond to these needs
and demands, which will more often than not be new project initiation.
2. First Project Initiation Phase:
Some organizations require that a feasibility study take place prior to making a final decision
about starting a project. Feasibility studies may be conducted as separate projects,
subprojects, or as the first project management initiation phase.
Feasibility studies might be conducted as separate projects, as subprojects, or as the
project management initiation. When you don’t know the outcome of the study, it’s best to
treat it as a separate project. The group of people conducting the feasibility study should not
be the same people who will work on the project. Project team members might have built-in
biases toward the project and will tend to influence the feasibility outcome toward those
biases.
Project Selection Methods:
There are a variety of selection methods an organization may choose to utilize. Selection
methods help organizations decide among alternative projects and determine the tangible
benefits to the company of choosing or not choosing a project. Project selection methods
are also used to evaluate and choose between alternative ways to implement the project. In
most cases, it primarily depends on the project management organizational structure, and
the project management office also plays a vital role (refer to Project Management Office
(PMO) – The Ultimate Guide for details).
There are generally two categories of selection methods:
Mathematical Models (also known as constrained optimization methods).
Benefit Measurement Methods (also known as decision models).
Decision models examine different criteria used in making decisions regarding project
selection, while calculation methods provide a way to calculate the value of the project,
which is then used in project selection decision-making.
1. Mathematical Models:
Mathematical models, also known as constrained optimization methods use linear, dynamic,
integer, nonlinear, and/or multi-objective programming in the form of algorithms—or in other
words, a specific set of steps to solve a particular problem. These are complicated
mathematical formulas and algorithms that are beyond the scope of this course and require
an engineering, statistical, or mathematical background to fully understand. Organizations
considering undertaking projects of enormous complexity might use mathematical modeling
techniques to make decisions regarding these projects. The vast majority of project
selection techniques will use the benefit measurement methods to make project selection
decisions.
2. Benefit Measurement Methods:
Benefit measurement methods employ various forms of analysis and comparative
approaches to make project decisions. These methods in the project initiation phase include
comparative approaches such as cost-benefit analysis, scoring models, and benefit
contribution methods that include various cash flow techniques and economic models.
A. COST-BENEFIT ANALYSIS:
One common benefit measurement method is the cost-benefit analysis. The name of this
method implies what it does—it compares the cost to produce the product, service, or result
of the project to the benefit (usually financial in the form of savings or revenue generation)
that the organization will receive as a result of executing the project. Obviously, a sound
project choice is one where the costs to implement or produce the product of the project are
less than the financial benefits. How much less is the organization’s decision? Some
companies are comfortable with a small margin, while others are comfortable with a much
larger margin between the two figures.
B. SCORING MODEL:
Another project selection technique in the benefits measurement category is a scoring
model or weighted scoring model. Many organization uses weighted scoring models not
only to choose between projects but also as a method to choose between competing bids
on outsourced projects.
Weighted scoring models are quite simple. The project selection committee decides
on the criteria that will be used on the scoring model—for example, profit potential,
marketability of the product or service, the ability of the company to quickly and
easily produce the product or service, and so on.
Each of these criteria is assigned a weight depending on its importance to the
project committee. More important criteria should carry a higher weight than less
important criteria.
Then each project is rated on a scale from 1 to 5 (or some such assignment), with
the higher number being the more desirable outcome to the company and the lower
number having the opposite effect.
This rating is then multiplied by the weight of the criteria factor and added to other
weighted criteria scores for a total weighted score. The project with the highest
overall weighted score is the best choice.