Tideum LPM. Lifecycle Performance Management and Project Management

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1 Tideum LPM Lifecycle Performance Management and Project Management November 2015

2 Content Content... 2 What s it about... 3 Lifecycle Performance Management... 4 Project Management... 4 The role of Projects within LPM... 4 LPM in Project Management... 5 LPM beyond Project Management... 6 Project Management beyond LPM... 6 Tideum LPM... 6 Comparison of selected Product Characteristics... 7 Conclusion... 8 Glossary... 9 Lifecycle Performance Management and Project Management Tideum - public 2

3 What s it about Lifecycle Performance Management (LPM) lives in the context of products, projects and operational activities of an organization. This article describes the relation LPM has with project management. It explains how LPM supports project management and points out what distinguishes LPM from concepts like project controlling. LPM - Financial Controlling for Products and related Projects Lifecycle Performance Management (LPM) is a concept for financial controlling with respect to products. It supports the financial controlling of products, product portfolios and the corresponding product related projects. Further reading For the foundation of LPM please refer to our document Lifecycle Performance Management in a Nutshell More articles to LPM related topics are available on our website or on request. Lifecycle Performance Management and Project Management Tideum - public 3

4 Lifecycle Performance Management LPM is a controlling concept focusing on products and related projects. It supports to analyze, manage and report the financial performance of products and product portfolios. With respect to projects, it provides financial analysis, simulation etc. for projects and their impact on products and product portfolios. 1 Project Management Project management is the application of knowledge, skills, tools and techniques to project activities to meet the project requirements. 2 It thus comprises a set of different activities that also includes monitoring and controlling. The nature of a project is its limited time span and the focus on the specific task a project shall resolve. A project may be conducted to develop or to modify a product. It thus focusses on the task to deliver a predefined outcome (e.g. engineered product ready for serial production) typically with a corresponding predefined input (budget, resources). The role of Projects within LPM Projects are key for product development and modification. Projects of this type usually affect the economic parameters of a product. They influence manufacturing costs, sales prices, potential sales volumes, etc. Thus they have a vital role for the product centric financial controlling with LPM. LPM therefore supports two perspectives, the product perspective and the project perspective. With the product perspective, LPM analyzes the financial performance of a product with all influences from different sources. This includes projects that are executed related to the product. Projects are seen as influencing factors for the product. KPIs, business case calculations and analyses are provided for products and product portfolios. The project perspective on the other hand changes the direction of analysis. It looks at the project and looks on project specific economics as well as at the effects the project sends out to the product portfolio. In this case the KPIs, business case calculations and analyses are provided for projects. When LPM refers to projects not only the project itself is analyzed but the effect the project has on products, their production, sales and service are considered. Doing this 1 For further details of the concept of LPM please refer to the Article Lifecycle Performance Management in a Nutshell 2 PMBOK Guide 5th ed. Lifecycle Performance Management and Project Management Tideum - public 4

5 the scope of analysis is extended to the entire product lifecycle which is the period where the results of a project typically generate value. Figure 1 Product lifecycle with projects and non-project related operations LPM in Project Management LPM supports project controlling. It provides project related financial KPIs and structures. It thus complements project management solutions with financial information putting the project and its outcome into the context of products and product portfolios. The economic value add of a project is realized through the related products. Thus it is advantageous to look at the product economics already during the project phase. Information as sales expectations, production expenses, remaining span of the product lifecycle, etc. are key to assess the value a project can add to a product profitability. Usually it is hard to gather this information efficiently with existing project management and controlling methods not focusing the product. LPM makes it available. It provides a comprehensive picture of the financial properties of products related to a project. Thus the economic performance of a product over its entire lifecycle can be considered, variations due to the project influence like changing KPIs on product and portfolio level, interdependencies in the product portfolio, etc. can be analyzed. It thus reaches beyond the project centric budget oriented approach. LPM helps to consider the effects a project has over the full lifecycle of the related product during the project phas already. For example, changing project costs are correlated with changes in expected costs and revenues in manufacturing, sales and service phase of the product. Gaining knowledge about the financial effects of projects on the product portfolio supports decision making. It helps making decisions based upon the outcomes of projects rather than focusing on the isolated project. The broader perspective increases the decision quality. Lifecycle Performance Management and Project Management Tideum - public 5

6 LPM beyond Project Management LPM provides financial controlling with a focus on products. This reaches beyond the scope of project management as it covers all financial aspects of products the parts within projects (development, etc.) and the parts within operations (manufacturing, sales, service, etc.). It provides means to analyze product profitability both prospected future based and realized actuals. The view on projects is only one facet of LPM. However, it is an important one. Project Management beyond LPM Project Management encompasses many activities that are not related to financial controlling like resource planning, scheduling, quality assurance, risk management, etc. Detailed budget controlling also is a domain of specialized project controlling tools, while LPM has a broader approach to financial controlling. Figure 2 LPM and project management meet each other in parts of the financial analysis of projects Tideum LPM Tideum LPM is the software solution putting the LPM concept at work. It overcomes the limitations of project controlling solutions with respect to timespan (lifecycle) and content (products). It thus allows to analyze a more holistic picture of corporate activities especially in the field of engineering and product development. It enables collecting product and project related data from other legacy systems like ERP, product costing, planning and project management solutions and complement it with information not yet handled in specialized systems. The latter are frequently found in research and development where e.g. Excel or other non-structured tools are used for ad hoc analysis and reporting. With the compiled data from multiple sources Tideum LPM is able to build a product centric data and analysis model that provides information for both project and product management. Lifecycle Performance Management and Project Management Tideum - public 6

7 Comparison of selected Product Characteristics Planning Typical project management solution 3 Project planning with tasks, milestones, gates, etc. Content, time and resource perspective Cost driven financial plan / budgeting Tideum LPM Focus on financial parameters Milestones and gates are relevant for financial controlling (e.g. time series or snap shot analysis) Project cost and budget plus revenues and costs as expected from the project in production, sales and service of the related products Plan / actual comparison Focused on project cost (budget) Project cost and revenues Product costs (production, service, sales, etc.) and revenues (sales, aftermarket) Other project and product related revenue streams Non financial project management tasks Analysis and simulation Quality management Risk management Resource management Etc. Simulation and analysis with respect to project Target achievement Progress Budget consumption Resource utilization Etc. Project specific KPI Analysis of project portfolios Focused on financial perspective Effect of projects on cost, revenues and profitability of related products Simulation and analysis with respect to both project and product Simulation of alternative scenarios (including/ excluding projects from a product business case, alternative project approaches, etc.) Sensitivity analysis Comparison of products and projects Evolution of business cases over time Managed objects Projects Projects Products Product portfolios Time perspective Project duration Product lifecycle Relative concept of time 3 This compilation does not refer to a specific product but highlights typical functionality of solutions for project management. The capabilities and features of specific products may therefor differ from this list. Lifecycle Performance Management and Project Management Tideum - public 7

8 Conclusion LPM and project management have some contact points in project controlling. LPM provides additional insights for project, program and product management. It allows considering the prospected product profitability and its evolution already during the project phase. The goal of LPM in the context of project management is to make better decisions on projects and project portfolios earlier and make them with respect to the overall economic value add to the company. Lifecycle Performance Management and Project Management Tideum - public 8

9 Glossary Lifecycle Performance Management (LPM) Innovative product centric concept of financial controlling. Key Performance Indicator (KPI) Indicator calculated in a standardized way to measure the performance of an economic entity. Product A series of identical or similar items developed, produced and marketed by a manufacturer. A product in the context of LPM is distinguished from the individual item that a specific customer buys and uses. Project A project is a temporary task of a complexity that requires a specific project organization. Projects are conducted to perform non repetitive tasks like product development, innovation, production ramp up, etc. Product Lifecycle In the context of LPM the product lifecycle is the timespan from initiating a new product development until the last economic impact of the product appears in the organization. The end of the product lifecycle may be defined as end of life or end of support, etc. A different definition is used in other economic concepts, e.g. the period a certain item of a product is used by the customer. Lifecycle Performance Management and Project Management Tideum - public 9

10 Tideum LPM Lifecycle Performance Management and Project Management Author: Andreas Hackethal Tideum Deutschland AG Wiesenstr. 21a Düsseldorf Germany Copyright 2015, Tideum. All rights reserved. This document is provided for information purpose only. The information contained herein is subject to change without notice and is not warranted to be error-free. Tideum disclaims any liability with respect to this document, any warranty or any contractual obligation. This document may not be reproduced or transmitted in any form without our prior written notice. Tideum and Tideum LPM are trademarks of Tideum. All other marks are property of their respective owners. TIDEUMDOC Lifecycle Performance Management and Project Management Tideum - public 10