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1Chapter12:Initiating2OpeningCase•Chapters12-15areallbasedonarealcasestudy•FayBeauchine,VPofReservationsatNorthwestAirlines(NWA),sponsoredtheResNetprojects•PeeterKivestu,amarketingdirector,wastheprojectmanagerforResNet•ResNetwasthefirstinformationtechnologyprojectledbynon-technicalmanagersatNWA3WhatIsInvolvedinProjectInitiation?•Initiatingistheprocessofrecognizingandstartinganewprojectorprojectphase•Itiscriticaltoensurethattherightkindsofprojectsarebeinginitiatedfortherightreasons•Itisbettertohavemoderateorevenasmallamountofsuccessonanimportantprojectthanhugesuccessonanunimportantone4SupportingExplicitBusinessObjectives•ThemostimportantreasonforinitiatingITprojectsistosupportexplicitbusinessobjectives•NWAwashavingfinancialdifficultiesintheearly1990s,soreducingcostswasakeybusinessobjective•ResNetwouldhelpstopthefinancialdraincausedbythereservationcallcenters5Table12-1.InitiatingProcessesandOutputs6BackgroundonNorthwestAirlines(NWA)•NorthwestAirlinesistheworld’sfourthlargestairlineandAmerica’soldestcarrier•In2001,NWAhadover53,000employeesworldwide•Thereservationsystemused3,000dumbterminalsintheearly1990s•Thereservationprocesswasbecomingmorecomplex,andthecallcenterswerelosingmoney7BackgroundonResNet•ThereservationsystembeforeResNetwasPARS•Reservationagentshadtousecrypticcommandstousetheoldsystem•Allinformationwasononecharacter-basedscreen•Deregulationandnewmarketinginitiativescomplicatedthereservationprocess•Calltimeswereincreasing8Figure12-1.SampleReservationScreenBeforeResNet9FocusonMakingDirectSales•FayBeauchines’visionwastochangethefocusofthecallcentersfromjustinformationandservicetosales•MakingadirectsalesavedNWAcommissionfeesof13%plus18%inoverheadcostsavings•Anewreservationsystemwasneededtohelpagentsmakedirectsales10StaffingaNewProject•FayselectedPeeterKivestu,amarketingdirectoratNWA,astheResNetprojectmanager•Peeter’sstrategywastoprovetheconceptofResNetfirstwithaprototype•PeeteraskedArvidLee,aseniormemberoftheISdepartment,toleadtheISteamontheResNetprojects•Kathy(Krammer)Christenson,amarketinganalyst,becometheResNetapplicationdevelopmentmanager11Table12-2.ThreeMainResNetProjectsResNetBetaorPrototypeResNet1995ResNet1996ScopeWritingandtestingnewreservationssystemsoftware,installingsystemon16PCs,developingmeasurementapproachInstallingPCs(smartterminals),software,andnetworksinBaltimore,Tampa,andinternationalportionofMinneapolis/St.Paulreservationsoffices,developingmoresoftwareCompletingtheinstallationofPCs,software,andnetworksatothersixreservationsoffices,developingmoresoftwareTimeMay1993-August1994September1994-December1995August1995-May1997CostAbout$500,000About$13millionAbout$20million12WhatWentWrong?AfterfinishingtheResNetbetaproject,PeeterandhisteamsawtherestofResNetasonelargeprojecttoimplementthenewreservationsysteminallofthecallcenters.Seniormanagement,however,broketherestofResNetintotwoseparateprojects,ResNet1995andResNet1996.TheirgoalsweretoavoidahugeinvestmentcommitmentandtoprovidefurtherincentivesfortheResNetteamtoproducesuccessfulresults.Ifthe1995ResNetprojectwasnotsuccessful,seniormanagementcoulddecidenottofundthe1996project.Althoughthisstrategyreducedfinancialrisk,Peeterandhisteamdidnotlikethedecision.IfResNet1996werenotapprovedforsomereason,theywouldbestuckwithtwototallydifferentreservationssystemsindifferentsalesoffices.Thissituationwouldcausehugemanagement,technical,andsupportproblems.TheResNet1995teamwasunderalotofpressuretodoagoodjobortheResNet1996projectwouldnotbefunded.13SelectingtheProjectManager•Animportantpartofprojectinitiationisselectingaprojectmanager.FayselectedPeeterbecause–heknewtheairlinebusiness–heunderstoodthetechnology–heknewthattechnologiescouldimprovebusinessproductivity–PeeterusedhispassionfortheprojecttoconvinceFayandothersthatheshouldbetheprojectmanager14PreparingBusinessJustificationfortheProjectsFortheBetaproject•Fayconvincedseniormanagerstoinvest$500,000intodevelopingaprototypesystem•Peeteremphasizedhistrackrecordasaleaderandwhatthecompetitionwasdoing•Arvidwaswell-knownandrespectedforhisISexpertise15PreparingBusinessJustificationfortheProjects•FortheResNet1995and1996projects•Verystrongjustificationwasneededtomakemajorinvestments•Peeterprepareddetailedplansandfocusedon–keybusinessobjectivesoftheproject–impressiveresultsfromthebetaproject–theopportunitytomakemoneywiththenewsystem(NPVestimateof$37.7M)16WhatWentRight?PeeterandtheResNetteampreparedoutstandingbusinessjustificationforalloftheResNetprojects.Usinghisstrongtechnicalandbusinessskills,PeeterwrotepersuasivedocumentsjustifyingResNet,andhemadehiscasewellinpresentations.Peeter'sjustificationstrategyforthe1995and1996ResNetprojectsincludedverystrongfinancialanalysis,whichgreatlyimpressedthefinancecommittee.Peeterknewthatthedecision-makerswantedtoseethebottomlinenumbers,andPeeterprovidedthemaswellasdetailedrationaleforhowhegotthem.Hepreparedafive-yearcashflowanalysisofallcostsandbenefits,clearlydefinedmajorassumptions,anddescribedthebasisforallofhisprojections.ItwasobvioustothefinancecommitteethatPeeterknewwhathewasdoin