MODULE-II

CHAPTER-01
“GENERATION OF PROJECT IDEA”
It is the creative process of generating, developing and communicating new idea which are abstract,
concrete and visual. It comprises all stages of a thought cycle from innovation to development, to
actualization. Idea generation is not a single step process but has step like innovation of idea and then
developing to get the desired output and finally actualization of the idea to get the desired result. It is
also called ‘Ideation’. The process includes: -
 Innovating the concept,
 Developing the process;
 Bringing the concept of reality.
A business idea is a concept that can be used for financial gain that is usually centred on a product or
service that can be offered for money. An idea is the first milestone in the process of building a
successful business. The characteristics of a promising business idea are: Innovative.
Idea generation is the creative process or procedure that a company uses in order to figure out solutions
to any number of difficult challenges. It involves coming up with many ideas in a group discussion,
selecting the best idea or ideas, working to create a plan to implement the idea, and then actually taking
that idea and putting it into practice. The idea can be tangible, something you can touch or see,
or intangible, something symbolic or cultural.
Project ideas are generated through different sources like customers, competitors, and employees.
Sometimes they are discovered through accident. Project manager should try to enhance people's
creativity, scan the entire business environment and appraise the company’s strengths and weaknesses to
generate a large number of ideas. The project managers should analyze the business environment that
consists of the economic sector, the governmental sector, the technological sector, the socio-demographic
sector, the competition sector and the supplier sector. Once a pool of ideas has been generated, the
project manager should carefully screen them.
Searching for New Project Ideas includes
A project is required for a successful venture, so every business first search for a project. As modern
business is illusive in nature so it is difficult to find out the opportunities. To find out the opportunities
there are so many necessities which have to be analyze: -
 Engage yourself in observation session;

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  Socialize outside your normal circle;
 Read book, journals, articles & write-ups;
 Study the Existing Industries;
 Observe the Inputs and Outputs of Various Industries;
 Analysis of Imports and Exports of Nation;
 Study of Economic and Social Trends;
 Observe New Technologies;
 Identifying Psychological Needs;
 Study the Government Guidelines and Recommendations for Financial Institutions.

Typ
es of Idea
There are many ways to categorize different businesses ideas. For our purposes, let's categorize them
into three general types: revolutionary, evolutionary and hybrid which is a mix of the two.
1. Revolutionary (Innovative) Idea: - A revolutionary idea breaks away from traditional thought and
creates a brand new perspective. The great thing about these kinds of ideas is that they lead the way
for everyone else. They create whole new markets and for a short time get a lead over other kinds of
businesses. They tend to also have potential to grow rapidly, and for that reason, are attractive
investments for venture capital and seed investors. The problem with innovative businesses is that
precisely because they are new, and their products are also new, no one really knows what the demand

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 for them will be, and how well they will ultimately grow, or whether they will not find market
acceptance. Example- Mobile App, Frozen peas were an innovative product.
2. Evolutionary (Commoditized) Idea: - There are many types of businesses which have been around
for a long time that do not have to innovate, and can still be great businesses. Just think about the
different businesses in any city. Every city needs restaurants, cleaners, dentists, mechanics, people to
fix homes, etc. The list goes on. The core differences between these types of businesses and
innovative businesses are that these tend to be service-based business with a local focus. For that
reason these have less potential to become multi-billion dollar businesses. Additionally, they do not
grow as quickly. But the great thing is that there is no risk of demand. There is definitely demand for
these kinds of businesses as long as the entrepreneur can provide the service with a high-enough
degree of quality.
3. Hybrid Businesses: - Hybrid business ideas are the kinds of ideas which borrow a little bit from both,
the commoditized types of ideas and the innovative. Here are some examples-
- Restaurants that serve fusion cuisine. They are traditional types of businesses, but with a new twist
on their main product which is the food.
- Websites to find school tutors. These kinds of sites take a local service that has been around for a
long time, and make it easier to find tutors.
There is a bit of a balance of innovation risk vs. commoditized business, which has an added benefit
of giving you a good way to differentiate the business from other similar businesses, and often
provides a marketing gimmick to get people's attention.
Innovation Commitment and Resource Allocation
It is common in organizations for any type of project, but even more problematic in innovation: the
resource allocation issue. How many times have you encountered the following problem:
 Top management is now really committed to innovation;
 Very serious idea generation methodologies and innovation management processes and tools in
place;
 Many interesting ideas generated- people enthusiastic v/s management enthusiastic;
 But, many interesting ideas stalled due to lack of resource allocation and commitment to their
development and implementation;
Resource allocation problems are created in several ways. When it comes to financial resources, the
problem is often the yearly budget cycle. If not in the budget, then implementation will start next year,
after the new budget has been approved. Some ideas might end up being delayed for 6-9 months this way

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and that might be just too long, especially in fast moving consumer goods industries. Another issue with
financial resources is the question who pays for the development and implementation. Without clear
sponsors, great ideas might be lost.
When it comes to allocation of people, the issue becomes even more serious. With even tighter
headcounts, how can we guarantee allocation to projects that weren’t even clearly foreseen? This is even
more difficult when the idea is radically new and the company might need to hire staff with different
knowledge and capabilities. To be successful innovators companies will need to break their traditional
mental model of resource allocation. If innovation is really important, best professionals should be
working on it, management should be seriously involved (not just in “check point” meetings), internal
and external venture funds should be created, specific innovation career paths created and hiring rules
made to be more flexible.
“Idea generation in industry is systematic innovation in the company and the market place Idea
generation occurs not only at the initial stage of developing the product concept but throughout the
project- in the design of the product, package& process and in developing the market strategy.” To
transform an idea into an active ongoing project, it is important to check on resource allocation.
Resources allocation can be required at two levels: -
1. Resource Allocation at the Corporate Level: - It may depend on the business functions of the
company, the demographical location of the company and the type of service provided by them.
While allocating resources, a company always keep the optimal utilization of the resources. The
resources allocation depends on: -
 Need for a change in the existing pattern of allocation;
 Need to make the decision making process more centralized;
 Decline of resources already allocated in the existing pattern;
2. Resource Allocation at the Business Unit Level: - A firm must identify the available opportunities
for investing its resources. This identification can be done in two ways: -
 By analyzing its environment (PEST – Political, Economic, Social & Technological forces);
 By analyzing its strategic capability;
“Environmental analysis” is a strategic tool which can affect the organization performance. The
analysis entails assessing the level of threats or opportunity the factor might present. These
evaluations are later translated into the decision making process. The analysis helps align strategies
with the firm’s environment.

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 Market is facing changes every day. Many new things develop over time and the whole scenario can
alter in only a few seconds. Business is greatly influenced by the environment. So, business must
constantly analyze the trade environment and the market.
Some Class Exercise / techniques to think of ideas:
 Use random input: Choose a word from the dictionary and look for novel connections between the
word and your problem.
 Mind map possible ideas: Put a key word or phrase in the middle of the page. Write whatever else
comes in your mind on the same page
 Pick up a picture
 Take an item

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 CHAPTER-02
“VARIOUS APPRAISAL METHODS IN PROJECT SCANNING &
SELECTION”

Project Appraisal
Project appraisal means a pre-investment analysis of project to determine whether the project should be
implemented or not. There are some inherent differences between the terms Project Appraisal and Project
Valuation although they are often used interchangeably. Project appraisal refers to an ex-ante
examination of a proposal project to determine whether the same should be implemented or not whereas
project evaluation is an ex-post assessment of the impact of an accomplished project.
Investment decision forms an integral part of development process. Amongst various methods of making
investment decisions, project appraisal occupies the most leading position. It helps rationalize the
guidelines for investment criteria at the project level and the national level. Production is a function of
specific use of inputs to derive outputs. How to decide about the specific use of inputs which have
alternative uses is an investment’s dilemma. In a free market economy, prices of inputs determine their
most efficient allocation. But the market forces may not lead to achieve desirable social economic
objectives such as equitable distribution of income. In the case of public sector investment, serious
attention should be given to its economic and social effects. In the case of private sector investment,
project usually center on around financial worth ignoring the social and economic aspect. But any
investment decision, be in the public sector or private sector, the project appraisal and its techniques play
a very significant role.
1. Market Appraisal –
The success of any project depends on the demand for the output produced by it. The firm should
identify the demand for a product in the market as well as the needs of the customers. Different features
of a market should be tested before launching any new product or brand in the market. This is called
‘market appraisal’ of a project.
The market appraisal estimates the likely market value that the company will achieve were it to be
placed onto the business sales market today. A market value assumes that there is no urgency for the
seller to sell, but takes into account:
 The prevailing strengths and weaknesses of the company;
 The current / future market opportunities;

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  The overall economic environment.
A Market Appraisal differs from a Valuation, which will focus primarily at the historical performance of
the company and the asset and liability base. When analyzing the markets, a marketing analyst is
interested in knowing the market demand of the proposed product which will be manufactures after the
successful completion of the project. The following information is needed to explore: -
 Consumer Behavior Trend;
 Past and Present Demand Supply (Market Survey);
 Nature of competition in the market;
 Pattern of demand (Demand Forecasting);
 Size of the market and market share;
 Channels of the distribution (Rail, Road, Air, Port);
 Market segmentation;
 Pricing policies;
 Administration and legal issues;
 Govt. tax, excise duty and other regulations;
Though there are many opportunities in the world, identifying the right project at the right time is very
difficult.
2. Technical Appraisal –
It means the identification and scanning of the engineering aspects of a project. It seeks to determine
whether all the features or attributes required for the successful commissioning of the project have been
considered or not. Analysis also happens with respect to its location size and process of manufacturing.
The following heads come in this appraisal-
 Project Purchase Management: - The primary objective is to buy material as well as services of
the optimum quality in right quantity from the best possible sources at the right place and time.
An efficient manufacturing process requires an uninterrupted supply of input material.
 Vendor Selection: - A potential and appropriate supplier has been identified. The project
manager may use the technique of competitive bidding or negotiation to get the best rate.
 Contract Administration: - It could be framing of rules and regulations, exercising rights and
obligations or issuing amendment to orders. It contains a brief description of the project, critical
deadlines and important clauses of the project.
 Procurement of Equipment and Materials: - The act of obtaining or buying goods and
services. The procurement is often part of the company’s strategy because the ability to purchase

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 certain equipments, machinery and material will determine that operation will continue or not. A
project will not be able to survive, if the price of procurement is more than the profit.
 Plant Capacity & Location: - ‘Plant Capacity’ is defined as the number of units produced by a
plant in a given time period. Capacity is a rate that can be measured during the input or output of
a product system. ‘Location’ refers to a place where the workforce, raw material, capital and
machine equipment are combined to produce goods. The efficient functioning of a plant greatly
depends on its location. A plant may have to be introduced due to changes or up-gradations in the
product type and can be terminated, expanded and diversified in the future.
3. Environmental Appraisal –
Environment literally means the surroundings, external objects, influences or circumstances under which
someone or something exists. The environment of any organization is the aggregate of all conditions,
events and influences that surround and affect it”. Characteristics of environment are –
 Environment is complex;
 Environment is dynamic;
 Environment is multi-faceted;
 Environment has a far reaching impact;
For finding business available opportunity and risks, environmental appraisal is needed. Environmental
appraisal means to analyze all the factors of business environment. Environmental analysis is a strategic
tool. It process for identifying all external and internal elements that can affect the performance of the
organization and evaluating the level of threat or opportunity they present. Opportunity and
threat assessments are then incorporated into decision making process in order to better
align strategies with the organization's environment.
A project may cause environmental pollution in several ways. It may produce liquid or solid discharges
that get mixed in nearby water bodies and lead to several diseases. It may pollute air by hazardous
gaseous emission. Industries may also create noise, heat and vibration that are above the safety limits,
resulting in various types of discomfort and disorders to the general population. While selecting the
project, the following environmental aspects need to be considered: -
 The type of garbage produced by the proposed project;
 Proper prevention mechanism for their disposal;
 Project must fulfil all statutory requirements;
There are many strategic analysis tools that a firm can use, but some are more common. The most used
detailed analysis of the environment is the PESTLE analysis. This is a bird’s eye view of the business

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conduct. Managers and strategy builders use this analysis to find where their market currently. It also
helps foresee where the organization will be in the future.
PESTLE analysis consists of various factors that affect the business environment. Each letter in the
acronym signifies a set of factors. These factors can affect every industry directly or indirectly. The
letters in PESTLE, also called PESTEL, denote the following things:
 Political factors: - The political factors take the country’s current political situation. It also reads
the global political condition’s effect on the country and business. When conducting this step, ask
questions like “What kind of government leadership is impacting decisions of the firm?” Some
political factors that you can study are: Government policies; Taxes laws and tariff; Stability of
government; Entry mode regulations.
 Economic factors: - Economic factors involve all the determinants of the economy and its state.
These are factors that can conclude the direction in which the economy might move. So,
businesses analyze this factor based on the environment. It helps to set up strategies in line with
changes. Following are the economic factors: The inflation rate, The interest rate, Disposable
income of buyers, Credit accessibility, Unemployment rates, The monetary or fiscal policies, The
foreign exchange rate.
 Social factors: - Countries vary from each other. Every country has a distinctive mindset. These
attitudes have an impact on the businesses. The social factors might ultimately affect the sales of
products and services. Some of the social factors are: The cultural implications, The gender and
connected demographics, The social lifestyles, The domestic structures, Educational levels,
Distribution of Wealth.
 Technological factors: - Technology is advancing continuously. The advancement is greatly
influencing businesses. Performing environmental analysis on these factors will help you stay up
to date with the changes. Technology alters every minute. This is why companies must stay
connected all the time. Firms should integrate when needed. Technological factors will help you
know how the consumers react to various trends. Firms can use these factors for their benefit:
New discoveries, Rate of technological obsolescence, Rate of technological advances, Innovative
technological platforms.
 Legal factors: - Legislative changes take place from time to time. Many of these changes affect
the business environment. If a regulatory body sets up a regulation for industries, for example,
that law would impact industries and business in that economy. So, businesses should also
analyze the legal developments in respective environments. Some legal factors you need to be

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 aware of: Product regulations, Employment regulations, Competitive regulations, Patent
infringements, Health and safety regulations.
 Environmental factor: - The location influences business trades. Changes in climatic changes
can affect the trade. The consumer reactions to particular offering can also be an issue. This most
often affects agri-businesses. Some environmental factors you can study are: Geographical
location, The climate and weather, Waste disposal laws, Energy consumption regulation, People’s
attitude towards the environment.
Environmental analysis is essential to determine what role certain factors play in the business. PEST or
PESTLE analysis allows businesses to take a look at the external factors. Many organizations use this
tool to project the growth of their company effectively. The analyses provide a good look at factors like
revenue, profitability, and corporate success. If management wants to take the right decisions for the
firm, employ environmental analysis.
4. Social Appraisal –
It is also becoming a key factor in the final selection, execution and success of a project. The story of
Tata Nano Car Project in Singur (West Bengal) explains how social-economic impact is important for a
project’s implementation. Financial viability alone cannot ensure selection of any project. Analysis of
social relevance and contribution of firm in the society also needed. Corporate Social Responsibility
(CSR) has also come-up in a big way.
5. Financial Appraisal –
Financial appraisal views investment decisions from the perspective of the organization. It assesses the
viability of a project based on the direct effects on the cash flow of the organization. It considers whether
the projected revenues will be sufficient to cover expenditures and whether the financial return is
sufficient to make the investment commercially viable (profitable). The basic purpose of financial
appraisal is to achieve better spending decisions for capital and current expenditure on schemes, projects
and programmes. Financial appraisal is routinely carried out by the companies to assess whether
investment projects are profitable or not. Some of the variants of financial analysis include-
 A general financial analysis identifies and quantifies financial inflows & outflows;
 Cash flow analysis which takes into account direct and indirect flows;
 Affordability analysis- An assessment of whether or not a project is affordable with reference to
expenditure;
 Analysis of sources of funds – a breakdown of the sources of finances for a given project;
 Examine the return on capital for different sources of funds;

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Project appraisal as an aid to investment decision assumes special significance when a scarce factor, such
as capital, foreign exchange, and or labour is to be rationed in terms of the alternative uses to which it
can be put. In addition, the time element is another important factor in the appraisal of investment
decisions.

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 CHAPTER- 03
PROJECT MONITORING, EVALUATING (M&E) & CONTROLLING

1. Project Monitoring
Monitoring is the regular observation and recording of activities taking place in a project or programme.
It is a process of routinely gathering information on all aspects of the project. To monitor is to check on
how project activities are progressing. It is observation ─ systematic and purposeful observation.
Monitoring also involves giving feedback about the progress of the project to the donors, implementers
and beneficiaries of the project.
Reporting enables the gathered information to be used in making decisions for improving project
performance. It is the systematic and routine collection of information from projects and programmes for
four main purposes:
 To learn from experiences to improve practices and activities in the future;
 To have internal and external accountability of the resources used and the results obtained;
 To take informed decisions on the future of the initiative;
 To promote empowerment of beneficiaries of the initiative.
Monitoring is a periodically recurring task already beginning in the planning stage of a project or
programme. Monitoring allows results, processes and experiences to be documented and used as a basis
to steer decision-making and learning processes. Monitoring is checking progress against plans. The data
acquired through monitoring is used for evaluation.
Purpose of Monitoring:
Monitoring is very important in project planning and implementation. It is like watching where you are
going while riding a bicycle; you can adjust as you go along and ensure that you are on the right track.
Monitoring provides information that will be useful in:
 Analyzing the situation in the community and its project;
 Determining whether the inputs in the project are well utilized;
 Identifying problems facing the community or project and finding solutions;
 Ensuring all activities are carried out properly by the right people and in time;
 Using lessons from one project experience on to another; and
 Determining whether the way the project was planned is the most appropriate way of solving the
problem at hand.

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2. Project Evaluation
Project evaluation is a systematic and objective assessment of an ongoing or completed project. The
aim is to determine the relevance and level of achievement of project objectives, development
effectiveness, efficiency, impact and sustainability. Evaluations appraise data and information that inform
strategic decisions, thus improving the project or programme in the future. Evaluations should help to
draw conclusions about five main aspects of the intervention:
 Relevance,
 Effectiveness
 Efficiency
 Impact
 Sustainability
Project evaluation is a systematic method for collecting, analyzing, and using information to answer
questions about projects, policies and programs; particularly about their effectiveness and efficiency. In
both the public and private sectors, stakeholders often want to know whether the programs they are
funding, implementing, voting for, receiving or objecting to are producing the intended effect.
While important considerations of project evaluation often include - how much the program costs per
participant, how the program could be improved, whether the program is worthwhile, whether there are
better alternatives, if there are unintended outcomes, and whether the program goals are appropriate and
useful. Evaluators help to answer these questions, but the best way to answer the questions is for the
evaluation to be a joint project between evaluators and stakeholders.
Monitoring & Evaluation
M&E is an embedded concept and constitutive part of every project or programme design (“must be”).
M&E is not an imposed control instrument by the donor or an optional accessory (“nice to have”) of any
project or programme. M&E is ideally understood as dialogue on development and its progress between
all stakeholders. In general, monitoring is integral to evaluation. During an evaluation, information from
previous monitoring processes is used to understand the ways in which the project or programme
developed and stimulated change. Monitoring focuses on the measurement of the following aspects of an
intervention:
 On quantity and quality of the implemented activities (outputs: What do we do? How do we
manage our activities?)

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  On processes inherent to a project or programme (outcomes: What were the effects /changes that
occurred as a result of your intervention?)
 On processes external to an intervention (impact: Which broader, long-term effects were
triggered by the implemented activities in combination with other environmental factors?)
The evaluation process is an analysis or interpretation of the collected data which delves deeper into the
relationships between the results of the project/programme, the effects produced by the
project/programme and the overall impact of the project/programme.
3. Project Controlling
Project controls are the data gathering, management and analytical processes used to predict,
understand and constructively influence the time and cost outcomes of a project or program; through the
communication of information in formats that assist effective management and decision making.
Consequently, the project controls discipline can be seen as encompassing:
 Project strategy, undertaking planning and methods studies to help the PM optimize future outcomes;
 Scheduling including development, updating and maintenance;
 Cost estimation, cost engineering/control and value engineering;
 Risk management, including maintaining the risk register and risk analysis/assessment;
 Earned Value Management and Earned Schedule, including WBS, OBS and other breakdown
structures,
 Document control;
 Forensic Assessment for required diagnosis of schedule and cost;
 Supplier performance measurement / oversight (but excluding contract administration);
 The elements of a project management methodology that integrate these disciplines both within the
‘controls’ domain and with other project management functions;
Maintaining proper control really requires that you consider three parameters:
(a) Where you are, compared with where you’re supposed to be;
(b) What lies ahead that can affect you; and
(c) Where you’re going to end up, compared with where you said you would end up. Bear in mind that
(a) and (b) are used primarily as internal control functions (although you may choose to report them
outside the team). They’re used for evaluating (c). At the risk of being repetitive, company’s primary
focus should always be on evaluating where they think they’re going to end up.
Put simply, Project Controls encompass the people, processes and tools used to plan, manage and
mitigate cost and schedule issues and any risk events that may impact a project. In other words, Project

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control is essentially equivalent to the project management process stripped of its facilitating sub-
processes for safety, quality, organizational, behavioural, and communications management.
4. Project Approval
The project approval process varies from organization to organization. In some, it is a rational process of
strategic and tactical planning. In others, it is a highly charged political game where project managers
keep their backs to the wall to avoid a dagger from behind. Whatever the environment, there are two
classic fantasies that executive sponsors play whenever the phrase “project approval” is mentioned.
There is also a game project manager’s play to cope with the sponsors’ demands.
Project Approval Process
Below is six steps to ensuring that you project is aligned with business strategy and therefore, making the
approval stage easy: -
1. Understand the approval process-
Many organizations have clear guidelines, processes and procedures for allowing new company
initiatives into their investment portfolio. Project Manager needs to work within these guidelines.
Working outside of this can be a waste of business resource and will not be looked upon kindly.
2. Determine the business need-
Before meeting with the executives responsible for funding, Project Manager must first understand
company’s vision and strategic goals. In order to get approval, the project has to contribute to one or
more of the corporate strategies. Project Manager must be able to provide detailed information on how
the project is strategic to the business. Non strategically-aligned initiatives are unlike to get the green
light from the funding decision makers.
3. Identify key influencers and align to them-
Project Manager needs to gain alignment with key decision-makers in the respective areas of the
business. This often includes, but is not limited to, both Operations and Finance. Explain how the project
will benefit each audience. For example, Sales may want to engage better with current and prospective
customers’, whilst Finance will want sufficient information to evaluate payback, such as ROI, NPV, and
ROCE. This should follow on from discussions on strategic objective alignment with the executive
decision makers.
4. Specific information needs-
Project Manager must have a clear and detailed understanding on the project and its sequential stages in
order to be able to communicate what each of the affected business areas needs to support the project.
For example, each of the areas will need to know the cost and time impacts on each of them during the

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commissioning, implementation and on-going support of the new initiative. Selling the features of the
projects outcomes in terms of the desired benefits and their positive impact on the affected business areas
will certainly improve the chances of the gaining approval.
5. Common information needs-
One of the most important needs is a determination of the initiatives return on investment (ROI). This is
quite simply the benefits in mathematical terms divided by the cost of delivering the project. However,
ROI is often discussed in terms of the payback time required to achieve the ROI. The ROI involves
analysis and should consist of detailed metrics, tangible examples and operational considerations for the
project. This include: internal factors such as affected areas time, travel expenses, and other items.
6. Obtain approval from Executive decision makers-
Having gained approval ‘buy-in’ from all affected areas, the next step is to present the final project
business case back to the funding and key executive decision makers. This group will invariably be
looking for the ROI to be within applicable targets and how the projects outcomes will provide tangible
and long lasting benefits to such things as bottom-line performance and competitive stance. This can be
further supported through providing clear mapping of the outcomes from the project to the organizations
strategic objectives.
“The key to successful project approval meetings is for Project Manager to be ready with options and
alternatives such as for finishing earlier, spending less money and using alternative resources. Good
project managers are eager to change the plan to fit the executives’ requirements if the scope, budget and
duration are feasible.”

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