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SWOT analysis and theory of constraint in information technology projects

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Volume 2, Number 23 http://isedj.org/2/23/ April 13, 2004

In this issue:

SWOT Analysis and Theory of Constraint in Information Technology

Projects

Asghar Sabbaghi Ganesh Vaidyanathan

Indiana University South Bend Indiana University South Bend
South Bend, Indiana 46634, USA South Bend, Indiana 46634, USA

Abstract: This study focuses on the potential cost and benefit analysis of Information Technology
projects. The purpose of this study is to synergize the role of Strengths, Weakness, Opportunities
and Threats (SWOT) analysis and the Theory of Constraint (TOC) approach in the planning and
execution of Information Technology (IT) projects. Due to limited resource availability and much
needed timely delivery of projects, organizations consider a number of trade-offs during the entire
lifecycle of an IT project. The selection of projects using evaluation and selection tools from the
myriad of proposed projects, particularly when all of them promise value to the organization remain
highly challenging. By minimizing trade-offs, proper selection of projects may be achieved. This
study will use the combined effects of SWOT analysis and TOC to measure the potential benefit and
cost tradeoffs. Such measures can be used to examine the effectiveness and efficiency of IT project
management. A Five-step TOC thinking process framework that will enable project management
teams to develop an integrated strategy is also discussed in this study.

Keywords: project management, SWOT analysis, theory of constraint, effectiveness, efficiency,

planning

Recommended Citation: Sabbaghi and Vaidyanathan (2004). SWOT Analysis and Theory of
Constraint in Information Technology Projects. Information Systems Education Journal, 2 (23).
http://isedj.org/2/23/. ISSN: 1545-679X. (Preliminary version appears in The Proceedings of
ISECON 2003: §2414. ISSN: 1542-7382.)

This issue is on the Internet at http://isedj.org/2/23/

ISEDJ 2 (23) Information Systems Education Journal 2

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The Information Systems Education Conference (ISECON) solicits and presents each year papers
on topics of interest to IS Educators. Peer-reviewed papers are submitted to this journal.

2003 ISECON Papers Chair Associate Papers Chair Associate Papers Chair
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Ithaca College Univ of Texas at Arlington West Texas A&M Univ
Ithaca, New York Arlington, Texas Canyon, Texas

EDSIG activities include the publication of ISEDJ, the organization and execution of the annual
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c 2004 EDSIG http://isedj.org/2/23/ April 13, 2004
ISEDJ 2 (23) Sabbaghi and Vaidyanathan 3

SWOT Analysis and Theory of Constraint in

Information Technology Projects
Asghar Sabbaghi1
Indiana University South Bend
South Bend, Indiana 46634, USA

and
Ganesh Vaidyanathan2
Indiana University South Bend
South Bend, Indiana 46634, USA

Abstract

This study focuses on the potential cost and benefit analysis of Information Technol-
ogy projects. The purpose of this study is to synergize the role of Strengths, Weak-
ness, Opportunities and Threats (SWOT) analysis and the Theory of Constraint (TOC)
approach in the planning and execution of Information Technology (IT) projects. Due
to limited resource availability and much needed timely delivery of projects, organi-
zations consider a number of trade-offs during the entire lifecycle of an IT project.
The selection of projects using evaluation and selection tools from the myriad of pro-
posed projects, particularly when all of them promise value to the organization re-
main highly challenging. By minimizing trade-offs, proper selection of projects may
be achieved. This study will use the combined effects of SWOT analysis and TOC to
measure the potential benefit and cost tradeoffs. Such measures can be used to ex-
amine the effectiveness and efficiency of IT project management. A Five-step TOC
thinking process framework that will enable project management teams to develop
an integrated strategy is also discussed in this study.

Keywords: Project management, SWOT analysis, theory of constraint, effective-

ness, efficiency, planning

1. Introduction project as promised, as well as its cost

and benefits. The recent developments
Advances in information technology and in IT have also brought significant rami-
intensified competition in the market- fications with regard to the critical re-
place have contributed to the timely de- quirements for effectiveness and effi-
livery of products and services. This in ciency in IT project management.
turn has contributed to increased bene-
fits and reduced costs of IT project Given the critical importance of project
management. Depending on the size, delivery and reliability as well as the
scope, and complexity of a project, a economic rationale in project planning
number of conflicting elements chal- and implementation, the future of any
lenge IT project management. Project business will be determined by how well
delivery may address the equally impor- projects are managed today. In general,
tant need for reliability in delivering the short period cycle times may lead to

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 4

substantial incremental earnings while taken by U.S. companies in 1999were

the penalty for long project cycle times cancelled or abandoned before comple-
may mean missing market opportunities tion, representing a loss of almost $62
altogether. In addition, multi-project million. It was also reported that only
organizations may often tend to launch 13 percent of IT system projects were
projects as soon as they are under- considered successful by sponsoring
stood. These organizations launch the managers, while only 16.2 percent of
projects concurrently with existing pro- software development projects were
jects, simultaneously with other new completed on time and within budget
efforts, or without sufficient regard to (Yeo, 2002).
the capacity of the organization. This
would commonly lead to an array of It can be argued that smaller projects
projects with conflicting priorities. Pro- are more manageable and it is usually
ject resources and managers are re- easier to ensure their success, and thus,
sponsible for sorting these priorities. Of smaller projects are more likely to suc-
particular concern in this regard is that ceed than large projects. On the other
the priorities established within a func- hand, one can argue that larger projects
tional area may not be in synchrony would have more funding and resources
with other areas, or more importantly and therefore should have a higher
with the company-wide priorities. Ac- probability of success. However, we
cording to Standish group report argue that while the smaller projects
(1999), Corporate America spends more may be more manageable, project
than $275 billion each year on approxi- management can be the critical factor in
mately 200,000 application software ensuring the success of the projects,
development projects. A great many of regardless of the size. Some of the criti-
these projects will fail for the lack of cal factors to project success are user
skilled project management (The Stan- involvement, executive support, and a
dish Group International, 1999). The clear statement of business objectives.
projects in this study are classified into In this context, SWOT analysis and the
three resolution types: (1) Success: The Theory of Constraints provide a com-
project is completed on time and on prehensive framework that can address
budget, with all features and functions the effectiveness and efficiency of pro-
as originally specified; (2) Challenged: ject planning.
the project is completed and opera-
tional, but over budget, over the esti- Wei, et al., (2002) proposed a resource
mated time, and with fewer features constrained-based project management
and functions than initially specified; model for project planning, implementa-
and (3) Failure: The project was can- tion and control. The research does not
celed before completion. According to include Theory of Constraints as a tool
this report, only 26 percent of the pro- for effective project selection. Another
jects were completely successful, while model used SWOT analysis to make de-
46 percent of them were “challenged” cisions on effective use of resources for
and 28 percent were considered to be housing projects (Ziara and Ayyub,
failures (Standish Group, 1999). The 1999.) The methodology considered
failed projects cost almost $75 billion in both the options and constraints of rele-
1998. Bounds (1998) reported that vant socio-economic factors in the plan-
only 26 percent of IT projects were ning and construction of urban housing-
completed on time and within budget. project developments. A selection of
According to Yeo (2002), approximately R&D projects models consist of integer
31 percent of two hundred thousand decision variables for both the number
software development projects under- of researchers allocated and project se-

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 5

lection. Researcher allocation and pro- as the extent to which the output of a
ject selection are subject to several lin- project meets the objectives of the pro-
ear and nonlinear goal constraints (Tay- ject. We can define efficiency as the
lor, et al., 1982). In this study, we ratio between the outputs achieved, i.e.,
have provided a framework for effec- the success of the project in achieving
tiveness and efficiency of IT project its objectives with the input of the pro-
planning using SWOT analysis and The- ject, i.e., the utilization of resources.
ory of Constraints. There is a potential The term “objectives” deal with whether
for further research using both these or not the organization will benefit from
tools to address the selection of projects the project.
in a more efficient and effective man-
ner. The key element to remember about
project management is that a develop-
2. SWOT Analysis ment project that fails to address the
right objectives cannot succeed, even if
Over the years, there has been much those objectives were realized very effi-
emphasis on gaining efficiency in pro- ciently.
ject management. Existing tools such
as CPM and PERT reduce both project SWOT analysis is an effective frame-
lead-time and the required resources to work for analyzing the Strengths,
complete a project. However, the objec- Weaknesses, Opportunities, and Threats
tives of the project, plans, and required of an organization (or a project) that
resources assigned have been taken for helps to address the effectiveness of a
granted. Therefore, insufficient atten- project planning and implementation.
tion has been paid to analyzing the The acronym comes from an old term
relevance of the project objectives from the strategic planning field that is
within the context of broader, company- concerned with the content and the ob-
wide goals, and to the effectiveness in jectives of the project, and with identi-
project planning and implementation. fying the right things to do. What is
How can one distinguish effectiveness right depends on the specific interface
from efficiency in project management? between the project, the objectives it
Table 1 displays a brief distinction of serves, and its environment (target
effectiveness versus efficiency and the groups, market, law and regulations,
possible outcome under various scenar- etc.). Strengths would define any inter-
ios. nal asset (expertise, motivation, tech-
nology, finance, business model, etc.)
In Table 1, we can define effectiveness that will help to meet demands and to

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 6

Key Questions: Typical answers

Internal What are our advantages? What do we do well?, How are Well-trained man-power , well established
Strengths we doing competitively? What are our resources? Are knowledge base, good contact to target
there any internal assets (know-how, motivation, group, technology, etc.
technology, finance, business links) which will help to
meet demands and to fight off threats?

Weaknesses What could be improved? What is done badly? What Lack of motivation, lack of transport
should be avoided? Are there any Internal deficits facilities, problems in distribution of
hindering the organization in meeting demands? services or products, low reputation (the
lack of a particular strength)
External

Opportunities What are the good tasks? What are the interesting trends? Changes in technology and market that
What changes do we expect to see in the market over the favor your products or services, changes in
next few years? Are are any external circumstances or government policy related to your industry,
trends that favors the demand for an organization’s changes in social patterns, population
specific competence? profiles, lifestyle, etc., local, national, &
international events increasing purchasing
power.

Threats What is our competition doing? What are the obstacles? Establishment of strong competitors, lack of
What future changes will affect our organization? Is cash at household level, governmental
changing technology threatening our position? Do we regulations that limit free distribution of our
have management support? Sufficient resources? Are we product.
using the right tools, software, and platform? Are there
any external circumstances or trends which will
unfavorably influence demand for an organization's
competence?

Table 2. SWOT Key Questions and Typical Answers

fight of threats. What are we good at in cess probability depends on whether its
project management? How are we doing strengths not only match the key suc-
competitively? Moreover, what are our cess requirements for operating in the
resources? Weaknesses describe inter- target environment but also exceed of
nal deficits (lack of motivation, lack of those of project threats. Threats define
transport facilities, problems in distribu- any external circumstance or trend (es-
tion of services or products, low reputa- tablishment of strong competitors, gov-
tion, etc.) that hinder the organization ernment deficit, or regulations that limit
in meeting its demands. In this con- free distribution of our products or buy-
text, one may consider the following ing our services, etc.) that will unfa-
questions: what are we doing badly? vorably influence demand for an organi-
What annoys our clients most? zation’s competence. Table 2 summa-
rizes some of the key questions and
Opportunities describe any external cir- typical answers in each area. Dell Com-
cumstances or trends that favor the puter Corp. can be viewed as an exam-
demand for an organization’s specific ple of how an IT company can use a
competence. For example, what SWOT analysis to carve out a strong
changes in economic, political, or tech- business strategy. Dell recognized that
nological factors (development of new its strength was selling directly to con-
markets for high quality products, new sumers and keeping its costs lower than
technologies that favor our product, those of other hardware vendors. As for
etc.)? Do we expect to see in demand weaknesses, the company acknowl-
in the near future? The project’s suc- edged that it lacked solid dealer rela-

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 7

tionships. Identifying opportunities was achieved? For example, an IT project to

an easier task. Dell looked at the mar- install a number of computers and rele-
ketplace and saw that customers in- vant software tools can be viewed to
creasingly valued convenience and enhance productivity in an organization.
one-stop shopping and that they knew According to Horn, Neiman et al (1994),
what they wanted to purchase. Dell also it is useful to start with critical factors in
saw the Internet as a powerful market- the project’s environment, i.e., oppor-
ing tool. On the threat side, Dell real- tunities and threats. In particular, they
ized that competitors like IBM and argue that opportunities and threats
Compaq Computer Corp. had stronger shall not only be formulated based on
brand names, which put Dell in a existing conditions but also by future
weaker position with dealers. Dell de- trends.
veloped a business strategy that in-
cluded mass customization and 3. Theory of Constraints
just-in-time manufacturing (letting cus-
tomers design their own computers and The Theory of Constraints (TOC) is a
custom-building systems). Dell also management philosophy (Tolerate
stuck with its direct sales plan and of- 1980), where the organization may be
fered sales on the Internet. considered as an interdependent series
of processes rather than an independent
In short, SWOT analysis provides a business unit. TOC offers a methodol-
framework for better understanding of ogy for achieving system optimization
framework conditions (strengths and rather than process optimization. The
weaknesses) from external framework theory can be characterized as a set of
conditions (opportunities and threats)? concepts, principles, and measurements
For example, an information technology that focus on the ultimate output of the
department needs to determine the whole system, not just that of a compo-
strengths and weaknesses of its people nent part of it. TOC views any organi-
the project objectives by focusing on zation as a system, as an integrated
the following questions: What are our whole instead of a collection of related
objectives? What do our customers parts with the primary emphasis on the
want? How do we distinguish ourselves output of the entire system, i.e.,
from competitors? How can we improve “Throughput.” Throughput is defined as
our services? How can we distinguish the difference between the value of out-
internal and its technology. It also put (sales) and direct cost (variables
needs to ensure that the IT strategy such as raw material, parts, etc.) and
complements the company's business thus as the rate at which the system
goals. The department head needs to generates money through sales.
ask: What is each staff member good at Therefore, on one hand, TOC promotes
in project management? What are they the use of global system-wide measures
not good at in project management? rather than local measures and the per-
Project leaders also must consider op- formance of any unit within the organi-
portunities and threat -- or customers zation is measured as to its contribution
and competitors. How attractive is the to the organizational goals and objec-
market or direction they are consider- tives. The focus of the TOC philosophy
ing? What is their market share and is that any organization (or system) has
cost structure? a constraint (or a number of con-
straints) that dominates the entire sys-
Effective project management requires tem. The secret to success lies with
a development of a mission statement managing these constraints and the
for the project, i.e. what is to be system. On the other hand, TOC moves

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 8

Table 3. Effectiveness and Efficiency in IT projects using TOC

the performance measurement from a Another reason cited for sub-

cost-oriented to a throughput-oriented optimization is analytical thinking
paradigm. Throughput provides a more (Dettmer, 1998). Analytical thinking
meaningful and effective measure of breaks complex problems into smaller,
improving organizational performance, more manageable sub-problems that
and does not necessarily prescribe cost may be analyzed separately. After solv-
cutting and downsizing strategies. ing each sub-problem, often in isolation
from the rest, the pieces are reassem-
In Table 3, we can define effectiveness bled into a whole again. This analytical
as the extent to which all constraints thinking is based on the assumption
are identified and managed in projects. that if we make each part of a system
We can define efficiency as the extent perform to its maximum capability, the
to which all weak links have been system as a whole will benefit. This ap-
strengthened i.e., the utilization of re- proach may be useful in analyzing sub-
sources. The term “objectives” deal components and, thus, there may be a
with whether or not the organization will certain appeal to the idea of disassem-
benefit from the project. bling and reassembling again. How-
ever, as systems become more com-
Deming (1993) described the danger of plex, the interaction and interdependen-
sub-optimization as follows: Anything cies of components (particularly organi-
less than optimization of the whole sys- zations and people) would define the
tem will bring eventual loss to every performance of the system as a whole,
component of the system. He noted and the effectiveness of analytical think-
that the obligation of any component is ing become questionable.
to contribute its best to the system, not
to maximize its own production, profit, In TOC, an organization is viewed as a
sales, or any other competitive meas- system and components of the system
ure. Some components may operate at under management subordinate their
a loss themselves in order to optimize efforts to the larger system of which
the whole system. Sub-optimization they are a part. However, the primary
may result from a lack of awareness or focus is on the constraints that hinder
an assumption that maximizing the per- the organization from achieving its goal.
formance of each component part of the More specifically, the organization is
system will automatically maximize the compared to a chain (Figure 1) or a net-
performance of the system as a whole. work of chains (Figure 2).
According to Deming, this is not a valid
assumption. In this analogy, one weak link limits the

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 9

complex chain of cause and effect that

can be traced back to a root cause.
Figure 1: The Chain Analogy Furthermore, in larger organizations,
the policy constraints often go across
multiple functional units and require ad-
dressing those constraints and breaking
them at higher levels of the organiza-
tion. Therefore, due to the relative
complexity of policy constraints,
Goldratt (1992) proposes a more elabo-
rate process, requiring three major
steps:
Figure 2. Network Chain Analogy
1. What to change? Where is the con-
performance of the entire chain. This straint?
weakest link is the system’s constraint
that has to be targeted for improve- 2. What to change? What should we do
ment, be carefully examined, and effi- with the constraint? (Develop and
ciently addressed. Once the weakest validate new ideas to break the con-
link is strengthened, the next weakest straint that would deliver the desired
link becomes the constraint that limits results, and at the same time mini-
overall system performance. Therefore, mize the adverse side effects.)
at each stage, improving the perform-
ance (throughput) of the chain requires 3. How to change? How do we imple-
strengthening the weakest link at that ment the change? (Convert those
stage. It may be relatively less complex ideas into effective action and real-
to locate physical constraints, such as ity.)
limitation of resources or technology to
support production/ operation/ distribu- These three questions provide the
tion processes, because they are tangi- framework for the TOC Thinking Proc-
ble. In most cases, however, the real ess. Furthermore, this thinking process
constraints to improving a system’s per- is logic based, and thus not confined
formance are not physical but policy only to physical constraints, manufac-
constraints. They are rules, plans, pro- turing systems, or for-profit organiza-
cedures, measurements, or other guide- tions. It is applicable to any system, as
lines that are less tangible and at the long as the goals of the system can be
same time prescribe the framework for clearly defined. In order to apply this
operations and management of the in- thinking process, there are four criteria
ternal organization, and its interface (Dettmer, 1998) to be satisfied:
with external environment. They can
manifest themselves in training and be 1. Motivation to improve the system,
the benchmarks and measurements that
are used to assess success or failure. 2. Thorough knowledge of the system
that needs to be improved
In Goldratt’s view, the policy constraints
are usually much more devastating than 3. Some degree of authority, or at least
physical constraints, and nearly every influence, to initiate change, and
physical constraint results from some
policy constraint. It is also more diffi- 4. Understanding of the TOC Thinking
cult and challenging to identify the ex- Process methodology.
act policy constraints, as it requires a

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 10

4. Five-step Thinking Process: Diagram (CRD): This step reveals hid-

A Framework den conflicts and underlying assump-
tions behind the UDEs. It can lead to
Using the rigor and logic of cause-and ef- breakthrough solutions. It helps a
fect, the five-step thinking process (shown management team to begin to answer
in Figure 3) would enable the manage- “what to change to,” and helps the team
to agree on the direction of the solution
ment team to solve a problem and/or de-
that will work.
velop an integrated strategy, beginning
with the symptoms and ending with a de- Future Reality Tree (FRT): The FRT step
tailed action plan that coordinates the ac- is used to confirm the solution and to
tivities of all those involved in implement- identify potential negative side effects.
ing the solution. The five-step thinking FRT construction starts with the Injec-
process is illustrated in Figure 3. tion from the CRD step, and uses the
logic and UDEs from the CRT to develop
Current Reality Tree (CRT): This step the future system. This would enable
examines the cause and effect logic be- management to remove negative effects
hind the undesirable effects in the sys- and see if a solution will work. As part
tem. The CRT process starts with the of FRT construction, the UDEs are
observed Undesirable Effects (UDEs), turned into Desired Effects.
and builds, with strict logical rules, a
model of the system. It helps man- Prerequisite Tree (PRT): This step is
agement to identify the system con- used to outline how to cause the
straint or what to change. The Man- change. It helps management to iden-
agement team making CRT must have tify obstacles, sequence, and milestones
knowledge of the system and it would and to overcome the obstacles in im-
help if the team agreed on the problem. plementing the solution.

Evaporating Cloud or Conflict Resolution Transition Tree (TT): This is a detailed

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 11

step-by step implementation of the so- done. In this traditional approach, the
lution. This is used to cause the change. Critical Path Method (CPM) of scheduling
It would help management to see the is defined as a project management
plan of action for overcoming obstacles method of calculating the total duration
and implementing the change. of a project based on individual task du-
ration and their interdependencies. In
5. TOC Solution in Project Man- other words, we determine which path
agement: A System Approach of work will take the longest, and thus
manage all others to fit within this long-
Applying TOC to the areas of project est path. However, the common project
management provides a whole system focus is on each individual task’s dura-
view of the challenge. In the TOC ap- tion and resource requirement. Thus,
proach, the set of tasks that determine the variation in an individual task’s de-
when a project can be completed is the mand for resources would cause varia-
Critical Chain. They are called a chain, tion in resource demand during the pro-
rather than a path, since they take into ject’s execution.
account resource dependencies. Thus,
the faster the critical chain tasks are
completed the sooner one can finish the
project. Therefore, the TOC-based solu-
tion for managing a single project,
whether stand alone or as part of a
portfolio of projects, is known as critical
chain scheduling and buffer manage-
ment. It provides part of the answer for Figure 4. Critical Chain
the priority aspect of the question Project Network
"What should I work on?" which, if not
addressed appropriately, drives multi- TOC considers a project as a network of
tasking behaviors in multi-project envi- required tasks that move toward a set
ronments (Goldratt, 1997; Newbold of clear objectives intended to be com-
1998; Patrick 1999). pleted under budget and on schedule.
As shown in Figure 4, for a project with
In managing a project, the emphasis is goals such as developing a new IT ser-
on the delivery of tasks that make up vice for sales management, certain pre-
the project. A task is defined as a set of requisites are needed. These prerequi-
activities performed by one or more re- sites are the precedents for the goal,
sources on a project. For each task, the i.e., what is needed to achieve the goal.
inputs are from one or more resources These precedents become the succes-
outside of the task, and its output is re- sors for their prerequisites. In order to
quired for one or more resources out- achieve the goal from the prerequisites,
side of itself. A task cannot begin work there may be some underlying assump-
until all required preceding inputs are tions to clarify all needed dependencies
received. A task is not complete until between the predecessor and the suc-
all required outputs are not only fin- cessor. This process is repeated a
ished (according to the task completion number of times until the start task is
criteria) but also passed on to all subse- reached. The result is a network that
quent resources requiring the output of describes what must be in place in what
task. It is assumed that if these tasks order and what is the logic behind these
are done on time, the project will be successive tasks.
completed on time as well, and thus
there is more focus on getting the task Austin and Peschke (1999) have sug-

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 12

Activity Immediate Weeks ES EF LS LF Slack Critical?

Precedence Required
A 3 0 3 0 3 0 Yes
B A 2 3 5 6 8 3 No
C A 5 3 8 3 8 0 Yes
D B,C 8 8 16 8 16 0 Yes
E B,C 4 8 12 12 16 4 No
F D,E 2 16 18 16 18 0 Yes
Table 4. Reliable IT project CPM Scheduling

gested a 5-step process in building a time, there is a tendency not to go at

TOC project network. Traditionally, in full steam, particularly when there is
CPM or PERT, given the focus on indi- pressure to do other tasks.
vidual activities, there is a strong ten-
dency to include contingency time and Consider, for instance, an IT project in
other resources within each activity. the Reliable Company that consists of
This estimate, and often an over esti- six activities (A, B C, D, E, and F). Ta-
mate of contingencies, are justified to ble 4 shows the activities and the
account for uncertainty due to individual PERT/CPM solution to manage the pro-
activity that commonly causes varia- ject.
tions in the activity as well as special
cause variation that is specific to some
local condition. This is argued to pro-
tect against Murphy’s Law: “If anything
can possibly go wrong, it will go wrong.”
The amount of these contingencies are
not usually well specified, and they are
justified to meet the deadline with a Figure 5. Network for an IT project
high level of certainty and to reduce the
risk. Figure 5 displays the network of the ac-
tivities for the project. Figure 6 displays
Furthermore, managers or co- the measure of required time and other
coordinators at each level within the or- resources for completing the project
ganizational hierarchy could build in under the PERT/CPM and TOC ap-
their own reserves on top of the re- proaches.
serves built in by people reporting to
them. In addition, in this approach, as Goldratt believes that a consequence of
Goldratt argues, there is a tendency to the three time estimates used in PERT
misuse the safety time created within and their weighted mean being used for
the estimated times for each activity. scheduling by CPM will be a tendency to
There is often a perception among the overestimate the times and other re-
employees that when safety time is built sources to give a reasonable degree of
into the estimates they do not need to certainty of completion. As he noted,
worry about starting on time, and thus, the uncertainty existing in every project
according to Parkinson’s Law, “work ex- is the underlying main cause for most
pands to fill (and often exceed) the problems. Furthermore, the allocation
time.” Therefore, starts may be de- of resources (funding, people time,
layed, and this, known as “student syn- skills, equipment, etc) to various activi-
drome,” would leave everything to the ties is viewed as a separate stage of
last minute. Even if starts are made on project management. In particular,

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 13

many of the resources required for indi- parts, is known as the “project buffer.”
vidual project tasks are often sub- The project team members who work on
contracted, where these resources may the project are expected to make realis-
be committed to other tasks or projects tic estimates of time and resources
at any time. Thus, the nature of distur- communicate their expectations on ac-
bances associated with most project tivity duration and attempt to meet
specific tasks may further complicate those estimates. To prevent non-critical
the availability of resources. In par- activities from delaying critical ones,
ticular, in PERT, all activities, whether or “feeding buffers” are placed where non-
not they are on the critical path, will re- critical paths feed into the critical chain
ceive similar treatment with regard to to protect the start of the critical chain
uncertainty, and thus they will have tasks.
similar safety time and resources.
However, TOC removes all these contin- The feeding buffers, which again can be
gencies from individual activities and smaller than the sum of the parts due to
aggregates them into a buffer for the aggregation, contain most or all of the
entire project, as the commitments re- contingency reserves, relating the rele-
garding the completion date are only vant non-critical path. Proper man-
made at the project level (Figure 6B). In agement of the feeding buffers prevents
other words, the safety associated with the critical chain from changing during
the critical tasks can be shifted to the the project execution and leads to a rig-
end of the chain, protecting the project orous project plan. As a result, the pro-
premise (the real due date) from varia- ject promise will be protected from
tion in the critical chain tasks. This con- variations in the critical chain by the
centrated aggregation of safety, which project buffer, the critical chain is pro-
can be smaller than the sum of the tected from variation in non-critical

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 14

work by feeding buffers, and conse- project buffer were sufficiently used,
quently the project is protected against this would indicate a heightened risk of
Murphy’s Law. In short, TOC would relo- the project promise and the priority for
cate the safety time and resources in attention in adjusting the allocation of
strategic positions such as project buffer resources to address the critical tasks
or feeding buffer. This will have the ef- associated with that project. Buffer
fect of reducing the length of the critical management thus would help project
path as shown in figure 6A and 6B. The managers focus on maintaining the
decision to cut the overall safety time premise of the project (effectiveness)
and resources is subject to the level of during its execution, keep it on schedule
confidence that appropriate team mem- and under budget (efficiency), know the
bers of the project have in this process. important priorities, and make the nec-
However, it is recommended that the essary adjustments.
first emphasis should be placed on fin-
ishing on time before looking for a re- Therefore, the critical chain approach of
duction in overall time: in TOC lan- concentrated protection would bring
guage, they go for “exploit” before “ele- about a dual benefit. First, it helps to
vate.” protect the project appropriately with
minimum impact on the estimate of
This TOC approach, by allowing a overall project duration. Second, it
“whole system” view of the project, would help us to monitor risk effectively
identifies the critical chain and the pro- throughout the course of the project.
ject buffer that protects it from inevita- The following section will discuss the
ble uncertainty. Task’s duration esti- system of buffer management as an im-
mates no longer have to be long enough portant ingredient of TOC and as an ef-
to have a high probability of completion. fective method for multi-project man-
Shortening the task duration estimate, agement.
therefore, avoids major impact of Park-
inson’s Law (work expands to fill the 6. The TOC Multi-Project Method
time allowed) and Student’s Syndrome
(delaying the start of a task due to hav- Organizations often tend to launch mul-
ing more than enough time to accom- tiple projects concurrently in order to
plish it) at the task level. It also re- take advantage of valuable new oppor-
moves detrimental pressures and asso- tunities. However, the demand of these
ciated behavior of artificial task dead- multiple projects would impose conflict-
lines from the concerns of project re- ing priorities on the constraint capaci-
sources. The buffers, and their con- ties, resources, and policies of the or-
sumption and replenishment during the ganization. This, in turn, decreases the
actual project execution, can provide chance of success of these projects. In
guidance in assessing the chain of ac- particular, project managers from vari-
tivities that is in the greatest jeopardy ous functional areas within an organiza-
of delaying the promise of the project. tion may argue for the functional impor-
This can provide a clear direction for the tance of their own projects and for
attention to be paid to the most critical higher priority. On the other hand, as
constraint of the project and the most Patrick (1999) notes, if a resource di-
beneficial use of a resource. For exam- vides its attention between different
ple, if a project buffer is sufficiently un- tasks before handing off task deliver-
used, the project premise can still be ables, this would prolong all the projects
protected from distractions and disrup- involved, since all of that resource's
tions on critical tasks that may jeopard- successors on each project will have to
ize the project. On the other hand, if a wait longer than necessary due to time

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 15

spent on other projects' work. The pro- estimates of task duration is that the
jects will also be impacted by the vari- estimate of the overall duration of a
ability of not only their own tasks, but project grows beyond the limits accept-
also of those associated with the other able to management, customers, and
projects that are interleaved within the bottom line. Therefore, manage-
them. Therefore, most projects will ment usually responds with what we
take significantly longer than necessary, might call backpressure. Typically, this
in both their premise and their execu- means that management mandates cuts
tion. TOC and its principles, when ap- in all estimates of task duration, usually
plied to multi project systems, provides in a rather arbitrary manner. The battle
guidance on assessing the capacity of that results between management and
such systems and related mechanisms staff, of course, rages on. However, the
for the synchronized launch of projects system approach in TOC would concen-
and improves the effectiveness of their trate on the areas of the project’s net-
execution. The TOC method consists of work where the protection is the most
five steps: (1) Prioritize the organiza- effective. There are two such areas:
tion's projects, (2) Plan individual pro- first, and perhaps the most important,
jects via critical chain, (3) Stagger the is at the end of a project's Critical
projects, (4) Measure and report the Chain, known as the Project Buffer, and
buffers, and (5) Manage the buffers, the second, called the Feeding Buffer, is
These steps together overcome the placed between every Critical Chain task
challenges of physical and policy con- and any non Critical Chain task that
straints, and help to address the priori- feeds the Critical Chain task. The pur-
ties among the projects and the activi- pose of the Feeding Buffers is to protect
ties within each project. the starts of those Critical Chain tasks
that require inputs from non Critical
1. Prioritize the organization's projects: Chain tasks, so that by protecting the
During the first step, the projects must starts of the Critical Chain tasks from
be prioritized at the organizational lead- the untimely availability of the required
ership level. Only at that level would inputs, with the Feeding Buffers, we
one be able to properly evaluate the po- prevent the project's longest chain of
tential contribution of each project to tasks from becoming longer unneces-
the organizational goals and objectives sarily. The TOC approach would help to
and determine the optimum order of effectively protect each project execu-
priority among the projects. However, if tion, as well as to efficiently manage the
the value of this step is left to middle buffers in a Multi-Project environment.
managers or, worse, to individual pro-
ject managers, this would increase the 3. Stagger the Projects: The TOC ap-
chance of sub-optimization, and conse- proach staggers the projects based on
quently failure of effectiveness. the availability of one resource that is
commonly required by most of the pro-
2. Plan Individual Projects via Critical jects within an organization and more
Chain: As was discussed earlier, there is heavily used relative to other resources
a strong tendency in any functional area (Newbold 1998). This is called the
to overestimate the contingency time drum resource or synchronizer. The role
and resources for each task within a of the drum resource is to set the pace
project partly to protect against Mur- at which projects are launched into the
phy’s Law, and partly to avoid negative system, and to regulate the flow of
consequences for themselves. Unfortu- work-in-process around the full capacity
nately, a direct outcome of embedding of the most restricted resource. The
such “contingencies “ within individual production rate of this drum resource

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 16

typically provides the pace for the rest formance, and thus there may be a ten-
of the system, and thus the work- dency to a biased report of the safe-
schedule for this drum resource is used guarding buffers. Therefore, a timely,
to determine the rate at which projects unbiased buffer report will be an impor-
are allowed to enter the system. There- tant tool for maintaining focus through-
fore, the drum resource is never over- out the organization.
loaded. Given the relatively heavy load
of the drum resource, other resources, 5. Manage the buffers: While a timely,
while they are part of the solution, will unbiased buffer report plays an impor-
not be overloaded. Furthermore, not all tant role in maintaining proper focus
the projects are consistently in use of throughout the organization, it plays an
the drum resource. Therefore, there even more significant role in setting pri-
are times when the stagger is insuffi- orities correctly. Project managers
cient to protect other resources from must constantly report the status of the
peak loading and pressures to multi- projects and the status of various buff-
tasking. In order to address this prob- ers, interpret them properly, and com-
lem, additional stagger is added be- municate them to the appropriate man-
tween the projects, known as the Ca- agers in the organization so that they
pacity Buffer. This would serve to pro- can identify the problems and the need
tect the level of a cross-project, to in- for possible reprioritization. For exam-
sure that on average there are enough ple, suppose a resource is in critical
resources to schedule for all the pro- need of multiple tasks and one needs to
jects, and to efficiently protect them determine which one of these tasks is
from any disruptions and delay. Obvi- the most urgent. All is needed is to
ously, by properly identifying the drum look at the buffers associated with the
resource and effectively using capacity various tasks, and examine which task
buffers, staggering the projects of the is associated with a project buffer since
organization can be an important step in it always has priority over tasks that are
multi-project management. TOC, in associated with feeding buffers. Simi-
particular, tends to focus on maximizing larly, when two or more tasks are all
the flow of work through a system associated with similar buffers, then the
rather than balancing capacity. This task whose buffer is in greater jeopardy
higher-level view of system capacity is clearly given the highest priority.
rather than resource capacity leads to Management of the organization's global
the conclusion that it is enough to keep buffers and their timely and compre-
as little as one resource effectively util- hensive reports would help the man-
ized to manage and maximize the agement team to identify the flexibility
throughput of the system. in the assignment of resources, and to
set the priorities that protect all the pro-
4. Measure the Buffers: As we discussed jects of the organization from undesir-
earlier, proper attention on buffer meas- able disruptions and delay. More spe-
urement and reporting throughout the cifically, if such a report indicates that
execution of each project is vital to the one project is in serious trouble, the
success of completing the project. This same report also shows where the right
task will become even more critical in resources can be borrowed without
multi-project environments as it affects jeopardizing the premises set for the
the reality check of the overall schedule projects.
for the organization. In particular, the
size of the buffers is often viewed by
those who report as an implicit
measurement of their own performance,

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ISEDJ 2 (23) Sabbaghi and Vaidyanathan 17

7. Concluding Comments 8. REFERENCES

Traditionally there has been much em- Austin, K. M., and Peschke, R. E.
phasis placed on gaining efficiency in (1999). How to Build a TOC/Critical
project management. CPM, PERT, and Chain Project Network, APICS CM-
Gant charts have been developed to fa- SIG Symposium Proceedings, March
cilitate the planning and execution of 22-23, 1999, Phoenix, Arizona.
projects on time and within the budget.
On the other hand, project managers Bounds, G. (1998), “The Last Word on
have taken the effectiveness of project Project management, “ IIE Solu-
planning and execution for granted. In tions.
other words, there has not been suffi-
cient emphasis placed on how to Deming, W. E. (1993). The New Eco-
achieve effectiveness in project man- nomics for Industry, Government,
agement. In particular, a project man- Education, Cambridge, MA: MIT,
ager needs to clearly identify the pro- Center for Advanced Engineering
ject’s goals and objectives in support of Study.
the organizational mission and vision
statements so that the project team Dettmer, H. W. (1998). Breaking the
could focus on the effectiveness of pro- Constraints to World-Class Perform-
ject planning and execution before look- ance, Milwaukee, Wisconsin: ASQ
ing for efficiency measures. SWOT Quality Press.
analysis is an effective method for iden-
tifying the strengths and weaknesses Goldratt, E. M. (1992). The Goal, 2nd
and examining the opportunities and Revised Edition, Great Barrington,
threats in project management. TOC MA: North River Press.
takes a system approach in managing a
project, using throughput as an effec- Goldratt, E. M. (1997). Critical Chain,
tive measure of performance evaluation. Great Barrington, MA: North River
It identifies the constraint that domi- Press.
nates the entire project at any given
time and allocates resources to break Horn, L., et al. (1994). SWOT analysis
the constraint and to achieve the pro- and strategic Planning-A Manual,
ject’s objectives. Thus, TOC Time Man- (GFA, Eulenkrugstr, 82, D22345
agement technique (Critical chain Hamburg, Germany).
scheduling) contributes significantly to
the effectiveness as well as to the effi- Newbold, R. (1998). Project Manage-
ciency of project management. Fur- ment in the Fast Lane, Boca Raton,
thermore, TOC has been extended to FL: St. Lucie Press.
allocate resources to multiple projects
that share common resources. This ap- Patrick, F. S. (1999). Getting Out From
plication maximizes the number of pro- Between Parkinson's Rock and Mur-
jects that an organization can handle phy's Hard Place. PM Network 13
while maintaining the principles for re- (April): 57-62.
ducing project duration on each individ-
ual project. TOC can also be effectively Standish Group Internation (1999),
applied to other areas such as project “Chaos: A Recipe for Success”, The
risk management and project cost man- Standish Group International.
agement.
Taylor, B. W., et al. (1982). R&D Project
selection and manpower allocation

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with integer nonlinear goal pro-

gramming, Management Science,
Vol. 28, Issue 10, pp1149 –1158.

Wei, C., et al. (2002). Resource-

constrained project management us-
ing enhanced theory of constraint,
International Journal of Project Man-
agement, Vol. 20, Issue 7, pp 561-
567.

Yeo, K.T. (2002), "Critical Failure Factors in

Information System Projects",
International Journal of Project
Management, Vol. 20, No. 3, April, pp.
241-247.

Ziara, M. M. and Ayyub, B. M. (1999).

Decision Analysis for Housing-
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1
[email protected]
2
[email protected]

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 ISEDJ 2 (23) Sabbaghi and Vaidyanathan 19

Asghar Sabbaghi, Ph.D., Associate Dean and

Professor of Decision Sciences, has been teaching at
Indiana University South Bend, School of Business and
Economics for many years. He received his Ph.D. in
quantitative economics and business analysis from
Indiana University. Dr. Sabbaghi has attended Harvard
University Management Development Program during
the summer of 1999. He had earlier attended the MIS
Faculty Development Institute at the University of
Minnesota in 1987, and Advanced MIS Faculty
Development Institute at IU/Bloomington in 1989. Dr.
Sabbaghi’s teaching is in the areas of Management
Information Systems (MIS), managerial decision making
models, production/operations management, and
database management systems. His research is in the areas of MIS, decision
support systems, economics of Information technology, scarce resource
planning, and economics of water resource management. The second edition
of his co-authored book, Economics of Water Resources: from Regulation to
Privatization, was published in 1998. A paper presented at the Society for
the Advancement of Information Systems received the Richard Irwin
Outstanding Paper Award. He has reviewed MIS and Operation Management
textbooks, articles for several journals including MIS Quarterly, served as
editorial Board/Reviewer for Journal of Economics and Finance, Journal of
Microcomputer System Management, and Journal of Information Systems
Education as well as a paper referee for professional organizations in
Decision sciences and MIS areas.

Ganesh Vaidyanathan, PhD, is an Assistant Professor

at the School of Business and Economics at Indiana
University, South Bend. He received his Ph.D. from the
Tulane University in 1989. He has over fifteen years
experience in ecommerce, information technology,
automation, strategy, and software engineering with
several high tech industries in US and abroad. Prior to
co-founding eReliable Commerce, Inc., Dr.
Vaidyanathan held executive positions at AlliedSignal,
Inc., General Dynamics, and Martin Marietta Inc. Dr.
Vaidyanathan launched products to include security,
payment processing, insurance, procurement, financing,
shipment, logistics, ERP, and data warehousing. He has consulted with
Fortune 100 companies including United Airlines, Mitsubishi, Motorola, and
Honeywell in technology, business and process reengineering. He has
enhanced effective business processes in Logistics, Payments, Purchasing,
Life Cycle Costs, Decision Support Systems, Marketing and Supply Chain
Management. His current research interests focus on eBusiness, information
technology, supply chain management and project management.

c 2004 EDSIG http://isedj.org/2/23/ April 13, 2004

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