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Case Study - Packer Telecom

Packer Telecom was spending a high percentage of earnings on R&D but few projects reached commercialization. A project manager proposed using risk management templates from other companies but the project sponsor had concerns. The sponsor questioned whether templates and probabilities could transfer between companies without tailoring to Packer's processes. The sponsor also noted templates should be forward-looking and validation was needed before employees used an untrained template on a project.

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464 views2 pages

Case Study - Packer Telecom

Packer Telecom was spending a high percentage of earnings on R&D but few projects reached commercialization. A project manager proposed using risk management templates from other companies but the project sponsor had concerns. The sponsor questioned whether templates and probabilities could transfer between companies without tailoring to Packer's processes. The sponsor also noted templates should be forward-looking and validation was needed before employees used an untrained template on a project.

Uploaded by

Malki
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Packer Telecom

BACKGROUND

The rapid growth of the telecom industry made it apparent to Packer’s executives
that risk management must be performed on all development projects. If Packer
were late in the introduction of a new product, then market share would be lost.
Furthermore, Packer could lose valuable opportunities to “partner” with other
companies if Packer were regarded as being behind the learning curve with regard
to new product development.
Another problem facing Packer was the amount of money being committed
to R&D. Typical companies spend 8 to 10 percent of earnings on R&D, whereas
in the telecom industry, the number may be as high as 15 to 18 percent. Packer
was spending 20 percent on R&D, and only a small percentage of the projects that
started out in the conceptual phase ever reached the commercialization phase,
where Packer could expect to recover its R&D costs. Management attributed the
problem to a lack of effective risk management.

THE MEETING

PM: “I have spent a great deal of time trying to benchmark best practices in risk
management. I was amazed to find that most companies are in the same boat as

460
Questions 461

us, with very little knowledge in risk management. From the limited results I have
found from other companies, I have been able to develop a risk management tem-
plate for us to use.”

Sponsor: “I’ve read over your report and looked at your templates. You have
words and expressions in the templates that we don’t use here at Packer. This con-
cerns me greatly. Do we have to change the way we manage projects to use these
templates? Are we expected to make major changes to our existing project man-
agement methodology?”

PM: “I was hoping we could use these templates in their existing format. If the
other companies are using these templates, then we should also. These templates
also have the same probability distributions that other companies are using. I con-
sider these facts equivalent to a validation of the templates.”

Sponsor: “Shouldn’t the templates be tailored to our methodology for managing


projects and our life cycle phases? These templates may have undergone valida-
tion, but not at Packer. The probability distributions are also based upon someone
else’s history, not our history. I cannot see anything in your report that talks about
the justification of the probabilities.
“The final problem I have is that the templates are based upon history. It is
my understanding that risk management should be forward looking, with an at-
tempt at predicting the possible future outcomes. I cannot see any of this in your
templates.”

PM: “I understand your concerns, but I don’t believe they are a problem. I
would prefer to use the next project as a ‘breakthrough project’ using these tem-
plates. This will give us a good basis to validate the templates.”

Sponsor: “I will need to think about your request. I am not sure that we can use
these templates without some type of risk management training for our employees.”

QUESTIONS

1. Can templates be transferred from one company to another, or should tailor-


ing be mandatory?
2. Can probability distributions be transferred from one company to another? If
not, then how do we develop a probability distribution?
3. How do you validate a risk management template?
4. Should a risk management template be forward looking?
5. Can employees begin using a risk management template without some form of
specialized training?

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