Assignment

Part 1: Learning in Projects

Slide 1 Introduction Welcome to Managing Project Risk. In this lesson, we will discuss learning in projects.

Slide 2 Topics The following topics will be covered in this lesson:

Learning at Escend Technologies; and Types of project learning.

Slide 3 Learning There are many different definitions for learning. However, for the purposes of this class, learning in projects is the flexible adjustment of the project approach to the changing environment as it occurs; these adjustments are based on new information obtained during the project and on developing new solutions during the course of the project. Each new activity will provide new insights and information, which can be used to revise the project plan, the resources required, and the stakeholders to be dealt with. While each of the changes may be minor, the project itself may look quite different at the end from the original plan and intention.

Slide 4 Learning at Escend Technologies To demonstrate the project learning approach to unk unks, we will use a company called Escend Technologies as our example. When Escend Technologies was founded in 1999, it had a business plan as is common in new venture funding. The business plan contains a description of the market, description of the core product, and a development plan consisting of key milestones to be met by startup at key points in time. Monthly board meetings track progress according to the key milestones.

Escend was built on the idea to help semiconductor and electronic component manufacturers connecting and collaborating with their extended sales force. The founders originally conceptualized the opportunity as one of collaboration among industry players who would want to be part of Escends B2B, business to business, community.

By the middle of two thousand and three, Escend was on the brink of bankruptcy. The planning approach used was not suitable for a startup in an unknown territory.

Escend faced too many unk unks: in its technology, in the industry, and in the customer needs. The milestones laid out in the business plan were unrealistic. Faced with time pressure and market dynamics that they did not understand, the team was forced to improvise around the plan and they found themselves frustrated by the simultaneous pressure to act and the inability to understand what was going on around them.

Changes in the value proposition were not the result of systematic investigations into the industry or the needs of its customers.

They were simply reactions to events that occurred around them. They lost sight of the original objective of making money in a market opportunity and instead focused on trying to implement the business plan. The business plan became the objective, and the message was changed from time to time to help get the business plan back on track.

When Escend requested an additional six million dollars from outside investors, they thought that the negative reaction was due to the message, not the business or management team, was the problem. The board continued to behave as usual by rewriting the message to investors, without critically examining the management team or the approach to the business opportunity. It was not until this funding situation reached a critical point that the board woke up to the situation at hand and things began to change. Unable to raise outside money, the board, including the key investors, had to critically assess both the management team and the business opportunity. The task fell to Elaine Bailey, a general partner at Novus Venture, one of the original funding partners. Her job was to determine whether Novus should participate in another round of funding or pull the plug on the venture.

Slide 5 Learning at Escend Technologies, continued In July 2003, Elaine stepped in as interim CEO of Escend Technologies to assess the company and recommend the next steps. Her key insight was not to attempt to diagnose what needed to be done to implement the business plan, but to remind herself of the objective, to make money in a particular market opportunity, and to diagnose what they knew and what they did not know about the market opportunity and Escend's ability to take advantage of this market opportunity.

Elaine recognized that significant knowledge gaps existed. She identified three main areas with unk unks:

Customer needs, industry readiness, and product functionality.

Customer needs had the greatest knowledge gaps because customers themselves could not articulate their needs. No one had yet to understand where the product would ultimately create the most value.

In addition, as there were no competitors yet in this space, no one had defined the problem before, and no analysts were covering an companies in this part of the industry. In other words, Escend was a pioneer in unchartered territory.

These three areas required a different mindset at Escend than had been previously established. Escend was creating a new market niche. The goal had to be to turn unk unks into known unknowns, foreseeable uncertainty.

In addition to the planning subprojects, the knowledge gap around customer needs and the readiness of the industry for a player like Escend become a learning project. Time was set aside purely to reflect and to gather information from multiple parties about the problem areas.

Slide 6 Learning at Escend Technologies, continued In developing the business over the twelve months, two large business changes occurred, both of which changed Escend's strategy and neither of which could have been anticipate.

First, Elaine learned how fast the electronic components market was becoming global. This implied a global platform and design- win tracking for component manufacturers when they were bidding for their components incorporation into end products. A global platform, another product redesign, would consume precious funds and resources. They made a number of changes to the product. This also meant that their target customers and growth strategy changed.

Second, firms in the industry network had limited visibility of the entire network. As a result, manufacturers were changing the way they sold products. Therefore, Escend would have to build distribution functionality into the product. Through this all, Escend's business model slowly crystallized. In the fall of two thousand and four, it seemed that Escend had turned the corner and was becoming an excellent bet for the investors. Elaine signaled her confidence by replacing herself as CEO.

Slide 7 Types of Project Learning In general, there are three Levels of Learning. In single loop learning, an organization detects errors and makes corrections according to existing plans and policies. This is consistent with contingency planning and classic project risk management. In double loop learning an organization detects errors and makes corrections in ways that involve the modification of the existing plans and policies. The term double loop implies a correction not only in response to errors, but also in how the response is made. This is consistent with the type of learning we will be applying in part two of this lecture. As the organization modifies its project plan in response to acquiring new information, it is creating new policies and implementing these new policies as it proceeds. The final level of learning, deutero learning, involves changing the learning system by which organizations detect errors and take action. This type of learning will be discussed in later lectures.

Slide 8 Check Your Understandin g

Slide 9 Summary We have now reached the end of this lesson. Let's take a look at what we've covered.

First, we looked at learning at Escend Technologies. The learning stages at Escend Technologies was first planning and firefighting, then diagnosis and learning, and finally, getting first results and further adjustments.

Finally, we considered the types of project learning. In general, there are three Levels of Learning, single loop, double loop, and deutero. In single loop learning, an organization detects errors and makes corrections according to existing plans and policies. In double loop learning an organization detects errors and makes corrections in ways that involve the modification of the existing plans and policies. The final level of learning, deutero learning, involves changing the learning system by which organizations detect errors and take action.