Tag Archives: Concept

How Do You Manage Major Projects? Seven Points

Situation: A company conducts both engineering feasibility studies and development projects. These are high budget projects and must be managed diligently to prevent cost overruns. What have others done to assure that projects are planned and managed to budget? How do you manage major projects?

Advice from the CEOs:

  • What is the structure of most contracted projects?
    • Most projects are fixed price. They come from feasibility studies which are essentially “marketing” for future sales. Typical terms are 30% up front, with the other 30/30/10 upon achievement of milestones and completion of the project.
  • Get complete buy-in from the customer as part of the initial negotiation.
  • Stay ahead of expenses by billing in time to maintain positive cash flow from the projects.
  • Structure pricing so that custom work is profitable if the project mix is 50/50 custom vs. standard work.
  • Push-back if the customer wants to reduce project cost up-front.
  • Carefully document work papers – above what is required by the contract. Get buy-in for this in advance, during the initial negotiation.
  • Once the feasibility study is completed, revise the scope and deliverables of the work agreement based on findings from the study.
  • Separate the “concept” phase from the execution phase and charge a premium for the concept work.
    • Position this as a value to the customer.

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How Do You Manage a Business Transition? Five Thoughts

Situation: A company is moving from sole focus on servicing a market to a split focus including developing and marketing their own products. This is a significant transition for the team. What is the best way to organize this effort? How do you manage a business transition?

Advice from the CEOs:

  • While the company’s financials are great for their market, cashflow may be insufficient to fully fund a development company.
    • Internal development of new products can create conflicts if it creates competition for resources between internal and external projects.
    • To avoid this, create an independent company or entity – in a separate location. Seek outside funding whether bank, angel or partner financing. The independent entity can then buy resources from the primary entity at competitive rates.
  • Several years ago, another CEO utilized the strategy just described. The important lessons were:
    • Assure that venture is properly resourced.
    • Assure that there is a balance between proven structure and creative application development.
    • Utilize best resources available at same rates that key customers pay.
    • Offer free guidance but not free services – peer reviews are key.
  • A third CEO had an opportunity to open a new business using the spin-off model.
    • They allowed infrastructure sharing – with proper compensation and incentives (equity ownership).
    • Ultimately both entities were successful.
    • Lesson: Properly implemented, this model works.
  • There are four aspects to the challenge.
    • Product concept
    • Talent for execution
    • Financing
    • Distribution
    • The business plan for the new venture must address all four.
  • Building internally (vs. externally) creates natural conflict. Workers will tolerate change in direction from clients better than they do from insiders.

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