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CHAPTER
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Planning and Estimation Tools
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In this chapter we will begin by looking at early planning and estimation tools that help you de ne a project during the concept, analysis, and early design stages. Then you will learn an excellent step-by-step method for creating a work breakdown structure (WBS), planning the project in detail by listing all of the project tasks. Lastly, we will turn to detailed estimation techniques that allow you to create a schedule and budget from the WBS.
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Tools for Defining Value
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This section provides a tool for de ning the seven sources of hard-dollar value and soft-dollar value of a product or service, as de ned in the explanation of the project overview template in 5. It then provides a tool for comparing value to cost.
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PART THREE Skills and Tools THE SEVEN TYPES OF VALUE
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Table 10-1 lists the seven types of value. Below are the steps to de ning value and documenting it in the project overview:  Create a blank table similar to Table 10-1, but with three columns instead of two. Each row of your table should list one of the seven types of value. The left-hand column names the type of value, the same as in Table 10-1. In the middle column you will enter hard-dollar value with speci c gures, and place soft-dollar value information related to the particular type of value in the right-hand column. Using that table, you can de ne all the hard- and soft-value items for your project. Summarize it in the purpose section of the project overview. List the one or two most important types of value added in the short purpose eld of the project overview, and include the total hard-dollar value. Make reference to this table as a supporting document in the project overview. In this table, make reference to any additional supporting documents used to estimate value, including process analysis documents and marketing studies.
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Below are some guidelines about how a business will respond to a statement of value for a project:     In general, a project is approved primarily on its hard-dollar value. Soft-dollar value enhances the likelihood of project acceptance, and may encourage commitment from various stakeholders. But soft-dollar value alone is not generally enough to justify a project. Soft-dollar value should be couched in the business terms of your organization, for example its vision, mission, and values, and also match the concepts in the table on de ning value. Technical items, such as increased reliability, are not value in themselves, but may be translated into either hard-dollar or soft-dollar value.
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A clearly written value statement enhances the chances of project acceptance.
CHAPTER 10 Planning and Estimation
Table 10-1 The seven types of value.
Type of organizational change that results in added value Cost reduction and cost avoidance Increased production
De nition
Cost reduction: allows you to maintain current production levels at lower cost Cost avoidance: allows you to prevent a foreseeable future cost The ability to produce more of what you produce in a given period of time. Only of value if you can sell the increased quantity of product Speeding up any business process, including: Delivery of products and services to customer Problem resolution Delivery of new services and products to the market Faster cycle time increases organizational exibility Serving more of the existing customer base than you currently serve New ways of reaching current potential customers that increase the likelihood that they will use your services, or use them more often, resulting in increased sales The opportunity to serve customer groups that you have not been able to serve before. This includes operating in new regions or locations, and reaching new customer groups, such as di erent age groups or cultural groups. This is also called market development and market penetration Any activity that protects or increases the value of anything that bene ts the company. This includes: Anything that assists with sta retention Security of all types Reduction of legal liability, which protects nancial assets Regulatory compliance, which protects nancial assets and the ability to operate as a business or organization Increase of customer satisfaction and customer retention Improving or maintaining the perceived value of the organization, retention and development of shareholder value and good will Anything necessary to continue business operations
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