Pelican beak analogy shows enhanced planning benefits

Pelican beak analogy shows enhanced planning benefits

Oct 4th, 2017

The pelican beak analogy shows enhanced planning benefits. As you probably know it by now, we have expressed skepticism toward using  buzzwords like black swan and others, for numerous reasons.

That does not stop us, however, to come out today with another avian analogy.

The pelican analogy displays in a simplified manner the capital required by an entity, i.e. a project, startup, basically any endeavor. It displays as the straight orange line. The capital produced in the meantime, i.e. the purple curve, is lower than the required capital, thus the project needs financing. After a while, hopefully the two lines intersect. That is the break-even time. After that, hopefully, the entity delivers profits.

Pelican beak analogy shows enhanced planning benefits

The gap between the orange line and the purple curve, i.e. the pelican beak pouch, is a clear graphic depiction of the financing requirements.

Pelican beak analogy shows enhanced planning benefits

The 2nd figure shows the effects of fast-tracking the entity’s development.

Time is money.

Fast-tracking shifts the break-even point towards the left, producing a time advantage to break-even due to enhanced planning.

The “pouch” may be deeper, but it becomes shorter.

Pelican beak analogy shows enhanced planning benefits

The pelican beak analogy shows enhanced planning benefits if a Net Present Value (NPV ) analysis is run. In this case we can use NPV  because we are looking at short term advantages. However, NPV does not include risks, so the results are unreliable, possibly significantly misleading.

What does enhanced planning mean?

By seeing those figures most people conclude that “enhanced planning” may be a synonym of Fast-Tracking or Crashing. These are two techniques generally used to shorten project duration.

Fast-Tracking refers to performing various activities related to the project in parallel rather than sequentially. It does not require additional financing but can certainly increase risks. If it is feasible, it also implies that the initial project’s schedule might have been too generous, with excessive margins.

Crashing is applied if fast-tracking is not sufficient. It requires careful analysis of cost and schedule trade-offs to obtain the maximum compression for the minimum cost.

So, what does enhanced planning mean?

It means performing fast-tracking and crashing as necessary, while maintaining an updated risk register using ORE, in order to benefit of the advantages, without incurring in risk over-exposures.

Strategic and tactical planning (Let’s define Strategic, Tactical and Operational planning) will thus be optimized.

Thus the pelican beak analogy shows enhanced planning benefits which are real and not merely a wishful thinking.

Contact me to know more.

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Category: Consequences, Risk analysis, Risk management

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