Define Phase: Lean Six Sigma Application in Information Technology Tutorial

3.1 Lesson 03 Define

Hello and welcome to the third lesson of Lean Six Sigma Application in Information Technology offered by Simplilearn. This lesson will explain Define phase concepts related to IT. It will also cover steps to apply Define phase tools to IT activities. Let us explore the objectives of this lesson in the next screen.

3.2 Objectives

After completing this lesson, you will be able to: Describe the use of a prioritization matrix to prioritize IT projects Define key elements to successfully develop a charter for IT projects Explain the use of Voice of Customer techniques to gather requirements Identify ways to assess project risk Before beginning with the first topic, let us review define phase on the next screen

3.3 Define Phase Review

Before moving into a discussion of specific define concepts and tools for IT, a high level review of the define phase is necessary. Overall, the purpose of the define phase in Lean Six Sigma is to document and gain agreement on key project questions. A key define activity is the development of the project charter. This topic will be covered in more detail later in the lesson. The project charter is complete when the sponsor and key stakeholders have approved the content. A well written project charter provides the foundation for the work of the project team Other key define deliverables include a SIPOC diagram, high level financial benefits, and voice of the customer information. All of these deliverables will be covered later in the lesson. We will now move onto the first topic of this lesson

3.4 Define Topic 1 IT Project Prioritization

Let us start with the first topic of this lesson, IT project prioritization

3.5 Project Prioritization

Project prioritization establishes governance around how projects are selected and approved for development. When completed correctly, prioritization provides a method by which projects are evaluated against each other Project prioritization should not be completed only within the context of the IT strategy. The prioritization criteria and process should begin with the strategy of the business in mind along with the IT strategy. Next, Let us look at why prioritization is important.

3.6 Importance of Prioritization

All organizations operate within a set of constraints. There is a set amount of money and resources available within the organization, which creates the need for a method to choose what to work on from the many possibilities presented. Given common constraints of money, and resources, it is critical to choose projects with the highest impact on the business. Impact can be measured in many ways. Often times it is based on ROI, however regulatory compliance , employee satisfaction, and supporting business functions such as Finance or Human Resources are other criteria that can be used in project prioritization Prioritization, when completed with a cross functional group, also ensures agreement and alignment around the final portfolio. Let us review when project prioritization occurs in the next screen

3.7 Timing of Prioritization

Project prioritization should occur on a regular cadence. At a minimum, it should occur on an annual basis in conjunction with the annual planning or budgeting process. It is good practice to revisit the portfolio on a regular basis as changes in the business can dictate changes in project prioritization. The next screen will address who should be involved in project prioritization

3.8 Prioritization Team

BP1: Project prioritization should take place at the organization vs the business unit level. This ensures the organization is investing in the projects with the strongest overall impact to the company as a whole instead of sub optimizing impact at the individual business unit level. BP2: The prioritization team is a group of equals in which everyone’s vote counts regardless of title or position in the organization BP3: The prioritization team has the responsibility to take the groups decisions back to the original requestors, and to explain the outcome. Having the right people on the prioritization team will lesson the likelihood of portfolio politics, where a sponsor disregards the decision and escalates the project for inclusion into the final portfolio. Let us cover the prioritization process in the next screen

3.9 Project Prioritization Process

There are 5 high level steps that should occur in the project prioritization process. Step 1 - Need Identified, IT or business identify issues or potential projects Step 2 - High Level Estimate, High level or “t-shirt” sizing estimate of effort and cost Step 3 - Project Charter, Initial project charter based on current information available Step 4 - Prioritization Exercise, Prioritization activities completed Step 5 – Decision, Project placed in final portfolio or declined based on prioritization results The next screen will begin the case study for this topic.

3.10 Define Topic 1 Case Study Using a Prioritization Matrix to Prioritize IT Projects

Let us understand a case study in the following screens.

3.11 Background

Background information : A medium sized mortgage broker with 450 employees operates in 3 states. The company serves both residential and commercial mortgage customers. Revenue is primarily driven through loan origination fees and administrative fees charged on loans. The profit on residential mortgage loans is 0.5%, or an average of $875 per loan. The company brokered 100,000 residential loans in the last fiscal year. The profit on commercial loans is 0.9%, or an average of $3600 per loan. The company brokered 30,000 commercial loans in the last fiscal year. The company’s strategic priority is to grow its commercial brokerage business. The mortgage brokerage industry is highly regulated both at the federal and the individual state level. As the company moves into the annual planning process, they have established an IT budget of $10 million for the year, 3 million of which is earmarked for already planned infrastructure projects. The next screen outlines the problem Mortgage Inc is facing.

3.12 Prioritization Activity

During the lead in to the annual budgeting cycle the 2 business units and the corporate IT team have identified 14 projects they wish to fund for this year, with a combined cost of $16.2 million. With a budget of only $7 million available, prioritization of the projects is necessary. Advance to the next screen for 2 case study questions

3.13 Case Study Question 1

Let us review what we have learnt in the case study with the help of a question. (Continue the voice over by narrating the question followed by the answer and a small explanation of the answer)

3.14 Case Study Question 2

Let us review what we have learnt in the case study with the help of a question. (Continue the voice over by narrating the question followed by the answer and a small explanation of the answer)

3.15 Prioritization Criteria

The company decided on 5 criteria which they would use to evaluate all the potential projects. They decided some aspects were more important than others, so each item is weighted according to the importance to the organization. They are: Strategic Value, Expense Reduction, Customer Satisfaction, Legal and Regulatory, Security. Let us look at the prioritization matrix in the next screen.

3.16 Prioritization Matrix

The prioritization team used the following matrix to rate the individual projects. Prior to completing the matirx, the team agreed to a scoring system of 1,5-and 10. A one indicates no impact on the factor being evaluated, 5 indicates medium impact, and 10 is high impact. Once the impact scoring was developed, the team populated the matrix with the projects under consideration and the 5 criteria against which the projects will be assessed. The outcome of the prioritization exercise is on the next screen.

3.17 Prioritization Matrix (cont.)

The prioritization team completed the matrix and ranked the projects by score. Please answer the case study question on the next screen

3.18 Case Study Question 3

Given budget, what projects should the company approve? Projects ranked 1-7 would definitely be approved. The credit reporting software project, ranked 9th might also be approved as there is a small amount of money left to allocate after the first 7 projects are funded. This completes the case study. We will move to the second topic in the next screen.

3.19 Define Topic 2 Chartering IT projects

Our second topic covers Chartering IT Projects On the next screen we will discuss the project charter.

3.20 Project Chartering

The project charter is the critical document of the initiation and planning phase of a project The charter is the foundation for a successful project launch, so care should be taken to make sure it is well thought out and complete. Failure to do so put the project at risk of unnecessary delays or other defects. We will discuss the elements of a project charter in the next screen

3.21 Project Charter

There are 3 sections of the project charter to be completed. Project Overview: The information contained in this section is similar to the overall charter elements seen in a Green Belt Lean Six Sigma project. The overview contains information including the purpose and goals of the project as well as the project scope . The project approach section highlights the major deliverables, the high level project schedule, and defines the project management methodology that will be used in the project. There is not much to fill out in the project approval section of the charter, however it is critical to obtain the approval signature of all major stakeholders prior to launching the project. This ensures the interested parties are aligned on the charter items from the very beginning of the project.

3.22 Stakeholder Analysis

Stakeholder analysis is a tool used to gain input and support for a project or change initiative. The concept of stakeholder analysis is applicable to any type of project whether it be technology solution development , infrastructure improvements, training, or lean six sigma projects. A stakeholder is defined as anyone who has a vested interest in the project While a project may have many stakeholders, they do not have the same impact on the project. The purpose of stakeholder analysis is not to address every single stakeholder need, but to identify the critical ones and identify their involvement in the project. In the next screen, we will discuss the importance of stakeholder analysis

3.23 Importance of Stakeholder Analysis

Stakeholders are people, and people are more likely to support projects if they feel they are involved and their feedback is being heard. Proper stakeholder analysis can ensure support for the project, while ignoring key stakeholder groups almost guarantees resistance to the project. Stakeholders are key providers of requirements and current state analysis, so involving them early and often ensures project quality later on. More than having IT resources to execute on most projects, and it is generally the stakeholders who provide the additional resources needed to ensure project progress and quality In the next screen, we will discuss methods for identifying stakeholders

3.24 Stakeholder Identification

A SIPOC diagram is a useful tool to identify a projects key stakeholders. SIPOC is an acronym for Supplier, Input, Process, Output, Customer. Following is a description of the elements of the SIPOC and how it is used in stakeholder analysis When completing a SIPOC, start with the process steps and then work backwards and forwards. The process should be at a very high level, with not more than 5-7 steps for a very complex project After documenting the process steps, the next step is to identify the inputs into each of the process steps. Use the 80/20 rule when completing the inputs. This will ensure that the important inputs are identified. Once the inputs are identified, next come the suppliers of the inputs. The suppliers identified on the SIPOC should be included in the stakeholder analysis Now move to the right of the SIPOC and document the output of the process steps BP10/11: the final step in the SIPOC is to list the customers of the outputs. Again, use the 80/20 rule to identify primary customers. Anyone listed in the customer column makes up the balance of the stakeholders to conduct the analysis on. In the next screen, we will discuss the actual stakeholder activity analysis.

3.25 Stakeholder Analysis

The stakeholder analysis should not be a solitary exercise. At a minimum it should include the project sponsor, and preferably with member of the project team to ensure accuracy. Output can take many forms- it can be completed as an Excel spreadsheet, or in a matrix format. Regardless of format, there are 4 critical elements to include in the analysis, they are: Impact on project- measured on a scale of low to high Level of Interest: also measure low to high Current attitudes and level of involvement and support ranked from is low to high, where you need them to be to ensure project success. Action plan to address gaps In the next screen, we will discuss high level project planning.

3.26 High-level Project Plan

A high level project plan is a critical component of the project chartering process. The high level project plan lays out the major milestones of how and when a project will be complete. A detailed project plan, including budget, detailed deliverables, and work breakdown structure come at the end of the define phase after a project has been prioritized and approved In the next screen, we will discuss components of the high level project plan

3.27 Components

Listed below are the key elements included in the high level project plan. A list of the major project deliverables The roles and responsibilities for the project as well as the people and technology resources Project Management methodology- i.e Agile, Scrum, Waterfall Project life cycle-stages the project will go through Project Controls: methods used by the Project Manager to monitor and report the project progress Cadence and method of status updates on the project Key milestones and stages of the project Overview Risks that might impact the project In the next screen, we will move on to the third topic in this lesson

3.28 Define Topic 3 Voice of the Customer Techniques for Requirements Gathering

Welcome to topic 3, Voice of the Customer techniques for Requirements Gathering On the next screen we will discuss the purpose of requirements

3.29 Requirements Gathering

Requirements define and document what the technology solution will deliver Requirements gathering is an iterative process starting with high level requirements used during the high level scoping and estimating processes. Once a project is prioritized and approved, the detailed requirements gathering process begins There are many types of requirements developed during the course of a project. This topic will focus specifically on gathering customer requirements. We will discuss the importance of customer requirements in the next screen

3.30 Importance of Customer Requirements

Although it seems common, however many technology projects fail because of poor customer requirements gathering. Understanding the voice of the customer is a key in ensuring that the final product actually solves the problems and concerns of the end user Understanding customer requirements is also necessary, along with current state analysis, to ensure the technology solution and business processes are aligned at implementation The next screen will discuss how to identify who to solicit requirements from.

3.31 Soliciting Requirements

The SIPOC used to identify key stakeholder for the project charter can also be leveraged to identify the key people of functions needed to develop the customer requirements. Specifically, the supplier and customer categories should be used to develop the initial list. The list should the be prioritized to ensure you are obtaining critical customer or stakeholder requirements In the next screen, methods of soliciting customer requirements will be discussed.

3.32 Obtaining Voice of the Customer

There are multiple voice of the customer option that can be used to gather customer requirements. Going to the Gemba. This is the foundational method for understanding current state and current conditions in Lean. The word Gemba is a Japanese term which roughly translates to the real place. Spending time observing the process in action allows the person gathering requirements to see for themselves how the process works and the problems with the current technology solution, which can then be translated to new system requirements. When using Gemba visits to capture requirements, it is important to make sure that the process observation occurs over the full range of days and shifts to ensure an accurate picture of the current project. One on One Interviews- this method allows the requirements gatherer to spend time with the individual stakeholders and asks a series of questions to understand their requirements and expectations of what a technology solution should deliver Facilitated group session: This method also allows for face to face interaction, but allows the requirements gatherer to here from multiple people at one time. Having the facilitated session, by including a cross functional group of stakeholders can benefit the process by highlighting how the requirements of different users compliment and contradict each other Conducting a survey is a viable option for soliciting requirements from stakeholder who are geographically distant or unable to participate in an in-person interview. While this method appears to be easy, attention must be given to the survey development to ensure adequate information is obtained. Low survey response rates can also be a problem with this method The next screen will discuss consolidating requirements gathered

3.33 Consolidating Requirements

Once all the customer requirements have been gathered, they can be consolidated and prioritized. An affinity diagram is a tool often used in lean six sigma projects to consolidate feedback into like categories. This tool is also effective in consolidating requirements into common categories to assist in the prioritization process. Competing an affinity diagram is easy to do- all you need is flip chart paper and some sticky notes with all the requirements. Once the categories are established, just move the sticky notes under the appropriate category and your affinity process is completed. The final step is to produce the affinity diagram. An example of what a completed affinity diagram might look like is provided on the screen. Let us process to the final topic of the lesson in the next screen.

3.34 Define Topic 4 Assessing Project Risk

Our final topic is Assessing Project Risk which we will discuss in the next screen.

3.35 Assessing Project Risk

Projects are inherently risky ventures Given that it is important to identify the potential risks to a project and evaluate how likely it is, that the risk will occur- this will help to prioritize the risks in a project Risks come in many forms during a project. Some of the most common risks identified in projects are: stakeholder, execution risk, external risk, and technology risk. The next screen will provide a simple method of assessing project risk

3.36 Impact Analysis

The impact analysis tool is a simple matrix used to quickly evaluate and prioritize project risks based on their impact to the project and the likelihood they will occur. To complete the matrix use the following steps: Brainstorm all the project risks- in our example each identified risk is represented by a blue circle Plot each pain point according to its impact on the project and the likelihood it will occur. The definition of impact should be defined by the group prior to the exercise. Impact can be defined as time, money, quality, or other criteria important to the project team and stakeholders. Begin risk mitigation planning on the risks that have the potential for high impact and/or have a high likelihood of occurring. In the next screen, we will cover an alternate method for assessing project risk

3.37 FMEA

The failure Modes Effect Analysis (F.M.E.A) is a tool used in lean six sigma to evaluate the likelihood and impact of identified root causes on the process being improved. The FMEA is a commonly used tool across industries including healthcare, manufacturing, and aerospace to name a few. The FMEA is traditionally thought of as a root cause identification tool, however it can be modified slightly and be used to identify and prioritize potential risks. (Graphic) Here is an example of a completed risk FMEA. The steps to complete a risk FMEA are: Brainstorm and list potential risks, then affinitize into categories of risk,. The categories are documented on the far right, with the individual risks in the Failure mode column. The rate the severity of the risk and the probability of occurrence- the above example allows for a 1-10 scale , but this can be modified based on preference. Many times the scale is compressed to a 1-3-5-7-9 scale to minimize disagreements on the subtleties of a 3 vs a 4 score. The output is a score that allows the ranking of risk. The template then provides the space to document the action plans and track the owner of the actions.

3.39 Summary

Here is a quick recap of what we have learned in this lesson: Project prioritization is most effective when done at the overall organization level vs within business unit silos The project charter lays the foundation for a successful project The SIPOC is a useful tool to identify key stakeholders used to complete the stakeholder analysis and requirements gathering processes Several effective methods are available to solicit customer requirements , which are critical to project success Impact Analysis matrix and modified FMEA are effective tools to identify and assess project risk Please advance to the next screen to end the lesson

3.40 Conclusion

This concludes lesson three, Define In the next lesson, we will discuss measure tools for IT

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  • PMP, PMI, PMBOK, CAPM, PgMP, PfMP, ACP, PBA, RMP, SP, and OPM3 are registered marks of the Project Management Institute, Inc.

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