Chapter 12: InitiatingOpening CaseWhat Is Involved in Project Initiation?Supporting Explicit Business ObjectivesTable 12-1. Initiating Processes and OutputsBackground on Northwest Airlines (NWA)Background on ResNetFigure 12-1. Sample Reservation Screen Before ResNetFocus on Making Direct SalesStaffing a New ProjectTable 12-2. Three Main ResNet ProjectsWhat Went Wrong?Selecting the Project ManagerPreparing Business Justification for the ProjectsSlide 15What Went Right?Table 12-3. ResNet 1995-96 Financial SummaryFigure 12-2. Sample ResNet Screen“What ResNet is to PARS Is Like What AT&T Is to Two Sticks and a Hollow Log”Figure 12-3. Executive Summary for Justifying ResNet ProjectDeveloping the Project CharterTable 12-4. Next Steps After Beta ResNet ProjectActions of the Project Manager and Senior Management in Project InitiationCopyright Course Technology 20011Chapter 12:InitiatingCopyright Course Technology 20012Opening Case•Chapters 12-15 are all based on a real case study•Fay Beauchine, VP of Reservations at Northwest Airlines (NWA), sponsored the ResNet projects•Peeter Kivestu, a marketing director, was the project manager for ResNet•ResNet was the first information technology project led by non-technical managers at NWACopyright Course Technology 20013What Is Involved in Project Initiation?•Initiating is the process of recognizing and starting a new project or project phase•It is critical to ensure that the right kinds of projects are being initiated for the right reasons•It is better to have moderate or even a small amount of success on an important project than huge success on an unimportant oneCopyright Course Technology 20014Supporting Explicit Business Objectives•The most important reason for initiating IT projects is to support explicit business objectives•NWA was having financial difficulties in the early 1990s, so reducing costs was a key business objective•ResNet would help stop the financial drain caused by the reservation call centersCopyright Course Technology 20015Table 12-1. Initiating Processes and OutputsCopyright Course Technology 20016Background on Northwest Airlines (NWA)•Northwest Airlines is the world’s fourth largest airline and America’s oldest carrier•In 2001, NWA had over 53,000 employees worldwide•The reservation system used 3,000 dumb terminals in the early 1990s•The reservation process was becoming more complex, and the call centers were losing moneyCopyright Course Technology 20017Background on ResNet•The reservation system before ResNet was PARS•Reservation agents had to use cryptic commands to use the old system•All information was on one character-based screen •Deregulation and new marketing initiatives complicated the reservation process•Call times were increasingCopyright Course Technology 20018Figure 12-1. Sample Reservation Screen Before ResNetCopyright Course Technology 20019Focus on Making Direct Sales•Fay Beauchines’ vision was to change the focus of the call centers from just information and service to sales•Making a direct sale saved NWA commission fees of 13% plus 18% in overhead cost savings•A new reservation system was needed to help agents make direct salesCopyright Course Technology 200110Staffing a New Project•Fay selected Peeter Kivestu, a marketing director at NWA, as the ResNet project manager•Peeter’s strategy was to prove the concept of ResNet first with a prototype •Peeter asked Arvid Lee, a senior member of the IS department, to lead the IS team on the ResNet projects•Kathy (Krammer) Christenson, a marketing analyst, become the ResNet application development managerCopyright Course Technology 200111Table 12-2. Three Main ResNet ProjectsResNet Beta or Prototype ResNet 1995 ResNet 1996Scope Writing and testing newreservations systemsoftware, installing systemon 16 PCs, developingmeasurement approachInstalling PCs (smartterminals), software, andnetworks in Baltimore,Tampa, and internationalportion ofMinneapolis/St. Paulreservations offices,developing more softwareCompleting theinstallation of PCs,software, andnetworks at othersix reservationsoffices, developingmore softwareTime May 1993 - August 1994 September 1994 -December 1995August 1995 - May1997Cost About $500,000 About $13 million About $20 millionCopyright Course Technology 200112What Went Wrong?After finishing the ResNet beta project, Peeter and his team saw the rest of ResNet as one large project to implement the new reservation system in all of the call centers. Senior management, however, broke the rest of ResNet into two separate projects, ResNet 1995 and ResNet 1996. Their goals were to avoid a huge investment commitment and to provide further incentives for the ResNet team to produce successful results. If the 1995 ResNet project was not successful, senior management could decide not to fund the 1996 project. Although this strategy reduced financial risk, Peeter and his team did not like the decision. If ResNet 1996 were not approved for some reason, they would be stuck with two totally different reservations systems in different sales offices. This situation would cause huge management, technical, and support problems. The ResNet 1995 team was under a lot of pressure to do a good job or the ResNet 1996 project would not be funded.Copyright Course Technology 200113Selecting the Project Manager•An important part of project initiation is selecting a project manager. Fay selected Peeter because–he knew the airline business–he understood the technology–he knew that technologies could improve business productivity–Peeter used his passion for the project to convince Fay and others that he should be the project managerCopyright Course Technology 200114Preparing Business Justification for the ProjectsFor the Beta project•Fay convinced senior managers to invest $500,000 into developing a prototype system•Peeter emphasized his track record as a leader and what the competition was doing•Arvid was well-known and respected for his IS expertiseCopyright Course Technology 200115Preparing Business Justification for the Projects•For the ResNet 1995 and 1996 projects•Very strong justification was needed to make major investments•Peeter prepared detailed plans and focused on –key business objectives of the project–impressive results from the beta project–the opportunity to make money with the new system (NPV estimate of $37.7M)Copyright Course Technology 200116What Went Right?Peeter