In the past, we have expressed skepticism toward buzzwords like black swan and others, for numerous reasons. That does not stop us, however, from coming out today with another avian analogy. The pelican beak analogy shows enhanced planning benefits.
The pelican beak analogy displays, in a simplified manner, the capital required by an entity for a project. It displays on the graph below as the straight orange line. When the capital produced in the meantime, shown as a purple curve, is lower than the required capital, the project needs financing. After a while, hopefully, the two lines intersect. That is the break-even point. After that, if all goes well, the project delivers profits.
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 second figure shows the effects of fast-tracking the entity’s development; as the adage goes, 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.
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 or 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.
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?
Enhanced planning means performing fast-tracking and crashing as necessary, while maintaining an updated risk register using ORE to benefit from the advantages, without incurring risk over-exposures. Strategic and tactical planning will thus be optimized.
