Change and uncertainty are constant challenges in business and project management. Project managers must regularly handle unpredictable situations, particularly when managing multiple projects simultaneously. This is where what-if analysis and scenario planning software become essential tools that help project stakeholders respond effectively to changes and uncertainties. Let’s examine these tools in detail.
What-if analysis in project management
In project management, what-if analysis or scenario planning involves modeling future scenarios (or possible situations) and analyzing their effects on the project environment. This process allows project managers and teams to make informed decisions about responding to changes and challenges they encounter, while preparing for them ahead of time. The main advantage is having multiple options to evaluate and choose from.
For example, you can model the following scenarios:
- What will happen if we move a project’s due date as a result of supplier’s delay?
- What if we assign more resources to a project?
- What will happen if we add one more project to the portfolio?
This forward-thinking approach helps teams prepare effectively for changes and challenges.
What-if analysis and forecasting: What’s the difference?
While these concepts may appear similar, they serve different purposes. Both look at future events, but in distinct ways. Here are the main differences:
- Forecasting is based on historical data analysis and tells what events are likely to happen. With its help, you can estimate the time, budget, or required resources based on the previous experience.
- What-if analysis involves creating multiple scenarios based on different parameters. Its purpose is to optimize decision-making by demonstrating different possible options. For example, how will the project environment change if there’s a talent shortage? Or cutting costs?
You can use both techniques in project management depending on your specific needs.
Now, let’s look at the main benefits of using scenario planning in project management.
Why is what-if analysis important in project management?
Here are the primary advantages of scenario planning for the project management process.
- Addressing uncertainty.
Unexpected changes can disrupt projects. Supply chain issues, changing priorities, or external factors can all affect project progress. Scenario planning helps prepare effective responses to these challenges and maintain project momentum.
- Optimizing resource management.
This is particularly crucial when managing multiple projects or portfolios with shared resources. Scenario planning helps assess workloads, identify potential bottlenecks, and determine the best solutions. It also enables analysis of various resource allocation options to find the most effective approach.
- Risk management support.
Scenario planning allows teams to test different risk responses and identify the most effective mitigation strategies. Planning responses in advance is significantly more effective than reacting after problems occur.
- Optimizing decision-making.
What-if analysis serves as an effective decision-making tool for complex multi-project environments. It supports better resource allocation, project prioritization, and strategy adjustments in complicated situations.
How to perform what-if analysis in project management?
Here are the essential steps for implementing scenario planning in project management.
- Identifying uncertainties: Identify and analyze all events that can potentially impact the project flow. Assess their severity and probability, and select the most significant ones.
- Create several scenarios: For each event, develop several scenarios: best-case, worst-case, and most likely scenario.
- Assess the impact: The next step is determining how each of these scenarios will affect projects (their scope, resources, timelines, budget).
- Develop responses to the situations: Determine what actions will help the team mitigate negative impact of uncertainties or take advantage of opportunities.
Using spreadsheets for manual scenario planning can be inefficient, especially with large datasets. Modern project, resource, and portfolio management tools include automated what-if analysis capabilities. Let’s examine these tools’ functions in detail.
What-if analysis software: Key capabilities
When selecting a tool with scenario planning capabilities, consider these important features.
- Visual scenario modelling: What-if analysis tools not only simulate but also visualize scenarios and their impact on the project environment, which increases the effectiveness of scenario analysis and decision-making.
- Resource impact simulation: It’s important for a scenario planning tool to provide insights into the impact of changes and uncertainties on the resource level, e.g., workloads and resource distribution, which in turn helps detect and mitigate resource bottlenecks.
- Portfolio optimization: Intelligent what-if analysis software can suggest portfolio optimization options (like rescheduling projects or reallocating resources) in response to existing constraints in order to complete the highest-priority projects on time.
- Integration with other tools: A good option for a scenario planning system is the integration with other software solutions, which makes it possible to integrate data from multiple tools and perform more accurate scenario planning.
These capabilities are available in Epicflow, a multi-project resource management software with scenario planning and what-if analysis features. They help make the right decisions under conditions of change and uncertainty in a multi-project environment with a shared resource pool.
Conclusions
Let’s summarize the most important points of the article.
- What-if analysis in project management involves modelling different scenarios and analyzing their impact on the project environment.
- In contrast to forecasting, which is based on historical data analysis, what-if analysis involves developing various possible scenarios.
- The benefits of performing scenario planning in project management include optimizing decision-making and resource management, supporting risk management, and addressing uncertainty.
- To perform scenario planning effectively, you need to identify uncertainties, create several scenarios, analyze their impact, and prepare responses to these possible situations.
- What-if analysis is often incorporated into project or portfolio management tools’ functionality.
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