When managing a project, no matter how detailed your project plan is, unexpected changes and variables are inevitable as things rarely go 100% according to plan. This is where what-if scenario analysis comes in handy. It allows you to anticipate potential changes and evaluate their impact on your project proactively.
In this post, we will explore what what-if scenario analysis is, its objectives, how to perform it, and its benefits. You will also learn when to leverage this technique in your projects, view an example scenario analysis, and get tips for passing the PMP exam questions on it.
What is What-If Scenario Analysis in Project Management?
What-if scenario analysis is a project management technique that involves creating and evaluating hypothetical scenarios to predict their potential impact on overall project objectives.
As a project manager, you take a proactive approach by identifying risks and planning ahead for unexpected events that may arise during project execution. You ask “what if” questions to simulate various scenarios, like what if the vendor delivery is delayed by 2 weeks or what if a key resource leaves the project halfway?
By modeling different scenarios, you can forecast the implications of potential changes on your project timeline, costs, resources, quality, or other success metrics. This allows you to understand the likelihood and extent of impact so that suitable contingency plans can be formulated to mitigate risks in advance.
What are What-If Scenarios in Project Management?
hat-if scenarios refer to hypothetical situations that could possibly occur during your project execution. When managing projects, you need to put on your creativity hat and come up with plausible scenarios that may impede your project plan.
These scenarios typically involve anticipating changes to key project variables and parameters. For example, you can build what-if scenarios around timeline delays, requirement changes, resource constraints, budget issues, risks occurring, external factors, and more.
The objective is to evaluate the ‘what if’ questions – what if the testing phase exceeds the estimated duration by 2 weeks, or what if a critical resource quits midway through development.
By simulating realistic situations that may arise, you are better prepared with contingency strategies. Constructing a diverse range of scenarios allows you to stress test your plan and identify the triggers that can negatively impact your project.
Objectives of What-If Scenario Analysis in Project Management
What-if scenario analysis serves some key goals in project management including:
Identify Potential Risks
By simulating hypothetical scenarios, you can uncover risks that may not have been apparent earlier. Exploring situations like shortage of resources or testing delays allows you to recognize threats to your project proactively.
Assess the Likelihood of Occurrence
Along with identifying risks, evaluating scenarios also provides insights into the probability of those risks materializing. Factors like past data and expert judgment can help estimate likelihood.
Determine Impact on Objectives
What-if analysis allows you to gauge the implications of variables on your project timeline, cost, resources, or other objectives. You can quantify the extent of the impact of potential scenarios.
Formulate Mitigation Strategies
The core purpose of what-if analysis is to minimize surprises and disruptions to your project. By assessing scenario impacts, you can devise targeted plans to mitigate risks even before they occur.
How to Do What-If Scenario Analysis in Project Management
What-if scenario analysis involves simulating hypothetical scenarios and evaluating their impact on your project objectives.
Here is a step-by-step approach to conduct an effective scenario analysis:
1. Identify Key Project Variables
First, determine the vital factors that can be uncertain and can impact your project plan. These would be your key variables like deadlines, budgets, resources, requirements, etc. Pinpointing the variables provides scope for building relevant scenarios.
2. Develop Scenarios
Next, construct hypothetical scenarios by changing the variables. Scenarios can range from simple like delaying a deadline to complex like combining multiple risks. Generate diverse scenarios including best case, worst case, and most likely case. Ensure the scenarios are realistic based on the project’s nature.
3. Quantify Scenario Impact
With scenarios in place, quantify their impact on your project KPIs like timeline, cost, resources, quality, etc. You can use data from past projects, expert judgment, simulations, etc. to predict the implications. Then analyze the magnitude and likelihood of the impact.
4. Compare Scenario Outcomes
The next step is to compare scenario outcomes to identify the most optimal strategies. Assess the pros and cons of each scenario against the impact metrics. This allows you to determine the scenarios that result in desired project performance.
5. Develop Mitigation Plans
Finally, devise targeted mitigation strategies for the key risks uncovered through scenario analysis. The mitigation plans should aim to reduce the probability and impact of the identified risks on your project objectives.
6. Tools
You can perform manual what-if analysis using spreadsheet tools like Excel. For more complex simulations, use specialized software like ProjectRisk, CrystalBall, RiskyProject, etc.
When to Use What-If Scenario Analysis in Project Management
Determining the apt timing to perform what-if analysis is key to maximizing its value. Here are some recommended occasions:
Initial Planning Stage
Conducting scenario analysis during early planning enables you to identify risks proactively and formulate mitigations right at the start. Assessing scenarios even before work begins sets the stage for smooth execution.
Key Milestones
At major milestones, revisit your scenario analysis to update it based on the current project state. With substantial work completed, you have more clarity on uncertainties that may emerge in the upcoming phases.
Signs of Variance
When your project shows early warning signs of variance from the plan, validate your initial scenarios or formulate new ones. Nip potential issues in the bud before they escalate.
New Developments
With major new developments like change requests or new resource additions, refresh your scenario analysis to assess their implications on the project outlook.
Periodic Reviews
Schedule periodic reviews of your scenario analysis, such as monthly or quarterly, to inspect the continued relevance of scenarios. Eliminate outdated ones and build new ones as the project environment evolves.
Benefits of What-If Scenario Analysis
What-if scenario analysis offers various advantages that amplify your probability of project success:
Enhanced Risk Management
By simulating hypothetical scenarios, you can uncover threats that may have been overlooked. Assessing their likelihood and impact allows for building mitigation strategies even before risks occur. This proactive risk management is a key benefit.
Improved Decision-Making
Evaluating multiple scenarios provides insights into different options available to handle uncertainties. You can objectively assess the pros and cons of each approach and select optimal solutions.
Greater Preparedness
Analyzing scenarios enhances readiness to handle disruptions through contingency planning. If a simulated scenario does materialize, your team will be better prepared rather than caught off guard.
Increased Adaptability
What-if analysis boosts your agility as stress testing the project plan against uncertainties builds resilience and flexibility to smoothly adapt as the environment changes.
Enhanced Communication
Sharing scenario analysis provides transparency into potential issues enabling stakeholders to align their expectations. This improves communications and stakeholder confidence.
Better Project Outcomes
By preparing mitigations for foreseeable disruptions right from the start, what-if analysis allows projects to meet objectives despite uncertainties which increases the probability of success.
What-If Scenario Analysis Example
Let’s look at a project scenario analysis example:
A project has two main phases; Design and Development, which originally had durations of 8 weeks and 16 weeks respectively. As the project enters the design phase, the project manager performs a what-if analysis to assess the implications of potential uncertainties.
Three scenarios are constructed:
- Scenario 1 (Best case): What if the Design phase finishes 2 weeks early? How will it impact the overall timeline?
- Scenario 2 (Most Likely): What if the Design phase is delayed by 1 week due to rescoping? How will it impact the overall timeline?
- Scenario 3 (Worst case): What if the Development phase duration increases to 20 weeks due to change requests? How will the overall timeline be impacted?
The project manager analyzes the three scenarios and finds that in the best case the project would finish 4 weeks early. In the most likely case, it would finish 1 week late. In the worst case, the project would finish 5 weeks late.
This analysis provides data-driven insights into the range of outcomes possible. The project manager can accordingly build mitigation strategies into the project plan to minimize delays and keep the project on track.
What If Scenario Analysis PMP Exam Tips
What-if scenario analysis is an important technique covered in the PMP exam. Here are some tips to tackle related questions:
- Know that what-if analysis is done in the planning phase as part of the Perform Quantitative Risk Analysis process according to the PMBOK Guide 6th Edition. It falls under Project Risk Management.
- Be clear on the objectives, like identifying risks and determining their impact.
- Understand how to construct scenarios by changing variables like budget, timelines, resources, etc.
- Recognize the benefits such as enhanced risk management, decision-making, and adaptability.
- For situational questions, assess the scenario details provided and select the response focused on leveraging what-if analysis to uncover risks and their implications.
- Choose responses highlighting the importance of performing what-if analysis early and continuously during projects.
- For numerical questions, be able to estimate the impact of different scenarios on the timeline, cost, etc.
Conclusion
In closing, what-if scenario analysis is a crucial technique in the project manager’s toolkit.
By proactively evaluating hypothetical scenarios, you gain invaluable insights into potential risks and their impacts. This foresight enhances your readiness to steer projects smoothly despite uncertainties.
With contingency plans for foreseeable disruptions in place right from the start, you can boost the probability of project success. The next time you kickstart project planning, remember to make scenario analysis a priority.
