MODULE 2

IDEA GENERATION:

The starting point for any successful new venture is the basic product / service to be
offered. This idea can be either generated internally or externally .For a new entrepreneur
it becomes very difficult to filter information from the business environment, identify
opportunities, evaluate them and then crystallize one specific idea. Developing a hobby,
difficulty in obtaining a satisfactory product or service, evaluating new products being
offered in the market and active engagement in Research and Development can help in
generating a number of ideas. A reading of the Economic Times, business magazines,
watching special business programmes on the television, discussions with professionals,
friends, even teachers, surfing the internet all help to provide valuable inputs .A study of
government policies for example tax incentives and holidays for setting up projects in
backward area can help an entrepreneur to arrive at some decision . Attending an
Entrepreneurial Development Programme can provide him with a sound understanding of
all the steps one has to take to initiate and run a venture. Business consultants can also
help him to identify a product or service and develop a business plan.
PROJECT IDENTIFICATION:

Project Identification : Collection, compilation and analysis of data to locate

potential opportunities for starting business and development of such opportunities

Opportunity is a business concept, which if turned into a tangible product or service,
by the enterprise, will result into profit. It is all about creating values

The search of a good idea:

Generate your own idea
Develop someone else’s idea

Opportunities are identified through innovation/search of business ideas. Types of

innovation:
Additive Innovation – Fully exploiting already existing resources, such as product lines
extensions
Complementary Innovation – Offers something new and introduces few changes in the
structure of the business
Breakthrough Innovation (Radical Innovation) – Changes the fundamentals of the business,
creating a new industry and new avenues for extensive wealth creation

IMPORTANCE OF PROJECT IDENTIFICATION:

It has long term consequences (make or break)

Involves commitment which can not be easily reversed

Ideas are put into action

Projects are catalytic agents for economic development

Involves creative use of resources- manpower, capital, raw materials etc.

Generates value addition and build-up national capital

Brings socio-cultural development

Leads to development of infra-structure and environment
CRITERIA FOR SELECTING A PROJECT

Investment size

Location of project

Technology to be used

Equipment

Marketing

CONSTRAINTS IN PROJECT FORMULATION

Lack of a viable / feasible project idea

Lack of realistic/ achievable objectives

Lack of necessary resources / infrastructure to convert idea into reality

Policies of government / Legal restrictions

Lengthy and cumbersome procedures to get finance, start business

FEASIBILITY ANALYSIS:
– Feasibility analysis is the process of determining whether a business idea is
viable.
– It is the preliminary evaluation of a business idea, conducted for the purpose
of determining whether the idea is worth pursuing.
– Feasibility analysis takes the guesswork (to a certain degree) out of a
business launch, and provides an entrepreneur a more secure notion that a
business idea is feasible or viable.

• Timing of Feasibility Analysis

– The proper time to conduct a feasibility analysis is early in thinking through
the prospects for a new business.
– The thought is to screen ideas before a lot of resources are spent on them.
 MARKET ANALYSIS
A market, whether a place or not, is the arena for interaction among buyers and
sellers.From seller’s point of view, market analysis is primarily concerned with the
aggregate demand of the proposed product/service in future and the market share
expected to be captured. Success of the proposed project clearly hinges on the continuing
support of the customers. However, it is very difficult to identify the market for
one’sproduct/service. After all, the whole universe cannot be your market. You have to
carefully segment the market according to some criteria such as geographic scope,
demographic and psychological profile of the potential customers etc. It is a study of
knowing who all comprise your customers, for this you require information on:
- Consumption trends.
- Past and present supply position
- Production possibilities and constraints
- Imports and Exports
Competition
- Cost structure
- Elasticity of demand
- Consumer behaviour, intentions, motivations, attitudes, preferences and
requirements
- Distribution channels and marketing policies in use
- Administrative, technical and legal constraints impinging on the marketing
of the product.

FINANCIAL ANALYSIS
The objective of financial analysis is to ascertain whether the proposed project will
be financially viable in the sense of being able to meet the burden of servicing debt
and whether the proposed project will satisfy the return expectations of those who
provide the capital. While conducting a financial appraisal certain aspects has to be
looked into
like:
 - Investment outlay and cost of project
- Means of financing
- Projected profitability
- Break- even point
- Cash flows of the project
- Investment worthiness judged in terms of various criteria of merit
- Projected financial position

TECHNICAL ANALYSIS
The issues involved in the assessment of technical analysis of the proposed
project may be classified into those pertaining to inputs, throughputs and
outputs.
• Input Analysis: Input analysis is mainly concerned with the identification,
quantification and evaluation of project inputs, that is, machinery and
67materials. You have to ensure that the right kind and quality of inputs
would b available at the right time and cost throughout the life of the project.
You haveto enter into long-term contracts with the potential suppliers; in
many cases you have to cultivate your supply sources. When Macdonald
entered India, they developed sustainable sources of supply of potatoes,
lettuce and other ingredients for their burgers. The activities involved in
developing and retaining supply sources are referred to as supply chain
management.

• Throughput Analysis: It refers to the production/operations that you would

perform on the inputs to add value. Usually, the inputs received would undergo
a process of transformation in several stages of manufacture. Where to locate
the facility, what would be the sequence, what would be the layout, what
would be the quality control measures, etc. are the issues that you would learn
in greater details in subsequent lessons.
• Output Analysis: this involves product specification in terms of physical
features- colour, weight, length, breadth, height; functional features; chemical
material properties; as well as standards to be complied with such as BIS, ISI, and
ISO etc.

ECONOMIC ANALYSIS
Economics is the study of costs- and- benefits. In regard to the feasibility of the
study the entrepreneur is concerned whether the capital cost as well as the cost
of the product is justifiable vis-à-vis the price at which it will sell at the market
place. For example, technically, silver can be extracted from silver bromide, (a
chemical used for processing the X-ray and photo films); but, the cost of
extraction is so high that it would not be economically feasible to do so. Likewise,
until recently cost of harnessing solar power was prohibitively high. This cost-
benefit analysis goes into financial calculations for profitability analysis that we
discussed under financial analysis. At this stage it is also useful to distinguish
between the economic and commercial feasibility; whereas economic feasibility
leads one to the unit cost of the product, commercial feasibility informs whether
enough units would sell. Apart from the cost-benefit analysis as above, which we
also refer to as private cost benefit analysis, it is also useful to do what is known
as social- cost-benefit- analysis (SCBA). For example, the entrepreneur may be
getting subsidized electricity in which case private cost would be less than social
cost. Likewise, exporting units earn precious foreign exchange resulting into
social benefits being more than private earnings. Many a time, a project that is
worthy on SCBA may find greater favour with the support agencies.
PROJECT PLANNING:

A Project Plan sets out the phases, activities and tasks needed to deliver a project. The
timeframes required to deliver the project, along with the resources and milestones are
also shown in the Project Plan. Using this Project Plan Template, you can quickly and easily
create a comprehensive Project Management Plan for your project, as it already lists the
commonly used tasks needed to complete projects from start to finish.

A Project Plan Template is filled in every time you wish to embark on a new project. A
summarized Project Plan is usually created early in the life cycle, with a detailed Project
Plan being created later the planning phase. The Project Plan is referred to constantly
throughout the project. Every day, the Project Manager will review actual progress against
that stated in the Project Plan, to ensure they are still on track. The Project Plan is therefore
the most critical tool a Manager can have to successfully deliver projects.

Project Planning A Step by Step Guide

The key to a successful project is in the planning. Creating a project plan is the first thing
you should do when undertaking any kind of project.Often project planning is ignored in
favour of getting on with the work. However, many people fail to realise the value of a
project plan in saving time, money and many problems.

This article looks at a simple practical approach to project planning. On completion of this
guide you should have a sound project planning approach that you can use for future
projects.

Step 1 Project Goals

A project is successful when the needs of the stakeholders have been met. A stakeholder is
anybody directly or indirectly impacted by the project.
As a first step it is important to identify the stakeholders in your project. It is not always
easy to identify the stakeholders of a project, particularly those impacted indirectly.
Examples of stakeholders are:

• The project sponsor

• The customer who receives the deliverables
• The users of the project outputs
• The project manager and project team

Once you understand who the stakeholders are, the next step is to establish their needs.
The best way to do this is by conducting stakeholder interviews. Take time during the
interviews to draw out the true needs that create real benefits. Often stakeholders will talk
about needs that aren't relevant and don't deliver benefits. These can be recorded and set
as a low priority.

The next step once you have conducted all the interviews and have a comprehensive list of
needs is to prioritise them. From the prioritised list create a set of goals that can be easily
measured. A technique for doing this is to review them against the SMART principle. This
way it will be easy to know when a goal has been achieved.

Once you have established a clear set of goals they should be recorded in the project plan. It
can be useful to also include the needs and expectations of your stakeholders.

This is the most difficult part of the planning process completed. It's time to move on and
look at the project deliverables.

Step 2 Project Deliverables

Using the goals you have defined in step 1, create a list of things the project needs to deliver
in order to meet those goals. Specify when and how each item must be delivered.

Add the deliverables to the project plan with an estimated delivery date. More accurate
delivery dates will be established during the scheduling phase, which is next.
Step 3 Project Schedule

Create a list of tasks that need to be carried out for each deliverable identified in step 2. For
each task identify the following:

• The amount of effort (hours or days) required to complete the task

• The resource who will carryout the task

Once you have established the amount of effort for each task, you can workout the effort
required for each deliverable and an accurate delivery date. Update your deliverables
section with the more accurate delivery dates.

At this point in the planning you could choose to use a software package such as Microsoft
Project to create your project schedule. Alternatively use one of the many free templates
available. Input all of the deliverables, tasks, durations and the resources who will
complete each task.

A common problem discovered at this point is when a project has an imposed delivery
deadline from the sponsor that is not realistic based on your estimates. If you discover that
this is the case you must contact the sponsor immediately. The options you have in this
situation are:

• Renegotiate the deadline (project delay)

• Employ additional resources (increased cost)
• Reduce the scope of the project (less delivered)

Use the project schedule to justify pursuing one of these options.

Step 4 Supporting Plans

This section deals with plans you should create as part of the planning process. These can
be included directly in the plan.
Human Resource Plan

Identify by name the individuals and organisations with a leading role in the project. For
each describe their roles and responsibilities on the project. Next, describe the number and
type of people needed to carryout the project. For each resource detail start dates,
estimated duration and the method you will use for obtaining them. Create a single sheet
containing this information.

Communications Plan

Create a document showing who needs to be kept informed about the project and how they
will receive the information. The most common mechanism is a weekly/monthly progress
report, describing how the project is performing, milestones achieved and work planned
for the next period.

Risk Management Plan

Risk management is an important part of project management. Although often overlooked,

it is important to identify as many risks to your project as possible and be prepared if
something bad happens.

Here are some examples of common project risks:

• Time and cost estimates too optimistic

• Customer review and feedback cycle too slow
• Unexpected budget cuts
• Unclear roles and responsibilities
• Stakeholder input is not sought or their needs are not properly understood
• Stakeholders changing requirements after the project has started
• Stakeholders adding new requirements after the project has started
• Poor communication resulting in misunderstandings, quality problems and rework
EVALUATION

Definitions:

Monitoring: This type of evaluation is performed while a project is being implemented, with the
aim of improving the project design and functioning while in action. An example given in the
World Bank Technical Paper, Monitoring and Evaluating Urban Development Programs, A
Handbook for Program Managers and Researchers by Michael Bamberger, describes a monitoring
study that, by way of rapid survey, was able to determine that the amount of credit in a micro
credit scheme for artisans in Brazil was too small. The potential beneficiaries were not
participating due to the inadequacy of the loan size for their needs. This information was then
used to make some important changes in the project. Bamberger defines it as: “an internal project
activity designed to provide constant feedback on the progress of a project, the problems it is
facing, and the efficiency with which it is being implemented” (Bamberger 1)

Evaluation: An evaluation studies the outcome of a project (changes in income, housing quality,
benefits distribution, cost-effectiveness, etc.) with the aim of informing the design of future
projects. An example from Monitoring and Evaluating Urban Development Programs, A Handbook
for Program Managers and Researchers describes an evaluation of a cooperative program in El
Salvador that determined that the cooperatives improved the lives of the few families involved but
did not have a major impact on overall employment.
Bamberger describes evaluation as “mainly used to help in the selection and design of future
projects. Evaluation studies can assess the extent to which the project produced the intended
impacts (increases in income, better housing quality, etc.) and the distribution of the benefits
between different groups, and can evaluate the cost-effectiveness of the project as compared with
other options” (Bamberger 1).

Monitoring and evaluation need not be expensive or complicated, nor do they require specialists
or grand calculations. The complexity and extent of the studies can be adapted to fit the program
needs. The job of the project manager in this process is to point out those areas in need of
monitoring or evaluation. If this is left to the researchers, the studies may tend to be too academic
and not as useful to project management.

Evaluation and monitoring systems can be an effective way to:

Provide constant feedback on the extent to which the projects are achieving their goals.

Identify potential problems at an early stage and propose possible solutions.

Monitor the accessibility of the project to all sectors of the target population.

Monitor the efficiency with which the different components of the project are being
implemented and suggest improvements.

Evaluate the extent to which the project is able to achieve its general objectives.

Provide guidelines for the planning of future projects (Bamberger 4).

Influence sector assistance strategy. Relevant analysis from project and policy evaluation can
highlight the outcomes of previous interventions, and the strengths and weaknesses of their
implementation.

Improve project design. Use of project design tools such as the logframe (logical framework)
results in systematic selection of indicators for monitoring project performance. The process of
selecting indicators for monitoring is a test of the soundness of project objectives and can lead to
improvements in project design.

Incorporate views of stakeholders. Awareness is growing that participation by project

beneficiaries in design and implementation brings greater “ownership” of project objectives and
encourages the sustainability of project benefits. Ownership brings accountability. Objectives
should be set and indicators selected in consultation with stakeholders, so that objectives and
targets are jointly “owned”. The emergence of recorded benefits early on helps reinforce
ownership, and early warning of emerging prob
problems
lems allows action to be taken before costs rise.

Show need for mid-course corrections.. A reliable flow of information during implementation
course corrections
enables managers to keep track of progress and adjust operations to take account of experience
(OED).

PROJECT MONITORING AND CONTROL:

Monitoring the Project

The project manager monitors the overall pr
project.
oject. A phase project manager monitors his
phase. The phase project manager reports to the overall project manager of any risks.

Jointly, phase project managers and overall project manager should

 identify risks, potential project problems, as ear

early as possible

 identify when goals may not be met

 identify when constraints may be violated

ensure that contingency plans occur before unrecoverable problems occur

 provide and receive project status for the phases and total project.

When there is a significant chance that the goals of the project will not be met, this risk
should be reported to upper management. Also, when the constraints of the project may be
violated, specifically, costs being overrun and schedules significantly slipped, these risks
will be reported.

When there are disagreements between the phase project manager and overall project
manager, then resolution will be escalated to the change control board. Lack of resolution
there could escalate to upper management.

lists types of risks, identified and not identified. Of the identified risks, these can be
separated into those that the project managers consider to be important and those not
considered to be important; of these, the important risks can be built into the schedule as
discussed in section 14.2.2. Of these identified important risks, some will be actual
problems and contingency plans in the schedule would be initiated.

CONTROLLING OF THE PROJECT:

 In order to provide stability to the project, project agreements must be recorded,
and any changes to agreements must be evaluated for their effects upon other agreements.
These agreements should thus be recorded in controlled documentation [1], and when an
agreement is changed, then all other agreements that are based upon that agreement must
be reevaluated.

In order to control controlled documents in the project, it is proposed that there be a

change control board [1] to review changes. The change control board would include the
overall project manager, phase project managers, representatives of workers, users, the
data processing group and business policy management, and perhaps a change control
administration manager to update schedules and provide unbiased advice on business,
technical and administrative decisions. Problems of interest to upper management, such
as budget issues, would be escalated up to them for resolution.

As the project progresses, the responsibilities of the phase managers might be consolidated
and the change control board might grow smaller, eventually just handling maintenance
changes rather than monitoring the project.

When a phase is completed, resulting automated systems should go into maintenance

mode. Changes to an automated system agreed upon by the change control board would be
sent to a business group for design and to a maintenance group for implementation in the
automated system. The maintenance group is often part or all of the group that did the
development of the automated system.

Once a phase is implemented, a help desk should take telephone calls from users of an
automated system. The help desk would give advice on the use of the system and report on
errors and suggested enhancements to the maintenance group who would go through the
change board for review.

As the automated system matures, a user group might take over the change control board
in reviewing changes.

Controlled Documents

Controlled documents may include the following:

 organizational objectives, priorities of objectives, strategies and goals

 project objectives, priorities of objectives, strategies, goals and constraints

 business requirements

 workflow requirements

 system requirements

 organizational business policies*

 interface plans*

 functional specifications*

 internal design documents (programming specifications)*

 vendor customization specifications*

 programs and program code*

 databases and data dictionary*

 test plans*

 performance and scalability requirements (a “Performance and Adaptability Plan”)*

 user documentation, including descriptions of user interfaces*.

Change Control Board

 Is the change necessary? When?

 What groups are impacted by the change? How will dependencies and schedules be
impacted?

 Is there are more effective and preferred change to the one that is proposed? Can
changes be consolidated?

 How and when can the change be best made with the least negative impact?

 Will the change also change the overall project?

 After approved: What is the priority of the changes with respect to other approved
changes?
 ROLE OF (SIDBI) IN PROJECT MAANGEMENT:

The SIDBI was established in 1990 as the apex refinance bank. The SIDBI is
operating different programmes and schemes through 5 Regional Office and 33 Branch
Offices.The financial assistance of SIDBI to small scale sector is channelised through the
two routes- direct and indirect.
a). Indirect Assistance
a) SIDBI’s financial assistance to small sector is primarily chnnelised through the
existing credit delivery system, which consists of state level institution, rural and
commercial banks.
b) SIDBI provides refinance to and discounts bills of Primarily Lending Institution (PLI)
c) The Assistance is Available for
i. Marketing of SSI product.
ii. Setting up of new venture.
iii. Availability of working capital.
iv. Expansion .
v Modernization.
vi. Human Resource Development .
vii. Diversification Of existing units for all activities.

b). Direct Assistance

a) The loans are available for new ventures, diversification technology upgradation,
modernization and expansion of well run small scale enterprises. Assistance is
also available for private sector.
b) Small scale sector is eligible for maximum debt-equity ratio of 3:1.
c) Foreign currency loan for import of equipment are also available to export
oriented small scale enterprises.
d) SIDBI also provide venture capital assistance to the entrepreneurs for their
innovative ventures if they have a sound management team, long term
competitive advantages and a potential for above average leading to attractive
return on investment.
New Initiatives of SIDBI
a) Two Subsidiaries viz. SIDBI Venture Capital Limited and SIDBI Trustee ompany
Limited formed to oversee Venture Capital.
b) Technology Bureau for Small Enterprise formed to oversee Technology Transfer,
March making Service, Finance Syndication and facilitating Joint Ventures.
c) SIDBI Foundation for Micro Credit has been launched to provide financial assistance
to the poor to meet emerging needs of the micro finance sector especially in the rural areas.