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Topics: Portfolio Management, Strategy
How do big companies choose between project and operation?

How do large companies decide whether to do the specific investment as a project or as an operating activity? Does it depend on budget or complexity or the duration of the activity? Do you know any specific financial rules or methodologies for this kind of decision?
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A project is a temporary endeavor undertaken to create a unique product or service. Operations are ongoing.
Now if you are asking about the difference between a project and a task, we review the time and cost. For example, anything over 2 weeks and $5000 is a project. But each company has their own definition depending on industry, etc.

My personal experience in the last 10 years is that the line between operations and project it has become diffuse. Most of the things that in the past are managed as operations becomes today as projects. In my personal opinion it is an opportunity and good news for people that work on project management. I am facing this situation today.

Aleksei -

It is a good practice to have an objective definition for what constitutes a project. For example, in my most recent client, they set a threshold of $35K as being the cost threshold to require formalization of a temporary, unique endeavor as a project.


For starters some activities can't be performed as projects. Try to operate a railway with projects, or a hotel or an airline, I think it is simply impossible. On the other hand some activities can't be performed as operations, try to build a railway as part as operations, it is probably impossible.

Some activities however can be both performed as operations or as projects. For instance software development. If you have an existing application and a support team that fixes bugs then that team can also work on enhancements and bring new functionality to the application.

However the ability of the developers to develop the new functionality is limited as bugs have priority and there may not be too much time for work on the new functionality. If the users need new functionality faster then a project is needed that of course would needed a budget.

In conclusion I think when you can choose between operations and projects you typically choose projects when you can't achieve what you want to achieve with the operational budget. In my example if the new functionality is not badly needed then there is no point to create a project and it is better to let the support team develop the enhancements as part of business as usual.

I used to be a combination director of operations & project director at a very large company. Basically, if I wanted to uplevel the efficiency or approach and it was more than chump change, I'd go get strategic funding.

Or, if the change involved more than just my group (every single change did), i'd get strategic funding.

Changes within a single department of (ie less than 50) people, requiring minimal investment, are typically done with operational dollars as the CFO won't give you extra money to do them. Finding efficiencies is expected as part of your duties running the department.

I once talked/joked with the CFO about doing a $100K "project", she reviewed it and said she'd approve it as long as I was budget-neutral for the year. I told her if I was self-funding with my operational budget I didn't actually need her approval. Said it with a smile on my face so it wasn't delivered in an aggressive way. She chuckled and said "okay but now you really better not exceed your budget". (Yes, I spent the $$, but yes, I stayed within budget. Had to get it done early enough in the fiscal year so I could use efficiencies to cut the $100K elsewhere)

Great thanks to all

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