Chapter 6

Gambler's fallacy

A bias related to the inaccurate statistical expectations people place on random event patterns. In a project environment, unrealistic statistical expectations could lead people to believe a string of bad luck will even out, and therefore underestimate the likelihood that unfavorable conditions will continue. Such expectations could influence a team assessing project risks or making go-no-go decisions in the context of a series of failures within a project.

Outcome

A dimension of uncertainty analysis, the outcome is the consequence of the event that a favorable or unfavorable uncertainty creates.

Uncertainty Source

A dimension of uncertainty assessment, the source is typically considered as the root cause or driver of an uncertainty. Five categories of uncertainty sources include: Financial, Technical, Business Environment, Social, and External or Natural Environment.

Likelihood

A dimension of uncertainty that project teams must consider, along with impact, when determining which uncertainties are worthy of attention. Likelihood is a subjective estimate of probability, based on opinion and judgment. In the absence of reliable historical data, teams can use consensus-based or voting methods to enhance their ability to forecast likelihood.

Dress rehearsal

A method of project simulation that employs a practice run before an event or activity.

Tabletop exercises

A method of project simulation that involves miniature props or mockups representing the physical facilities where a project event will occur. Team members use the physical representation to help them imagine the scenario and envision possible the circumstances. They brainstorm critical uncertainties for which they feel ill-prepared and develop contingency plans.

Physical mock-up

A method of project simulation that utilizes a three-dimensional representation of a product for assessing design concepts, examining physical compatibilities, or testing physical properties during the design phase of product development.

Risky shift

A social-psychological phenomenon in which individuals tend to increase their willingness to accept risk, beyond their innate level of risk tolerance, after engaging in group discussion about an action under consideration.

Six Sigma

A systematic approach for planning and managing quality management and quality improvement projects. Several tools within Six Sigma can be applied to projects of all types, regardless of whether or not they involve quality improvement.

Known unknown

A term used to describe uncertainties for which a team has anticipated and planned carefully.

Fishbone diagram

Also known as Ishikawa diagram or cause-and-effect diagram. In the context of uncertainty analysis, it is used as a structural framework for brainstorming potential causes of an identified risk. Possible causes are organized into a few general categories, and further research is needed later to determine whether the identified causes are the actual reasons for the problem or opportunity.

Simulation

An approach for tackling project uncertainties, and defined by The American Heritage College Dictionary as "Representation of the operation or features of one process or system through the use on another," simulation generally engages the use of technical methods to understand the behavior of a product or process, but can use other, physical representation methods such as dress rehearsal, physical mock-up and tabletop exercises.

Unknown unknown

An event that still may occur as a surprise in a project, even after the team has performed a thorough uncertainty analysis and identified known unknowns.

Gut-feel method

An interactive and visual method used for uncertainty assessment in team settings that can be adapted to include both favorable and unfavorable uncertainties. Teams brainstorm ideas about the likelihood and impact of uncertainties, vote using adhesive-backed colored dots to signify likelihood and impact, and visually identify the most significant uncertainties for further discussion and preparation.

Unfavorable project risks

Events or occurrences not currently within the project team's expectations that have the potential to undermine the success of a project.

FMEA (Failure Modes and Effects Analysis)

FMEA was originally developed as a systematic, team-based analytic process for examining what could go wrong with a product or a routine production process. FMEA has been adapted for use in planning projects as a tool to aid a team in identifying potential risks and assessing their significance using numerical scoring.

Favorable project uncertainty

Things not currently within the project team's expectations that have the potential to make the project even better or open doors for valuable opportunities currently outside the scope of the project.

Uncertainty analysis

Tools and processes used to increase a team's awareness of unknowns that can affect project outcomes, and to address those uncertainties by making adjustments in the project schedule, budget, resource distribution, specifications and other project dimensions. Uncertainty assessment occurs at every stage of project planning and management, but the stage immediately following WBS development offers the best place for a productive formal assessment.