The Cone of Uncertainty is a term often used in project management to describe the phenomenon by which project unknowns decrease over time. As the project proceeds and more research and development is completed the amount of uncertainty decreases, eventually approaching zero. Project unknowns, or uncertainty, largely correlate to variances in project estimates. Plotting these variances over time creates a cone or funnel shape (variance percentages shown are only examples, values may vary).
Understanding the principle behind the cone of uncertainty can help project managers and analysts as they estimate projects. The amount of variance (estimated versus actuals) that will occur at different phases of a project can be estimated based on historical project data . Then, starting with an estimate which reflects the most likely outcome, the historical variation can be used to determine the type of multipliers that should be applied to create a high to low estimate range.
It’s worth noting that the range of variance expected during projects may also change based on the project type. Whether it’s a product launch, process improvement, or information system, some projects may have more or less unknown information at various phases.
posted @ Sunday, August 12, 2012 10:50 PM by Chris Adams