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project managers have the least amount of authority in a pure _____ organizational structure.

Contents

Preface

Chapter 1: Overview

1.0 Introduction

1.1 Understanding Project Management

1.2 Defining Project Success

1.3 Success, Trade-Offs, and Competing Constraints

1.4 The Project Manager–Line Manager Interface

1.5 Defining the Project Manager’s Role

1.6 Defining the Functional Manager’s Role

1.7 Defining the Functional Employee’s Role

1.8 Defining the Executive’s Role

1.9 Working with Executives

1.10 Committee Sponsorship/Governance

1.11 The Project Manager as the Planning Agent

1.12 Project Champions

1.13 The Downside of Project Management

1.14 Project-Driven versus Non–Project-Driven Organizations

1.15 Marketing in the Project-Driven Organization

1.16 Classification of Projects

1.17 Location of the Project Manager

1.18 Differing Views of Project Management

1.19 Public-Sector Project Management

1.20 International Project Management

1.21 Concurrent Engineering: A Project Management Approach

1.22 Added Value

1.23 Studying Tips for the PMI® Project Management Certification Exam

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Answers

Problems

Chapter 2: Project Management Growth: Concepts and Definitions

2.0 Introduction

2.1 General Systems Management

2.2 Project Management: 1945–1960

2.3 Project Management: 1960–1985

2.4 Project Management: 1985–2012

2.5 Resistance to Change

2.6 Systems, Programs, and Projects: A Definition

2.7 Product versus Project Management: A Definition

2.8 Maturity and Excellence: A Definition

2.9 Informal Project Management: A Definition

2.10 The Many Faces of Success

2.11 The Many Faces of Failure

2.12 The Stage-Gate Process

2.13 Project Life Cycles

2.14 Gate Review Meetings (Project Closure)

2.15 Engagement Project Management

2.16 Project Management Methodologies: A Definition

2.17 Enterprise Project Management Methodologies

2.18 Methodologies Can Fail

2.19 Organizational Change Management and Corporate Cultures

2.20 Project Management Intellectual Property

2.21 Systems Thinking

2.22 Studying Tips for the PMI® Project Management Certification Exam

Answers

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Problems

Chapter 3: Organizational Structures

3.0 Introduction

3.1 Organizational Work Flow

3.2 Traditional (Classical) Organization

3.3 Developing Work Integration Positions

3.4 Line-Staff Organization (Project Coordinator)

3.5 Pure Product (Projectized) Organization

3.6 Matrix Organizational Form

3.7 Modification of Matrix Structures

3.8 The Strong, Weak, or Balanced Matrix

3.9 Center for Project Management Expertise

3.10 Matrix Layering

3.11 Selecting the Organizational Form

3.12 Structuring the Small Company

3.13 Strategic Business Unit (SBU) Project Management

3.14 Transitional Management

3.15 Barriers to Implementing Project Management in Emerging Markets

3.16 Seven Fallacies that Delay Project Management Maturity

3.17 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 4: Organizing and Staffing The Project Office and Team

4.0 Introduction

4.1 The Staffing Environment

4.2 Selecting the Project Manager: An Executive Decision

4.3 Skill Requirements for Project and Program Managers

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4.4 Special Cases in Project Manager Selection

4.5 Selecting the Wrong Project Manager

4.6 Next Generation Project Managers

4.7 Duties and Job Descriptions

4.8 The Organizational Staffing Process

4.9 The Project Office

4.10 The Functional Team

4.11 The Project Organizational Chart

4.12 Special Problems

4.13 Selecting the Project Management Implementation Team

4.14 Mistakes Made by Inexperienced Project Managers

4.15 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 5: Management Functions

5.0 Introduction

5.1 Controlling

5.2 Directing

5.3 Project Authority

5.4 Interpersonal Influences

5.5 Barriers to Project Team Development

5.6 Suggestions for Handling the Newly Formed Team

5.7 Team Building as an Ongoing Process

5.8 Dysfunctions of a Team

5.9 Leadership in a Project Environment

5.10 Life-Cycle Leadership

5.11 Value-Based Project Leadership

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5.12 Organizational Impact

5.13 Employee–Manager Problems

5.14 Management Pitfalls

5.15 Communications

5.16 Project Review Meetings

5.17 Project Management Bottlenecks

5.18 Cross-Cutting Skills

5.19 Active Listening

5.20 Project Problem-Solving

5.21 Brainstorming

5.22 Project Decision-Making

5.23 Predicting the Outcome of a Decision

5.24 Facilitation

5.25 Handling Negative Team Dynamics

5.26 Communication Traps

5.27 Proverbs and Laws

5.28 Human Behavior Education

5.29 Management Policies and Procedures

5.30 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 6: Management Of your time and Stress

6.0 Introduction

6.1 Understanding Time Management

6.2 Time Robbers

6.3 Time Management Forms

6.4 Effective Time Management

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6.5 Stress and Burnout

6.6 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 7: Conflicts

7.0 Introduction

7.1 Objectives

7.2 The Conflict Environment

7.3 Types of Conflicts

7.4 Conflict Resolution

7.5 Understanding Superior, Subordinate, and Functional Conflicts

7.6 The Management of Conflicts

7.7 Conflict Resolution Modes

7.8 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 8: Special Topics

8.0 Introduction

8.1 Performance Measurement

8.2 Financial Compensation and Rewards

8.3 Critical Issues with Rewarding Project Teams

8.4 Effective Project Management in the Small Business Organization

8.5 Mega Projects

8.6 Morality, Ethics, and the Corporate Culture

8.7 Professional Responsibilities

8.8 Internal Partnerships

8.9 External Partnerships

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8.10 Training and Education

8.11 Integrated Product/Project Teams

8.12 Virtual Project Teams

8.13 Breakthrough Projects

8.14 Managing Innovation Projects

8.15 Agile Project Management

8.16 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 9: The Variables for Success

9.0 Introduction

9.1 Predicting Project Success

9.2 Project Management Effectiveness

9.3 Expectations

9.4 Lessons Learned

9.5 Understanding Best Practices

9.6 Best Practices versus Proven Practices

9.7 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 10: Working with Executives

10.0 Introduction

10.1 The Project Sponsor

10.2 Handling Disagreements with the Sponsor

10.3 The Collective Belief

10.4 The Exit Champion

10.5 The In-House Representatives

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10.6 Stakeholder Relations Management

10.7 Politics

10.8 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 11: Planning

11.0 Introduction

11.1 Validating the Assumptions

11.2 Validating the Objectives

11.3 General Planning

11.4 Life-Cycle Phases

11.5 Proposal Preparation

11.6 Kickoff Meetings

11.7 Understanding Participants’ Roles

11.8 Project Planning

11.9 The Statement of Work

11.10 Project Specifications

11.11 Milestone Schedules

11.12 Work Breakdown Structure

11.13 WBS Decomposition Problems

11.14 Work Breakdown Structure Dictionary

11.15 Role of the Executive in Project Selection

11.16 Role of the Executive in Planning

11.17 The Planning Cycle

11.18 Work Planning Authorization

11.19 Why Do Plans Fail?

11.20 Stopping Projects

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11.21 Handling Project Phaseouts and Transfers

11.22 Detailed Schedules and Charts

11.23 Master Production Scheduling

11.24 Project Plan

11.25 Total Project Planning

11.26 The Project Charter

11.27 Project Baselines

11.28 Verification and Validation

11.29 Requirements Traceability Matrix

11.30 Management Control

11.31 The Project Manager–Line Manager Interface

11.32 Fast-Tracking

11.33 Configuration Management

11.34 Enterprise Project Management Methodologies

11.35 Project Audits

11.36 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 12: Network Scheduling Techniques

12.0 Introduction

12.1 Network Fundamentals

12.2 Graphical Evaluation and Review Technique (GERT)

12.3 Dependencies

12.4 Slack Time

12.5 Network Replanning

12.6 Estimating Activity Time

12.7 Estimating Total Project Time

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12.8 Total PERT/CPM Planning

12.9 Crash Times

12.10 PERT/CPM Problem Areas

12.11 Alternative PERT/CPM Models

12.12 Precedence Networks

12.13 Lag

12.14 Scheduling Problems

12.15 The Myths of Schedule Compression

12.16 Understanding Project Management Software

12.17 Software Features Offered

12.18 Software Classification

12.19 Implementation Problems

12.20 Critical Chain

12.21 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 13: Project Graphics

13.0 Introduction

13.1 Customer Reporting

13.2 Bar (Gantt) Chart

13.3 Other Conventional Presentation Techniques

13.4 Logic Diagrams/Networks

13.5 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 14: Pricing and Estimating

14.0 Introduction

11

14.1 Global Pricing Strategies

14.2 Types of Estimates

14.3 Pricing Process

14.4 Organizational Input Requirements

14.5 Labor Distributions

14.6 Overhead Rates

14.7 Materials/Support Costs

14.8 Pricing Out the Work

14.9 Smoothing Out Department Man-Hours

14.10 The Pricing Review Procedure

14.11 Systems Pricing

14.12 Developing the Supporting/Backup Costs

14.13 The Low-Bidder Dilemma

14.14 Special Problems

14.15 Estimating Pitfalls

14.16 Estimating High-Risk Projects

14.17 Project Risks

14.18 The Disaster of Applying the 10 Percent Solution to Project Estimates

14.19 Life-Cycle Costing (LCC)

14.20 Logistics Support

14.21 Economic Project Selection Criteria: Capital Budgeting

14.22 Payback Period

14.23 The Time Value of Money

14.24 Net Present Value (NPV)

14.25 Internal Rate of Return (IRR)

14.26 Comparing IRR, NPV, and Payback

14.27 Risk Analysis

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14.28 Capital Rationing

14.29 Project Financing

14.30 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 15: Cost Control

15.0 Introduction

15.1 Understanding Control

15.2 The Operating Cycle

15.3 Cost Account Codes

15.4 Budgets

15.5 The Earned Value Measurement System (EVMS)

15.6 Variance and Earned Value

15.7 The Cost Baseline

15.8 Justifying the Costs

15.9 The Cost Overrun Dilemma

15.10 Recording Material Costs Using Earned Value Measurement

15.11 The Material Accounting Criterion

15.12 Material Variances: Price and Usage

15.13 Summary Variances

15.14 Status Reporting

15.15 Cost Control Problems

15.16 Project Management Information Systems

15.17 Enterprise Resource Planning

15.18 Project Metrics

15.19 Key Performance Indicators

15.20 Value-Based Metrics

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15.21 Dashboards and Scorecards

15.22 Business Intelligence

15.23 Infographics

15.24 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 16: Trade-Off Analysis in a Project Environment

16.0 Introduction

16.1 Methodology for Trade-Off Analysis

16.2 Contracts: Their Influence on Projects

16.3 Industry Trade-Off Preferences

16.4 Conclusion

16.5 Studying Tips for the PMI® Project Management Certification Exam

Answers

Chapter 17: Risk Management

17.0 Introduction

17.1 Definition of Risk

17.2 Tolerance for Risk

17.3 Definition of Risk Management

17.4 Certainty, Risk, and Uncertainty

17.5 Risk Management Process

17.6 Plan Risk Management (11.1)

17.7 Risk Identification (11.2)

17.8 Risk Analysis (11.3, 11.4)

17.9 Qualitative Risk Analysis (11.3)

17.10 Quantitative Risk Analysis (11.4)

17.11 Probability Distributions and the Monte Carlo Process

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17.12 Plan Risk Response (11.5)

17.13 Monitor and Control Risks (11.6)

17.14 Some Implementation Considerations

17.15 The Use of Lessons Learned

17.16 Dependencies Between Risks

17.17 The Impact of Risk Handling Measures

17.18 Risk and Concurrent Engineering

17.19 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 18: Learning Curves

18.0 Introduction

18.1 General Theory

18.2 The Learning Curve Concept

18.3 Graphic Representation

18.4 Key Words Associated with Learning Curves

18.5 The Cumulative Average Curve

18.6 Sources of Experience

18.7 Developing Slope Measures

18.8 Unit Costs and Use of Midpoints

18.9 Selection of Learning Curves

18.10 Follow-On Orders

18.11 Manufacturing Breaks

18.12 Learning Curve Limitations

18.13 Prices and Experience

18.14 Competitive Weapon

18.15 Studying Tips for the PMI® Project Management Certification Exam

15

Answers

Problems

Chapter 19: Contract Management

19.0 Introduction

19.1 Procurement

19.2 Plan Procurements

19.3 Conducting the Procurements

19.4 Conduct Procurements: Request Seller Responses

19.5 Conduct Procurements: Select Sellers

19.6 Types of Contracts

19.7 Incentive Contracts

19.8 Contract Type versus Risk

19.9 Contract Administration

19.10 Contract Closure

19.11 Using a Checklist

19.12 Proposal-Contractual Interaction

19.13 Summary

19.14 Studying Tips for the PMI® Project Management Certification Exam

Answers

Chapter 20: Quality Management

20.0 Introduction

20.1 Definition of Quality

20.2 The Quality Movement

20.3 Comparison of the Quality Pioneers

20.4 The Taguchi Approach

20.5 The Malcolm Baldrige National Quality Award

20.6 ISO 9000

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20.7 Quality Management Concepts

20.8 The Cost of Quality

20.9 The Seven Quality Control Tools

20.10 Process Capability (CP)

20.11 Acceptance Sampling

20.12 Implementing Six Sigma

20.13 Lean Six Sigma and DMAIC

20.14 Quality Leadership

20.15 Responsibility for Quality

20.16 Quality Circles

20.17 Just-In-Time Manufacturing (JIT)

20.18 Total Quality Management (TQM)

20.19 Studying Tips for the PMI® Project Management Certification Exam

Answers

Chapter 21: Modern Developments in Project Management

21.0 Introduction

21.1 The Project Management Maturity Model (PMMM)

21.2 Developing Effective Procedural Documentation

21.3 Project Management Methodologies

21.4 Continuous Improvement

21.5 Capacity Planning

21.6 Competency Models

21.7 Managing Multiple Projects

21.8 End-of-Phase Review Meetings

Chapter 22: The Business of Scope Changes

22.0 Introduction

22.1 Need for Business Knowledge

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22.2 Timing of Scope Changes

22.3 Business Need for a Scope Change

22.4 Rationale for Not Approving a Scope Change

Chapter 23: The Project Office

23.0 Introduction

23.1 Present-Day Project Office

23.2 Implementation Risks

23.3 Types of Project Offices

23.4 Networking Project Management Offices

23.5 Project Management Information Systems

23.6 Dissemination of Information

23.7 Mentoring

23.8 Development of Standards and Templates

23.9 Project Management Benchmarking

23.10 Business Case Development

23.11 Customized Training (Related to Project Management)

23.12 Managing Stakeholder Relations

23.13 Continuous Improvement

23.14 Capacity Planning

23.15 Risks of Using a Project Office

23.16 Project Portfolio Management

Chapter 24: Managing Crisis Projects

24.0 Introduction

24.1 Understanding Crisis Management

24.2 Ford versus Firestone

24.3 The Air France Concorde Crash

24.4 Intel and the Pentium Chip

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24.5 The Russian Submarine Kursk

24.6 The Tylenol Poisonings

24.7 Nestlé’s Marketing of Infant Formula

24.8 The Space Shuttle Challenger Disaster

24.9 The Space Shuttle Columbia Disaster

24.10 Victims Versus Villains

24.11 Life-Cycle Phases

24.12 Project Management Implications

Chapter 25: Future of Project Management

25.0 Changing Times

25.1 Complex Projects

25.2 Complexity Theory

25.3 Scope Creep

25.4 Project Health Checks

25.5 Managing Troubled Projects

Chapter 26: The Rise, Fall, and Resurrection of Iridium: A Project Management Perspective

26.0 Introduction

26.1 Naming the Project “Iridium”

26.2 Obtaining Executive Support

26.3 Launching the Venture

26.4 The Iridium System

26.5 The Terrestrial and Space-Based Network

26.6 Project Initiation: Developing the Business Case

26.7 The “Hidden” Business Case

26.8 Risk Management

26.9 The Collective Belief

26.10 The Exit Champion

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26.11 Iridium’s Infancy Years

26.12 Debt Financing

26.13 The M-Star Project

26.14 A New CEO

26.15 Satellite Launches

26.16 An Initial Public Offering (IPO)

26.17 Signing Up Customers

26.18 Iridium’s Rapid Ascent

26.19 Iridium’s Rapid Descent

26.20 The Iridium “Flu”

26.21 Searching for a White Knight

26.22 The Definition of Failure (October, 1999)

26.23 The Satellite Deorbiting Plan

26.24 Iridium is Rescued for $25 Million

26.25 Iridium Begins to Grow

26.26 Shareholder Lawsuits

26.27 The Bankruptcy Court Ruling

26.28 Autopsy

26.29 Financial Impact of the Bankruptcy

26.30 What Really Went Wrong?

26.31 Lessons Learned

26.32 Conclusion

Epilogue (2011)

Appendix A. Solutions to the Project Management Conflict Exercise

Appendix B. Solution to Leadership Exercise

Appendix C. Dorale Products Case Studies

Appendix D. Solutions to the Dorale Products Case Studies

20

Appendix E. Alignment of the PMBOK® Guide to the Text

Author Index

Subject Index

21

Dr. Kerzner’s 16 Points to Project Management Maturity

1. Adopt a project management methodology and use it consistently.

2. Implement a philosophy that drives the company toward project management maturity and communicate it to everyone.

3. Commit to developing effective plans at the beginning of each project.

4. Minimize scope changes by committing to realistic objectives.

5. Recognize that cost and schedule management are inseparable.

6. Select the right person as the project manager.

7. Provide executives with project sponsor information, not project management information.

8. Strengthen involvement and support of line management.

9. Focus on deliverables rather than resources.

10. Cultivate effective communication, cooperation, and trust to achieve rapid project management maturity.

11. Share recognition for project success with the entire project team and line management.

12. Eliminate nonproductive meetings.

13. Focus on identifying and solving problems early, quickly, and cost effectively.

14. Measure progress periodically.

15. Use project management software as a tool—not as a substitute for effective planning or interpersonal skills.

16. Institute an all-employee training program with periodic updates based upon documented lessons learned.

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Cover illustration: xiaoke ma/iStockphoto Copyright © 2013 by John Wiley & Sons, Inc. All rights reserved Published by John Wiley & Sons, Inc., Hoboken,

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Library of Congress Cataloging-in-Publication Data: Kerzner, Harold.

Project management : a systems approach to planning, scheduling, and controlling / Harold Kerzner, Ph. D. Senior Executive Director for Project Management, the International Institute for Learning, New York, New York. — Eleventh edition.

pages cm

Includes bibliographical references and index.

24http://www.copyright.comhttp://www.wiley.com/go/permissionshttp://booksupport.wiley.comhttp://www.wiley.com

ISBN 978-1-118-02227-6 (cloth); ISBN 978-1-118-41585-6 (ebk); ISBN 978-1- 118-41855-0 (ebk); ISBN 978-1-118-43357-7 (ebk); ISBN 978-1-118-48322-0

(ebk); ISBN 978-1-118-48323-7 (ebk) 1. Project management. 2. Project management—Case studies. I. Title.

HD69.P75K47 2013

658.4’04—dc23

2012026239

25

To

Dr. Herman Krier,

my Friend and Guru,

who taught me well the

meaning of the word “persistence”

26

Preface Project management has evolved from a management philosophy restricted to a few functional areas and regarded as something nice to have to an enterprise project management system affecting every functional unit of the company. Simply stated, project management has evolved into a business process rather than merely a project management process. More and more companies are now regarding project management as being mandatory for the survival of the firm. Organizations that were opponents of project management are now advocates. Management educators of the past, who preached that project management could not work and would be just another fad, are now staunch supporters. Project management is here to stay. Colleges and universities are now offering graduate degrees in project management.

The text discusses the principles of project management. Students who are interested in advanced topics, such as some of the material in Chapters 21 to 25 of this text, may wish to read one of my other texts, Advanced Project Management: Best Practices in Implementation (New York: Wiley, 2004) and Project Management Best Practices: Achieving Global Excellence, 2nd edition (Hoboken, NJ: Wiley and IIL Publishers, 2010). John Wiley & Sons and the International Institute for Learning also introduced a four-book series on project management best practices, authored by Frank Saladis, Carl Belack, and Harold Kerzner.

This book is addressed not only to those undergraduate and graduate students who wish to improve upon their project management skills but also to those functional managers and upper-level executives who serve as project sponsors and must provide continuous support for projects. During the past several years, management’s knowledge and understanding of project management has matured to the point where almost every company is using project management in one form or another. These companies have come to the realization that project management and productivity are related and that we are now managing our business as though it is a series of projects. Project management coursework is now consuming more of training budgets than ever before.

General reference is provided in the text to engineers. However, the reader should not consider project management as strictly engineering-related. The engineering examples are the result of the fact that project management first appeared in the engineering disciplines, and we should be willing to learn from their mistakes. Project management now resides in every profession, including information systems, health care, consulting, pharmaceutical, banks, and

27

government agencies. The text can be used for both undergraduate and graduate courses in business,

information systems, and engineering. The structure of the text is based upon my belief that project management is much more behavioral than quantitative since projects are managed by people rather than tools. The first five chapters are part of the basic core of knowledge necessary to understand project management. Chapters 6 through 8 deal with the support functions of managing your time effectively, conflicts, and other special topics. Chapters 9 and 10 describe factors for predicting success and management support. It may seem strange that ten chapters on organizational behavior and structuring are needed prior to the “hard-core” chapters of planning, scheduling, and controlling. These first ten chapters are needed to understand the cultural environment for all projects and systems. These chapters are necessary for the reader to understand the difficulties in achieving cross-functional cooperation on projects where team members are working on multiple projects concurrently and why the people involved, all of whom may have different backgrounds, cannot simply be forged into a cohesive work unit without friction. Chapters 11 through 20 are more of the quantitative chapters on planning, scheduling, cost control, estimating, contracting (and procurement), and quality. The next five chapters are advanced topics and future trends. Chapter 26 is a capstone case study that can be related to almost all of the chapters in the text.

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