Putting Strategy Into Projects

Transcription

1 Putting Strategy Into Projects Steven R. Meier, Ph.D., PMP SRM Consulting, LLC 24 February 2015 SRM Consulting LLC 1

2 Common Scenarios I try for months to get an initiative off the ground, and then it is shut down because it doesn t fit the strategy. Why didn t anyone tell me that at the beginning? I don t know whether I should be pursuing this market opportunity. I get mixed signals from the powers that be. Why are we bidding on this customer s business again? We lost it last year, and I thought we agreed then not to waste our time chasing the contract! Should I cut the price for this customer? I don t know if we would be better off winning the deal at a lower price or just losing the business. D.J. Collins and M.G. Rukstad, Harvard Business Review, April 2008 SRM Consulting LLC 2

3 Why am I doing this project? SRM Consulting LLC 3

4 Our research suggests that companies on average deliver only 63% of the financial performance their strategies promise. Our research also shows that a select group of high performing companies have managed to close the strategy-to-performance gap through better planning and execution *. Their disciplined planning and execution processes make it far less likely that they will face a shortfall in actual performance. * better planning and execution = project management M.C. Makins and R. Steele, Harvard Business Review, July-Aug 2005 SRM Consulting LLC 4

5 The Gap Between Strategy and Project Management Corporate Strategy Project Portfolio Valley of Death SRM Consulting LLC 5

6 Sources of the Gap Fewer than 15% of employees can state their company s strategic goals. If you can t articulate the strategy, you can t make smart decisions about what projects to keep or remove. 1 Of 423 clients, more than 75% indicated difficulties in integrating and aligning their project portfolio with their core business strategy. 2 No organizational level strategy, mission, vision, or objectives exists Poor strategy communication across the organization 1 C. Benko and F. W. Warren Connecting the Dots: Aligning Projects with Objectives in Unpredictable Times 2 R.H. Dalton, Deloitte webcast survey of 423 clients SRM Consulting LLC 6

7 The Gap Costs Money The U.S. spends roughly $2.3T on projects defined as efforts that have a discrete beginning, end, and deliverable. And yet the vast majority of companies don t have a strategy for managing their projects in a way that captures their full value and effectively maps them to the needs of the organization. The consequence? Close to $1T in underperforming investments in the U.S. alone over the past 5 years. C. Benko and F. W. Warren Connecting the Dots: Aligning Projects with Objectives in Unpredictable Times SRM Consulting LLC 7

8 Overcoming the Strategy Gap SRM Consulting LLC 8

9 Strategy Definitions Military term coined in 1825, the word strategic originates from the Greek word strategikos, of or for a general Creating value for your customer Kaplan and Norton, creators of the Balanced Scorecard Henry Mintzberg defined strategy as "a pattern in a stream of decisions". Wikipedia A strategy is a plan of action designed to achieve a specific goal Strategy (2a.) a careful plan or method; (2b.) the art of devising or employing plans or stratagems toward a goal (Webster s 9 th Collegiate Dictionary) SRM Consulting LLC 9

10 Porter on Strategy SRM Consulting LLC 10

11 Cynthia Montgomery on Strategy and the Chief Strategist atch?v=zrxuebwxqse As the PM you are the Chief Strategist SRM Consulting LLC 11

12 My View of Strategy My own view is simply that strategy is the process of deliberately choosing a unique, competitive direction SRM Consulting LLC 12

13 Where Strategy Fits Within an Organization s Hierarchy Vision Mission Core values must be the underlying support for your entire organization Strategy Strategic Goals Programs and Projects Performance Measurement Core Values SRM Consulting LLC 13

14 There are Different Levels of Strategy Corporate Strategy Business Unit Strategy Divisional Strategy Ensure Your Strategy is Traceable and Consistent to all levels Group Strategy SRM Consulting LLC 14

15 Strategy Planning Time Horizons Government agencies 3 years to 15 years Blue Chip Industry 6 months to 3 years High Technology Industry 3 months to 3 years SRM Consulting LLC 15

16 Why do you Need a Strategy? A strategy enables everyone in the organization to make day-to-day decisions that fit within the long-term interests of the organization A strategy will help you define where you are going and the most efficient, effective, and economical way to get there. Gets everyone synchronized. SRM Consulting LLC 16

17 Execution is Critical SRM Consulting LLC 17

18 Research indicates that only a fraction according to some studies, less than 10% - of companies strategic plans are effectively executed and that firms deliver just 50% to 60% on average, of the financial performance that the strategy promises. Frank Cespedes, Putting Sales at the Center of Strategy, Harvard Business Review, October SRM Consulting LLC 18

19 Dr. Pietro Micheli on Execution tch?v=bztbxqy1sdu SRM Consulting LLC 19

20 Execution is Critical to Success Execution is handled poorly by many organizations: Managers are trained to plan, not execute Let the grunts handle execution Planning and execution are interdependent Execution takes longer than formulation Execution is a process, not an action or step Execution involves more people than strategy formulation does L. Hrebiniak, Making Strategy Work SRM Consulting LLC 20

21 Perquisites for Aligning Strategy and Projects An organizational strategic plan with specific goals Organizational operations plan Strategy, budget, and human resources that are aligned Strong execution-based leadership A system to manage change effectively Motivated, aligned team Visibility across the organization Information and decision-support systems Individual performance measurement tied to strategy These are all project management activities SRM Consulting LLC 21

22 Linking Projects to Strategy with a Project Portfolio SRM Consulting LLC 22

23 Traditional Portfolio Management Model SRM Consulting LLC 23

24 Portfolio Management A centralized management of one or more portfolios which includes identifying, prioritizing, authorizing, managing, and controlling projects, programs, and other related work to achieve business goals.* * PMBOK Guide SRM Consulting LLC 24

25 Portfolio Benefits Traceable to and directly support strategic goals Better alignment of human and financial resources Improved productivity Efficiency gains Greater economic efficiency Increased shareholder value Customer satisfaction SRM Consulting LLC 25

26 How do you Create a Portfolio? 1. Develop specific focus areas based on your current business strategy 2. Establish project selection criteria and weightings 3. Develop a process to select projects 4. Assign budget, schedule, performance milestones, and deliverables to each project 5. Create a performance measurement system to track progress SRM Consulting LLC 26

27 Identify Selection Criteria and Weightings Potential selection criteria may include: Financial/Cost perspective (30%) Technical/Performance perspective (20%) Strategic alignment perspective (35%) Schedule perspective (15%) For new or early stage projects financial calculations such as ROI, IRR, NPV, and ROS usually have large uncertainties SRM Consulting LLC 27

28 Establish Project Selection Criteria Establish detailed criteria and weightings: Does it fall within a focus area (strategic) (25%) Benefit to more than one customer or business unit (strategic) (15%) Number of years from initiation to completion (schedule) (10%) Percentage of cost sharing/matching funds (cost) (10%) Cost reduction compared to current product (cost) (5%) Percent capability improvement over the current state (technical) (20%) The number of years it will take generate a top line impact (sales or orders) (financial) (5%) Cost reduction for production, operations, or maintenance of a product or system (cost) (10%) SRM Consulting LLC 28

29 Linking Strategy to Projects Organization Portfolio Organizational Strategy Division 2 Division 1 Division 2 Portfolio Division 1 Portfolio Project 1 output Program 2 Project 3 Project 1 Partner ship output Program 2 s/w Product Project 3 Proposal Internal Process h/w Product Proposal Portfolios Can Consist of Programs and Projects SRM Consulting LLC 29

30 Projectized View of Strategy Strategic Initiatives Project 1 Project 2 As is Project 3 To be Project 4 Project 5 SRM Consulting LLC 30

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32 Conduct Project Gate Reviews Validate business case is it consistent with the current strategy? Validate statement of work Assess project performance (planned vs. actual) Cost Schedule Staffing Performance Confirm position within the portfolio Make go/no go decisions Document lessons learned at each gate review SRM Consulting LLC 32

33 Utilize a real-time Portfolio Dashboard SRM Consulting LLC 33

34 Summary Strategy is determining a unique position and advantage in an industry Strategy is about making deliberate choices to set a direction Strategy is a continuous process Strategy usually fails during execution A focused project portfolio will link strategy to individual projects and facilitate effective management and efficiencies to meet strategic business goals SRM Consulting LLC 34

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36 Contact Info Steven Meier, Ph.D., PMP SRM Consulting LLC 36