Linking Corporate Strategy to Project Strategy via Portfolio and Program Management. Peter W.G. Morris and Ashley Jamieson

Transcription

1 Linking Corporate Strategy to Project Strategy via Portfolio and Program Management Peter W.G. Morris and Ashley Jamieson This paper reviews evidence from four case studies together with questionnaire data which shows that the processes, practices and people issues involved in moving from corporate strategy through portfolio management to programs and projects is done in a much more systematic way than is generally recognized. It suggests that companies have a clear governance structure between business unit enterprise management across portfolios to programs and projects. Developing corporate strategy Corporate strategy is a means of thinking through and articulating how an organization s goals and objectives will be achieved. This strategy is then typically operationalized at a strategic business unit [SBU] level. Much of traditional management writing tends only to cover only those elements concerned with the formulation of strategy at the corporate level; there is a dearth of writing about how corporate strategy gets translated into implementation, particularly through programs and projects. Yet in practice projects and programs are, as we shall see, important ways for strategy to be implemented in the enterprise and we ought to understand much better how this occurs. Strategy management is a dynamic process. We can distinguish both deliberate and emergent strategy development. Deliberate in the sense that strategy is planned and its formulation, review, approval and implementation follows well defined processes and schedules. Emergent as it, and events, emerge with time (Mintzberg, 1996; Mintzberg & Waters, 1985). Project managers tend to be more comfortable in process-driven control environments, typical of deliberate implementation. Emergent strategy suggests a more incremental, learning approach to 1

2 implementation where results are regularly appraised against benefits and changes are managed against the evolving picture of requirements. In such circumstances implementation projects and programs often have an ambiguous relationship to the environment in which they evolve because they often stretch and change the context which the strategy is addressing (Lampel and Jha, 2004; Garbher, 2002). The very act of implementation may change operational reality, and ultimately even modify strategic intent. Hence though there may be formal strategy planning processes and practices, strategy is rarely realized in as rigid and deliberate manner as many planners assume. It is important to recognize that different types of program and project may require different business management approaches. Artto and Dietrich (2004) for example outline a number of different managerial practices for the strategic business management in multiple project environments. Crawford et al. (2002), Shenhar et al. (2002), and Youker (1999) also investigate project classification and different management approaches to different projects. Hierarchy is usually important in any discussion of implementing strategy. A hierarchy of objectives and strategies can generally be formed as a result of using a strategy planning process; this can be a very effective means of structuring and managing strategy, and communicating it to the organization. One such model is Archibald s hierarchy of objectives, strategies and projects where objectives and strategies are developed at the policy, strategic, operational and project levels and cascaded down, thereby ensuring alignment and continuity of strategy (Cleland, 1990; Archibald, 2003). Similarly Kerzner (2000) shows a hierarchy where strategic plans are cascaded from corporate strategy to SBUs and from SBUs to supporting plans. Not all strategy implementation is downwards from the corporate level through portfolios to programs and projects. Just as in strategic planning there is upward flow from SBUs, so in implementation there is management information and action bearing up from programs and projects onto portfolio, business unit and corporate strategy. For example, a fundamental responsibility of project/ program management is to manage the resources needed to define and deliver its programs and projects effectively. We shall see (in the pharma case for example) that resource management becomes a critical factor in moving from corporate strategy into project implementation. 2

3 Portfolio management A portfolio is a set of projects that are managed in a coordinated way to deliver benefits which would not be possible if the projects were managed independently (Artto et al., 2002; Platje et al.,1994). A slightly different but widely accepted view is that a project portfolio is a collection of projects to be managed concurrently under a single management umbrella where each project may be related or independent of the others (Thiry, 2004; Martinsuo & Dietrich, 2002). Archer and Ghasemzadeh (2004) stress that portfolio management is pre-eminently about selecting or prioritizing the best projects or programs to proceed with. Project portfolio management, then, is predominantly about choosing the right project, whereas project management is about doing the project right (Cooke-Davies, 2002, 2004). Archer and Ghasemzadeh (1999) have provided a general framework for project portfolio selection which demonstrates the need for strategy to be set at the corporate level and then to be filtered down to the project level. Subsequently they emphasized the importance of aligning resource demand with resource availability to achieve a set of strategic goals (Archer & Ghasemzadeh, 2004). Knutson (2001) points out that the project portfolio management process provides a means of consistently and objectively evaluating each proposed project that is vying for a limited pool of resources, thereby aiding the process of making the most effective strategic use of the resources. Linking company strategy to portfolio development is critical, particularly when company strategy involves both a high degree of innovation and a high rate of growth. In fact, advances in portfolio selection and management practice have been notably strong in new product development (Archer & Ghasemzadeh, 2004; Cooper, Edgett et al., 2001) and the top performing benchmark businesses display strong management support for portfolio selection and management, using formal portfolio management methods to manage their portfolio strategy within the context of the enterprise business strategy (Cooper, Edgett et al. 1999). While there are many possible methodologies that can be used in selecting a portfolio, there is little consensus on which are the most effective (Archer & Ghasemzadeh, 2004). Archer and Ghasemzadeh (1999) suggest a project portfolio selection framework that includes the development of strategy for the portfolio. 3

4 Shenar and Dvir (2004) propose a strategic portfolio classification framework which is based on the need to select projects due to their strategic impact and to form a policy for project selection. Archer and Ghasemzadeh (2004) identify risk and outsourcing as having a particularly strong impact on portfolio selection and management. They point out that a key criterion for successfully applying risk evaluation in portfolio selection is that risk assessment and quantification be uniformly applied across all projects and teams. Program management Both portfolio management and program management focus on prioritizing resources and optimizing the business benefit. Program management is more involved in dayto-day management unlike portfolio management which is more periodic and is strongly analytical. Program management is a powerful way of coordinating projects that have a shared business aim and is an important method of ensuring that the organization gains the maximum benefit from integrating its project management activities. There is however quite a degree of confusion in the literature and in practice over just what is involved in program management. Thiry (2004) defines programs as a collection of change actions (projects and operational activities) purposefully grouped together to realize strategic and/or tactical benefits. Others define program management primarily as a collection of interrelated projects. Several perspectives exist on the optimal ways to configure programs to achieve strategic objectives and deal with change (Murray-Webster & Thiry, 2000). Some emphasize the technology base, as in platform projects (Wheelwright and Clark, 1992). Others, particularly those coming from Information Technology, emphasize in addition the importance of business benefit (OGC, 1999). Pellegrinelli (1997) has proposed the generic portfolio and program typologies of Goal-oriented, Portfolio, and Heartbeat. Murray-Webster and Thiry (2002) have proposed Strategic, Multi-Project, and Incremental. Programs are often ongoing or long-term and are subjected to both uncertainty and ambiguity (Thiry, 2004). Programs and program management are frequently used in large organizations to implement strategic initiatives. The UK Office of Government Commerce [OGC] for example considers the alignment between strategy and projects to be one of the main benefits of program management (OGC, 1999). They require a decision management paradigm which takes into account the appropriate strategic perspective. Whereas projects essentially involve deliberate (planned) 4

5 strategies, programs combine both deliberate strategies and emergent (unplanned) strategies. Benefits management is increasingly recognized as a key formal activity within program management (Thiry, 2004; Ward & Peppard, 1997; OGC, 1999) and is clearly linked to value management: both must be linked to strategy and programs to be most effective according (Thiry, 2004a). A program often has to strive for the achievement of a number of sometimes conflicting aims and has a broader corporate goal than projects, which aim to achieve single predetermined results (Wijnen & Kor, 2000). Implementing strategy through program management involves continuous re-formulation and adjustment. Projects on the other hand concentrate on achieving one single particular result within set time and cost constraints (Görög and Smith, 1999). Pellegrinelli, Partington & Young (2003) see programs emanating from business strategies and initiatives with an iterative hierarchy of programs, projects and business operations cascading from them. Youker (1993) illustrates a cascade to show how organizations position programs and projects to achieve their development objectives. As a result of the research reported here (Morris & Jamieson, 2004) the model has been modified to include business strategy and portfolios, as shown in Figure 1. Business Strategy Portfolio Objectives Context Portfolio Strategy Program Objectives Program Strategy Project Objectives Project Strategy Phase Objectives Phase Strategy Team Objectives Strategic Planning for Projects Team Strategy Individual Objectives Individual Strategy Source: The Handbook of Project-Based Management, 2 nd ed. J.R.Turner 1999 Reproduced by kind permission of the Open University Press / McGraw-Hill Publishing Company. Adapted by Morris and Jamieson (2004). Figure 1: Linking corporate and project strategy 5

6 Project management Projects, in distinction to programs, have a unique objective and follow a single development life cycle. There is a widespread view that project management is largely about execution. As a result the vitally important period of front-end definition and the role of management in this is too often overlooked. Morris, on the other hand, amongst others, has argued for a more holistic view of managing projects, covering both the front-end definition and the interaction between the project, and its environment and stakeholders (Morris, 1994). Developing effective strategy for program or project implementation bears directly on the important front-end definition phases of project definition and assessment. It is often a complex activity drawing on strategic elements from a wide range of project management practices, such as risk management, value management and supply chain management, as well as incorporating some form of interaction with a whole range of other factors shaping the nature of the project: stakeholder requirements and technical definition, marketing, finance, and so on. Achieving alignment between the project and the company s strategy may prove difficult because, as we have seen, strategy itself is frequently an umbrella that permits a range of options rather than a clearly and tightly defined set of goals (Mintzberg & Waters, 1985), and the very act of developing project proposals interacts with, and shapes, the organization s strategic options, as has been highlighted in numerous industry specific case studies (Morris & Pinto, 2004; Morris & Hough, 1987; Morris, 1994). Artto and Deitrich (2004) address how multiple projects can be collectively aligned with business strategy in a manner that generates enhanced benefits for the whole business, and the role of specific projects in implementing, creating and renewing business strategies. PMI s PMBOK ( ) links the strategic plan of the organization, containing the strategic goals, to the project scope management processes (para ) However, while PMBOK signposts the process connections between strategy and scope, it is short on detailing the substance. Turner (1999) is better, advocating the development of a comprehensive definition of a project at the start of the project, in which business plans are aligned with project plans containing key elements of project strategy. Simister (2000) shows the development of business cases and strategic briefs as 1 The early drafts of the revised PMBOK [2004] would seem to show no modification in this. 6

7 part of the project definition process. Morris (1994) summarizes the elements of project strategy. The UK s Association for Project Management BOK (Dixon, 2000) gives fuller recognition to the business context within which the project resides, as well as recognizing portfolio and program management, and requirements management. (The business and operating requirements of a project frequently affect project strategy significantly and for this reason the APM BOK identifies requirements as a key project management process (Davis et al, 2004; Stevens et al., 1997; Young, 2001).) Work by Morris and Jamieson in integrating what the PMBOK and the APM BOK have to say about the way strategy shapes project definition shows the large number of factors involved in creating project strategy at the front-end of a project (Morris and Jamieson, 2004). This highlights the need for an effective way to manage project strategy creation, covering not only the front-end of a project but the entire project lifecycle. Though developing strategy obviously occurs at the front end of a project, it often encompasses the entire project lifecycle: Integrated Logistics Support, Operations and Maintenance, and Whole-Life Costs for example may well figure importantly in the strategy (Kirkpatrick, McInally & Pridie-Sale, 2004). In fact, as the case studies reported below show, many companies have developed structured approaches for creating and managing project strategy that cover the entire project life cycle and are integrated with the business strategy development processes. The research study The literature on how corporate strategy gets implemented via portfolios, programs and projects is thus diverse, patchy and incomplete. While that on portfolio management is quite thorough, the treatment is primarily from an analytic viewpoint. There is little on implementation. The literature on program management is often quite confused (and confusing). There is a lack of detail in the APM BOK on how corporate strategy influences project strategy while the subject is hardly dealt with in PMBOK. A research project was therefore initiated by the Centre for Research in the Management of Projects funded primarily by PMI but with additional support from UCL, UMIST, and the pharmaceutical company to explore and illustrate in more rigorous detail how corporate strategy is implemented via project, program and portfolio management. 7

8 Given the availability of funding and time available, the research was designed to be exploratory. That is, it was recognized that only a limited number of case studies and survey data could be undertaken, and that the findings therefore could not be, and should not be, taken as either exhaustive or conclusive. (There is much room for additional research in this area.) Case studies were selected from four different areas: aerospace, financial, pharmaceutical and transportation/ construction (though admittedly all from the sponsoring organization s perspective: that is, from the perspective of the company making a capital investment). Semi-structured interviews were conducted with senior managers using a questionnaire-based approach. The questionnaire covered topics discussed in the theoretical framework above including: strategic management formulation and implementation processes; portfolio management processes; business enterprise models; business management processes; portfolio management processes; program and project management processes; program and project management practices; and program and project management people skills, knowledge and behaviors. The results and findings of each case study were validated by the appropriate company before a cross analysis of all the results and findings was carried out. The case study data provided a rich qualitative context in which to explore how companies moved from corporate to program and project strategy. But the data sample was obviously small. To provide a bigger data sample we carried out a survey of members in a number of PMI Chapters in European countries. A series of thirty-two multiple questions were posed. Seventy-five responses (about 50% from UK) were received from people at various levels of seniority, in small, medium and large enterprises in a diverse range of business sectors such as aerospace, automotive, IT, telecommunications, pharmaceuticals, retail, transportation and publishing; and academia and consultancy. The response rate about 2% is too small for the results to be considered as statistically valid but can be taken as indicative: the research is, as we have indicated, at best only exploratory. 8

9 Survey findings Boxes 1-5 summarize the analysis of the survey findings, and cover the following areas: Business management; Program management and Portfolio management; Project management and project strategy; Value management; and Project management competencies How business management models are used was the first area to be studied. 67% used a generic business model. 50% believed they had extensive processes for moving corporate goals into project strategy; 90% had adequate or better interconnection between corporate, business and project management processes. Over 53% recognized a hierarchy of objectives and strategies (68% at the SBU level). Box 1: Survey findings - Business management 1. The extent to which a business model was used Model used Generic * Equivalent Population % *Including project management processes 2. 80% of the organizations indicated they were process-orientated organizations as follows: Level of process orientated Extensively Adequately Inadequately Population % Those extensively or adequately process-orientated indicated they had processes for moving corporate goals and objectives to project strategy as follows: Level of processes Extensive Adequate Population % The level of interconnection between the corporate, business and project management processes for the organizations with extensive processes was as follows: Level of Interconnection Extensive Adequate Inadequate Population % Organizations having extensive processes/sub-processes for moving corporate goals and objectives to project strategy consider continuity of strategy is achieved as follows: Level of continuity achieved Fully Well Inadequate or poor 9

10 Population % Hierarchy of objectives and strategies developed and deployed for structuring strategy: Hierarchy span Corporate through to project SBU to project Population % How organizations perceive and use program management and portfolio management and the extent to which they moved strategy through programs to projects was the second major area investigated. Essentially 50% used some form of portfolio management, 95% used some form of program management (with 75% having business benefit management as an explicit part of this). Box 2: Survey findings Program management and Portfolio management Population % 1. Program management was defined as the management of a portfolio of projects sharing a business objective of strategic importance, probably utilizing shared resources Programs were considered to comprise: Groups of projects 20 No. of separate projects 20 Combination of both Programs were used to implement change: Some form of portfolio management was implemented: Portfolio management was considered as: Selecting the right project quantitatively 50 Maintaining a balanced portfolio 60 Managing projects grouped around a common theme Hierarchy of objectives and strategies were developed and deployed at program and project level 75 Of which, the levels deployed were as follows: Program 90 Program and project 60 Program, project and project team 45 Program, project, project team and individual Program management was implemented 90 Of which, program management included the following: A. [i] Managing an integrated set of projects to achieve 55 a common theme, aim or working off a common platform; [ii] Integrated project teams 10

11 [iii] Managing resources in an integrated manner B. [i] and [ii] 10 C. [i] and [iii] Program management implied the management of business benefits 75 Of which: It was normal practice to formally identify a benefits process within the overall program management process. 70 Those who do not incorporate a benefits process believed they should. 60 Non-financial measures were used to track benefits in programs Program management implied the aggregation of risks 75 Of which: It is normal practice to formally identify risk aggregation as part of the overall risk management activity. 80 Those who do not who do not identify risk aggregation believed It should be incorporated into program management. 60 The third area investigated, project management, followed on naturally from program management. The survey focused on identifying the key strategy inputs and some of the project management activities which were employed to create project strategy. 85% used extensive or partial project management processes to manage project strategy; most (75%+) had specific strategy inputs into project management, 65% doing this in an emergent manner. 85% used a gate review process with clear sponsorship responsibilities. 65% upgraded strategy as the project progressed. Box 3: Survey findings - Project management and project strategy % Population 1. Organizations had extensive or partially integrated Almost all project management processes to help manage project strategy, which contained: Project strategy management 85 Requirements management, project strategy, project definition and project scope management 75 Requirements management, project definition and project scope management Organizations had specific strategy inputs to integrated project management processes which included: Corporate strategy 75 Corporate strategy and business strategies 65 Corporate, business and portfolio strategies 50 Most 11

12 Corporate, business, portfolio, and program strategies 45 Portfolio and program strategies only 55 Program strategy The integrated project management processes delivered the following outputs: A project or program plan and strategy plan 50 Other project management plans 75 A project or program plan, strategy plan and other plans Organizations with integrated project management processes managed project strategy dynamically The roles and responsibilities for developing, implementing and updating project strategy were specified in: Project management procedures 60 Project plans Project plans were formally reviewed at project gates 85 Those who did not and thought they should Peer groups formally reviewed project plans 75 Those who did not and thought it would be sensible to do It was clear who approved and signed off project strategy In broad terms, a project sponsor was the individual or group within the performing organization who provides the financial resources, in cash or in kind, for the project; and as the owner of the business case, represents the funder s interests. 90 The relationship between the project sponsor and the project management team was normally defined in project plans Strategy was expected to be upgraded and reviewed: During the development of the project 65 Systematically as projects develop from concept to execution 55 Of which: it was systematically undertaken at project review gates 85 12

13 The survey also explored a two other areas. Project value management and its link to project strategy. (55% had a process for optimizing the value of the project; 75% of this 55% combined this with risk management.) The extent companies define competencies to manage program and project strategy and incorporate them in competency frameworks and job descriptions. (80% had project management competencies defined of which 75% included those for managing the strategy development process.) Box 4: Survey findings - Value management Population % 1. A process was used for optimizing the value of proposed project /program strategy 55 Of which: Value was expressed as benefit over resources used 80 The process was formalized as value management 55 Of which value management workshops were held at strategic stages in the life of the project. 40 Those not using a process for optimizing the value of project/program strategy believed they should Value engineering was practiced on programs and projects 25 Of which: Value engineering (optimizing the value of the technical configuration) was distinguished from value management. 80 Those not practicing value engineering on programs and projects thought they should The value optimization process was integrated with risk management 75 Those that did not thought it should be done. 40 Box 5: Survey findings Project management competencies Population % 1. Project management skills and knowledge competencies required to manage programs or projects were formally defined 80 Of which included: Those required to develop program and project strategy 75 Linking the competencies to personal appraisal and development systems 80 Linking personal objectives to project objectives 65 13

14 2. Those that did not formally define the project management skills and knowledge competencies incorporated the management of project strategy in job descriptions or job specifications Wide-wide behavioral competency frameworks were used 60 Those that did not use them, considered they should Competency support programs for program and project managers were provided 70 Of which covered support for project strategy development. 66 A full report on the research was published by PMI in the Spring of 2004 (Morris & Jamieson, 2004). This report contains also full details of the four case studies. Case studies We shall briefly look at some of the key findings coming from the cases overall for their implications on the role of leadership in project management. Business models Two of the companies used business models that included strategy management, portfolio management, and program and project management processes. The aerospace company had a very powerful business process model in which program management (and project strategy) played a prominent part. The international transportation company also had a strong business process model, though project management, as a formal discipline, had a less visible role. (It existed as an activity but was spread between development management and project execution.) The pharmaceutical company had a process model which was dominated by the drug development process this is not the same as a business model per se but was clearly the major business process. Project and portfolio management (and program management to a lesser extent) are important aspects of this process. The financial services company had a high-level business process but this was less visible than the business models in the other case studies. Cascading corporate strategies into projects and strategy plans All the companies created corporate objectives, goals and strategies using processes like the strategic management processes described by Mintzberg and others. As in Youker s model, these objectives, goals and strategies were cascaded to the strategic business units [SBUs] or equivalent organizational entities, which in turn 14

15 developed their own objectives, goals and strategies: in some instances using additional processes which were fully integrated with the business strategy processes. The SBUs subsequently developed objectives, goals and strategies with and for their respective program and project teams, again in some instances using fully interconnecting business and project management processes. The importance of project portfolio management was recognized by all the companies. In all four cases the program and/or project teams developed strategies that aligned with the SBU and corporate strategy containing the objectives, goals, and strategies. These included strategy plans, business plans, deployment plans and project plans, the hierarchy of which, in most cases, was similar to Archibald s hierarchy of objectives, strategies and projects. Portfolio management The importance of project portfolio management was recognized by all the companies. Portfolio management was used primarily to select and priorities programs and projects, and not to manage programs or projects. Corporate and business units assembled a strategic portfolio of programs and projects, or measured the strategic contribution of a program or project, using a number of strategic and project management processes, tools and techniques. Governance adopted or rejected projects based on this information. Program management Program management was practiced by all the companies, primarily in the sense of managing a group of high value projects sharing a common aim and/or of delivering regular benefits over a protracted period of time. In the aerospace company program management was positioned primarily as the management of a number of interrelated projects. In the financial services company there was much more emphasis in program management on managing multiple, interrelated projects for business benefit. In the pharmaceutical case the emphasis was on asset management, in the sense that the program represented a basic chemical entity (a technology platform in Wheelwright and Clark s phrase (1990)) which can be promoted as a brand. Program management in the transportation case was used to manage a large number of interrelated projects. Program management and project management activities were carried out in all cases using the same set of common processes, variously called integrated program 15

16 management, program management, or even project management. The development of program strategy and its alignment with corporate and business strategy was, as a consequence, achieved in a similar way to that for projects. Project strategy The creation of business cases was a key element of the business and project management interface within all the companies. An outline project strategy was developed during this activity, and was aligned with corporate and business strategies. Subsequently, business strategy, in most of the companies, was translated into a comprehensive project strategy using project management processes. However, none of the companies documented project strategy in a single comprehensive document; instead project strategy was covered by a diversity of management and project plans. Managers did not see the point the benefit of doing so and thus resisted another bureaucratic task. Two of the companies used a very structured approach to create and manage project strategy. One had institutionalized a project strategy management practice that was equivalent to, for example, risk management or technical management. The other had identified specific project strategy related issues for each phase and stage of the project management process and the project life cycle. Both companies assigned roles and responsibilities for managing the execution of these processes. The other companies used a less structured approach. Though they developed management plans for their projects they tended not to summarize the plans nor develop a single project strategy statement from them. Only one of the four companies used the term project strategy in their project management processes. Two out of the four companies the aerospace and pharmaceutical companies managed project strategy for effectively the entire project life cycle and not just at the front-end of a project. The aerospace company The company is a global supplier of aero-engines. It creates and translates its strategy from the corporate to project level through a hierarchy of processes: these are contained within the overall Plan the business process. Corporate strategy, within the company, is a portfolio of integrated business strategies that deliver corporate intent and are consistent with the financial constraints facing the company. The process by which this is achieved is Create corporate strategy : one of eight 16

17 top-level processes of the Plan the business process. The process operates at two levels: the development and agreement of a Corporate Strategy Plan [CSP] by the Board; and engaging the business sectors to arrive at a committed set of business strategies that fully support the CSP. The corporate strategic requirements are analyzed taking into account the relevant internal and external influences, and particularly the competitive environment. The process owners, business sectors and business units provide most of the information necessary to carry out the analysis. A portfolio of strategies is developed, including commitments and opportunities submitted by the businesses, to form the CSP for the Board to discuss, approve and commit to. Once this has been completed, the CSP becomes the baseline against which corporate strategy is monitored. The CSP also contains the Corporate Financial Plan [CFP], which summarizes the financial element of corporate strategy. Corporate strategy is then communicated to the business sectors and business units in order for them to formulate their own strategies, plans and commitments Business sector strategy is cascaded to the business units through the Deploy business plans process. The outline business plans produced in the Create business strategy process are developed by the business units to a level of detail sufficient to achieve the agreed objectives and targets for the business unit, and to agree budgets for the activities. They are also used to deploy business unit objectives and targets in a meaningful way, and to provide the means for reviewing performance against the plan. Business units then develop detailed business plans that include plans of all the types of resources required to support the strategy and the timescales of their acquisition. This process in effect transforms the commitments of each business area into meaningful objectives for the program or project teams and every individual. When the budget for a business plan has been agreed the business plan is transformed into a program of work. The Lead and manage programs process is another of the eight top-level processes of the Plan the business process. This process transforms business plans into programs of work and comprises the four phases of Integrated Program Managemen t: Pre-program evaluation, Planning, Execution, and Close out. During the planning phase an integrated program or project team develops a program or project plan using a twelve-stage program planning process. The process 17

18 starts by capturing the requirements of the program or project and finishes with the assembly of, and commitment to, the plan, and the delivery of a program master schedule. The plan includes inter alia: Program deliverables and milestones Roles to manage WBS deliverables Management and reporting requirements for each package of work Formal control gates to ensure that all work done meets the defined customer requirements, deliverables, specification, cost and schedule Assignment of budget and resource to each activity. The stages of the project process cover all the activities associated with the project lifecycle. There are management gates between the stages. Each of these stages has a number of phases, for example Stage 1 has eight phases. (The stages are also referred to at the project management process.) A number of key topics are addressed during each of the phases, one of which is project strategy. Project strategy is managed, in considerable detail, by project teams, throughout all the stages and all the associated phases of the project management process. T he financial services company The group is part of a large company with operations in a number of countries and continents. Business strategy is derived from corporate strategy and the group investment plan using a strategy development process. Business units also develop strategy plans, and align business strategy to the corporate vision, mission, strategies and objectives, using the same process; and identify the strategic programs and projects to be pursued to achieve the objectives of the business unit. The objectives and timetable for programs and projects are determined during the project engagement process along with benefits and indicative costs of the project. The direction of the business unit is confirmed and documented as a hierarchy of directions, and includes vision, strategies and objectives. These drive the program s operational direction, which defines the vision, strategies and objectives of the program or project. The alignment of the business direction with the program s operational direction is then checked and confirmed. The output of this process is a program operational direction that is consistent with the business direction. The availability of resources determines if and when the program can proceed, and the program is prioritized accordingly. The approach for delivering the vision and Letter 18

19 of Intent is decided, and a project management plan is created for undertaking the Plan Solution stage of the program. The Letter of Intent reflecting the program operati onal direction is compiled, and is effectively a proposal for funding the Plan Solution stage of the program and the development of a business case for it. The bu siness case process involves some of the key activities associated with project strategy management identified in the literature review, such as project requirements, scope management and scope definition, and the development of associated plans and documents including the following: Definition Management plan; Initial project briefs; Project scope Management plan; Project requirements and deliverables; and Project WBS. The process also confirms the program or project operational vision, containing strategy, and uses it to drive the scope planning and definition, and develop a WBS for the project. The business case document contains inter alia: The program operational vision; The relationship with the business strategy plan; Program/project organization structure; Risk and resource plans; Delivery Plan; Project Briefs; and WBS In summary: the Plan Solution stage develops the program or project operational vision into an integrated and complete program or project, and presents it as a business case. The business case is then subject to an approval process. Upon approval, the project is prepared for execution using the Mobilize Program process. This takes the results of the previous planning processes, particularly the confirmed operational vision and business case, containing the business strategy and project strategy, and incorporates them into the project management plan: a 19

20 practice that is similar to that described in PMBOK. But unlike the PMBOK approach there does not appear to be a requirement to provide a description of the project management approach or strategy in the form of a summary of the individual management plans. Projec t strategy as a term and activity is not mentioned in the project management process from this point onwards. However, the way in which the project is to be managed - in other words the project strategy - is covered in detail in the following sections of project management plan: Project objectives; Project schedule; Project budget; Resource plan; Risk management plan; and A complete set of project briefs. The program or project business case is also maintained during the Mobilize Program process to ensure it is accurate and up to date, and that a process is in place to ensure that changes are properly controlled. Changes, for example to the project scope arising during development or update of the project management plan, could impact the business strategy and the project strategy defined in the operational vision during the Define Operational Vision and Plan Solution stages. Managing project strategy through the business case in this way is effectively a closed-loop process, and extends to the close of the project. In summary, while there is strong management of the interaction between the corporate/ business plan and the program/ project plan pre project approval, from thereon the level of control is less and is more scattered. Most of the evolving program strategic interaction is at the front-end: once moved into implementation, strategy is taken more as a given. T he transportation company The company s operations comprise a number of strategic business units at various a sites in the UK, the USA and elsewhere. An Objectives, Goals, Strategy and Measure (OGSM) framework is used to cascade strategy down the organization, and through it to set the strategic context for the whole company. Figure 2 shows 20

21 how the framework cascades from the enterprise level to business units and into projects. Corporate CIP SBUs &Other functions CIPs [Inc AM] Corporate SBUs/Other OGSMs OGSMs Business Governance Project Governance Project Board Major Projects Process Minor Projects Process AM Process Project Environment SBU/Project Environment Figure 2: cascading strategy from the corporate level to the project level A project board is responsible to project governance for the day-to-day running of the project, which it executes through a project leader and project team. The Project Board Chairman acts as primary sponsor and client for the project. He/she is responsible for ensuring the project meets the needs of the business and maximizes shareholder value, and that the strategic contribution, value-for-money [VFM] and uncertainty assessments are undertaken appropriately; and is accountable for ensuring the successful project delivery and the identification and reporting of risks and safety issues that may affect the project. The project development team is the process owner for Finding the Right Solutions. He/ she is responsible for reviewing the business need for the project with the business owner, and preparing: the Statement of Need for the project; a list of potential options the project can undertake to meet the business need; and a business case together with a financial analysis to support the solution to the business need. He/she also directs and implements the strategy approved by the 21

22 project board and documenting the strategic contribution, VFM and complexity/ uncertainty assessments. The project execution team is the process owner for Delivering the best value solutions. This team will work with the Development team in the Finding the Right Solutions stages providing professional input on downstream execution issues and where appropriate directly managing activities on behalf of the development team. The pharmaceutical case Development of pharmaceuticals is a complex, long and very risky activity. It can take well over 10 years and cost over $800m to develop a product from the laboratory to delivering it in the market. Towards the latter stages of development, the organization of the development teams is especially large and complex, with people working in a virtual and matrix environment. Perhaps uniquely in scientific and engineering based projects, in drug development there is not really a product being designed (Foulkes & Morris, 2004). Rather, a chemical entity has been discovered and the project team is assessing its therapeutic efficacy and commercial attractiveness by performing tests (in the lab, on animals, in human beings). Generally, things don t work out quite as expected particularly in the early stages of development and hence there is a very high rate of attrition. Since there are usually more candidates than resources available to develop them, as this attrition occurs there is consequently a high degree of interaction between governance at the portfolio level and project management at the execution level, not least over the selection of which candidates to work on, the risks and opportunities these offer, and the availability of resources. Strategy is truly emergent, and interacts constantly with project management. Applying value management practices to key elements of project strategy is a distinctive part of the way the company manages its programs and projects. The value planning process aims to understand the drivers of a product development project and optimize the strategy to deliver the agreed objectives. It comprises the following stages: 1. Review project objectives; 2. Evaluate a range of strategic options; and 3. Define the scientific/commercial case for the development project. 22

23 In Discovery, a fundamental review is carried out by the project team, either during or just before a phase gate review. This is to ensure that the project objectives are correct, and is done by reviewing the project strategy that has been developed for the phase of the project; and critically assessing the project strategy to ensure the objectives can be achieved. At a milestone review point during the early part of Development a specialist portfolio management group works with project management to identify and evaluate a range of strategic alternatives for the project. Options are appraised and selected on the basis largely of technical and commercial risk and opportunity. Based on this evaluation the portfolio group recommends the best strategic option to governance for endorsement. The value maintenance process is designed to maintain the value of the project set out in the strategic planning documents. Reviewing the project objectives and their achievement, and their impact on project strategy, are key activities undertaken by the project teams, governance and lines during the value maintenance process. The important point however is that the value optimization process takes place around the strategic character of the project in relation to the portfolio, including the rest of the program where this is appropriate. Conclusions Project and program management is clearly widely used as a means of implementing corporate and business strategy and is a key business process. We can expect strategies to be aligned and moved from the corporate level through programs and projects in a systematic and hierarchical manner. There is a cascade of moving from corporate planning at the enterprise level through portfolio management into programs and projects, though there is flow up from projects to corporate strategy too (e.g. over resources, and as implementation alters the strategic landscape). Within this framework, project strategy is managed dynamically. Project and program strategy is developed and maintained by project/program leadership teams and governance through project management processes, managed within the context of business strategy. Value Management is widely used in optimizing the strategy, often in combination with Risk Management. 23

24 The interaction between corporate, portfolio, program and project management is seen to be common and well managed in most cases. There is a clear framework in many companies for project governance interaction. Project management, as a discipline, should therefore recognize this managerial context within which, and by which, it is governed. References Archer, N.P. and Ghasemzadeh, F. (1999) An integrated framework for project portfolio selection. International Journal of Project Management. Vol. 17. pps Archer, N.P. and Ghasemzadeh, F. (2004) Project Portfolio Selection and Management in: The Wiley Guide to Managing Projects. Morris, P.W.G. and Pinto, J. K., (eds). New York: John Wiley & Sons Inc. Archibald, R. (2003) Managing High-Technology Programs and Projects. 3 rd edn. New York: John Wiley & Sons Inc. Armstrong, M. (1999) A Handbook of Human Resource Management Practice. 7 th edn. London: Kogan Page Ltd. Artto, K.A., Martinsuo, M and Aalto, T., (2001) Project Portfolio Management, PMA Finland Artto, K. A. & Dietrich, P.H. (2004) Strategic Business Management through Multiple Projects in: The Wiley Guide to Managing Projects in Morris, P.W.G. and Pinto, J. K., (eds). New York: John Wiley & Sons Inc. Cleland, D.I. (1990) Strategic Design and Implementation. Blue Ridge Summit: TAB Books Inc. Cooke-Davies, T.J. (2002) The Real Success Factors on Projects. International Journal of Project Management Vol. 20, no. 3: Cooke-Davies, T. J. (2004) Project Success in: The Wiley Guide to Managing Projects. Morris, P.W.G. and Pinto, J. K., (eds). New York: John Wiley & Sons Inc. Cooper, R.G., Edgett, S.J., and Klienschmidt, E.J. (1998) Portfolio management for new products. Reading, MA: Perseus Books. Cooper, R. G., S. J. Edgett and E. J. Kleinschmidt (1999) New product portfolio management: Practices and performance. Journal of Product Innovation Management. Vol. 16: pp