K. C. Yelin
Strategy without tactics is the slowest route to victory.
Tactics without strategy is the noise before defeat.
—Sun Tzu, Chinese military strategist, c. 490 B.C.
Many organizations are accustomed to investing in the devel- opment of strategies that will drive them forward. Multiple days of leaders’ and cross-functional teams’ time are spent each year in off- site meetings to define or refine the organization’s strategy. Partici- pants leave the meetings with the satisfied feeling that they have raised options, hammered through them, and achieved an essential alignment among participants on the key methods that the organi- zation will pursue to achieve its goals.
Independent of the passion exhibited during the development of strategies, the goals these strategies are intended to make happen are frequently not achieved. The inability to execute against the strategies may be related to a lack of understanding, lack of ac- countability, lack of resources, lack of competencies, or changes in external factors to name a few. The assumption that a “can-do” at- titude alone can be counted on to deliver on complex and inter- dependent strategies is naive; it ignores issues of cross-functional resource allocation and competing priorities that cause drag on the
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138 PROJECT PORTFOLIO MANAGEMENT
organization. At the end of a measurement period, if goals are not achieved, blame for lack of results is meted out, and the cycle be- gins again. Over time, belief in the organization’s ability to develop effective strategies and achieve goals lessens. Funding sources re- treat, and when the economy is good, talented associates who want to contribute to a successful organization leave.
An explicit rigor is necessary to execute against strategy effec- tively. Project portfolio management is the process, projects are the vehicles, and project management is the discipline that can bridge the gap between strategy and the realization of its related goals.
What Is Strategy?
Strategyis a word we use frequently. It is a member of that stock col- lection of organizational jargon that includes words such as goal, ob- jective, plan,and team.The words are used so often that we assume they have a common meaning to everyone in the organization. But assumptions about the meaning of words have caused wars, so there is high value to validate exactly how your organization is defining what it means by strategy.
Here are a few of the most commonly referenced definitions of strategy:1
“Strategy is the framework that guides those choices that determine the nature and direction of an organization.”
—Benjamin Tregoe and John Zimmerman, Top Management Strategy
“Strategy answers the questions: What should the orga- nization be doing? What are the ends we seek and how should we achieve them?”
—George Steiner, Strategic Planning
“Competitive strategy is a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there.”
—Michael Porter, Competitive Strategy
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As you can see, there is no single, definitive definition of strat- egy.In truth, it doesn’t matter which words you use to define it;
what is key is that all members of an organization have a clearly ar- ticulated and shared understanding of the elements below. When you have each of the following items, consider that you have a set of strategies:
• A position or mission comprising a set of products, services, customers, markets, geographies, channels, technologies (ends)
• A set of quantifiable goals (ends)
• Overarching approaches by which you will achieve the ends (means)
• Specific plans to apply those means and resources to achieve the ends (project portfolio management)
In visualizing the link between strategy and the project port- folio in Figure 4.1-1, we will assign the term strategyto the element of means or approach that will be used to accomplish the ends.
Assuming that leadership has identified the mission, goals, and strategies, the critical next level of detail is identification of specific projects that will carry out the strategies. These projects become candidates for inclusion in the organization’s project portfolio. This map may be referred to as the strategic plan. When you follow it from right to left, it describes exactly what you will do to deliver on each strategy, which should result in achieving the goals and mis- sion of the organization. Applying effective project management process, a fifth level of detail, is added to the plan. Each project can- didate is defined in greater detail outlining outcomes, resource re- quirements, and potential time lines and accountabilities. The more explicit the plan is, the higher is the probability that the goals will be achieved. Figure 4.1-2 provides a snapshot of sample goals with links to strategies and potential projects.
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140 PROJECT PORTFOLIO MANAGEMENT
Rating the Degree of Linkage Between Projects and Strategy
Just because a project supports a strategy does not guarantee it a pass into the project portfolio. The project is still competing with other candidates for the limited resources of the organization. As such, it needs to go through the organization’s standard project portfolio
Project x Project 1 Strategy
Goal
Goal
Goal
Goal
Goal
Strategy Strategy Strategy Mission
Strategy Strategy Strategy Strategy Strategy Strategy
Project 2 Project 3 Project 4 Project 5 Project 6 Project 7 Project 8 Project 9 Project 10 Project 11 Project 12
Ends:
Project 13 Project y
Desired outcomes
Means:
Methods to achieve them
What:
Actions we will take
FIGURE4.1-1 Strategic Linkage in Project Portfolio
© 1997 ICS Group.
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evaluation process. Among the criteria that projects will be evalu- ated against is the degree of impact the project has on the organi- zation’s strategies. Let’s look at one way to evaluate against the criteria of strategy impact.
Assume that an organization has the following four strategies:
• Build brand value.
• Invest in core technologies.
• Build organizational effectiveness.
• Revitalize quality.
Exhibit 4.1-1 displays how each project candidate is rated for the degree of impact it has on each of the strategies. The sum of the in- dividual strategy impact ratings provides an overall project strategy value score. This score is integrated with a project’s ratings on other
LINKING STRATEGY AND PROJECT PORTFOLIO MANAGEMENT 141
Buy & integrate Y Acquisitions
Mission
Developing sales channels in Asia Growth to
$5Billion
Improved customer satisfaction
Increased $ from new products
Continuous cus- tomer participation in our decisions Building industry-leading competence in X
Buy & integrate Z
Establish IP security Research & rec- ommend 3 channels
Establish 5 customer involvement centers Fund university Collaborative in X Build sustainable recruiting program
Project Candidates for Portfolio Means
Strategies Ends
Goals
FIGURE4.1-2 Sample Strategy Elements
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Installation of plant testing equipment1009101003113$,100,000 Develop and launch product line for seniors9300120315$5,000,000 Marketing campaign linking products to health and safety900090312$,400,000 Implement new product development process that will shorten average time by 20 percent033170310$,400,000 Close Plant X, transfer production to Plant Y00000099$3,500,000 Launch internet sales channel10001034$1,000,000 Build plant in China and related marketing plan for produced goods10001034$9,000,000
EXHIBIT4.1-1Evaluating the Degree of Linkage and Criticality to the Strategies PROJECT CANDIDATE EVALUATION PROCESS Strategic Alignment/ImpactComplianceRiskNPV Scoring: 9 = Strong alignment and/or high impact 3 = Moderate alignment and/or impact 1 = Limited alignment and/or impact 0 = No relationship 100 = Compliance project necessary for us to stay in business (compliance trumps all other evaluation criteria) PROJECT CANDIDATES Does this project build brand value?
Is this an investment in core technologies?
Does this project build organizational effectiveness?
Does this project support quality revitalization?
TOTAL STRA TEGY IMPACT SCORE
Is this a compliance project essential for us to stay open?
Score yes as 100 points.
What is the probability of successfully implementing this
project?
9 = High, 1 = Low What is the Net Present Value of this project to our organization?
OVERALL PROJECT SCORE
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evaluation criteria, such as net present value or risk. Such a total project score is often used to do the initial prioritization of project candidates.
Some organizations employ intricate quantitative analyses to assess which projects rate highest on the portfolio admissions test.
But it is not always the highest-scoring projects that make it to the portfolio. That is because the ultimate decisions of which projects will be resourced and executed are made by executives, who are human beings. The executive investment management team uses information from the evaluation process as input to their decisions, which may be made based on experience, environmental condi- tions, and “feel,” along with healthy debate and compromise among competing programs. It is during these debates that the scope of some proposed strategies may narrow or even be discarded.
The project evaluation criteria and their degree of detail are most effective when they meet the needs and style of those who make the ultimate decisions regarding which projects will enter the portfolio. In one leading consumer products company in whose process I participated, the CEO alone made the selection of which projects would enter the portfolio and be executed. With minimal evaluation data presented to him, he made the decision in five min- utes. He knew his company’s strategies inside out, and to him the decisions were straightforward. In another firm, decisions were made by a group of functional vice presidents who required detailed quantitative analysis and six weeks to make portfolio decisions every quarter. Although each decision-making group had different needs and styles, both made excellent choices. Explicitly defining the linkages and dependencies that strategies have on specific proj- ects is key to ensuring delivering on the strategies that the organiza- tion is counting on. How you communicate that linkage is tailored to the needs of those who will use the information.
Certain critical data must be made explicit and communicated to all decision makers. One is the capacity of the organization to ab- sorb and deliver on each project (see Figure 4.1-3). Without that, organizations will attempt to launch every strategy-related project along with other “staying in business” operational projects in the
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portfolio. Perhaps the greatest risk to an organization’s ability to de- liver on its strategies, goals, and mission is committing to more proj- ects than it can possibly deliver. When this occurs, critical projects fail later in the cycle. An executive’s fiduciary responsibility is to re- source critical projects or to narrow the scope of the strategies.
Making Strategy Explicit
So far we have assumed that strategies exist for the organization.
What if they do not? Do we abandon the notion of evaluating project candidates for their degree of contribution to strategies? The risk with discarding such an evaluation is embodied in the German proverb, “What’s the use of running if you are on the wrong road?”
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FIGURE4.1-3 Reconciliation of Project Demand Against the Organization’s Capacity to Deliver Before Commitment of Projects to the Portfolio
Project 1
Project 2
C R I T E R I A
Project 3
“Portfolio”
of Projects
Strategies competing to enter the portfolio
Project 6 Project 8 Project 9 Project 12 Strategy
Goal
Goal
Goal
Goal
Stay in Business
Strategy
Strategy
Strategy Mission
Strategy Strategy
Strategy Strategy
Project 2 Project 3 Project 4 Project 5 Project 6 Project 7 Project 8 Project 9 Project 10 Project 11 Project 12 Project 13 Project N
Opport’y Evaluation Process
Resource Capacity
“Pipe”
© 1997 ICS Group.
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Stop and find the right road. Although this presents a challenge, you can find a map that will help you.
In every organization, a strategy does exist whether or not one is articulated. Decisions made by executives are based on some cri- teria or strategy; to find it, follow the money. Where is the organi- zation spending its money? What programs are funded? What skills are being bought? Once you have analyzed such actions and iden- tified trends, reverse-engineer them to tease out common underly- ing criteria or a strategy that drove them. After recording your theories, hold dialogues with decision makers to validate and refine the theories. Gain concurrence from leadership to use these as strategic criteria in the project candidate evaluation process.
PPM as a Surrogate for Strategic Planning
The definition of strategylooks amazingly like all of the elements necessary in project portfolio management. If your organization does not do strategic planning today, instituting project portfolio management will enable the discipline and process that defines the strategic process. If your organization does do strategy work today, integrating project portfolio management with it is a natural ex- tension to strengthen it and increase rate of strategy realization.
In 1982, K. C. Yelinfounded ICS Group, a management consulting firm that works with Fortune 100 market leaders to improve business execution. She was the president of ICS Group through 1999 and is the author of that firm’s project portfolio management model and project leadership process. She has served on the faculty of the Uni- versity of Connecticut Graduate School of Business Administration.
She currently heads Yelin Associates based in Scottsdale, Arizona, and is an adviser to the project portfolio management practice at ICS Group.
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