BEcon416---PROJECT MANAGEMENT (7:40-8:40MWF) CHAPTER 2 ORGANIATION !TRATEG" # PROJECT !E$ECTION “Strategy is implemented through projects. Every project should have a clear link to the organization’s strategy.”
!TRATEG" % describes how the organization will compete. % decides the survival of an organization. “Organizations “Organizations use projects to convert strategy into new products, products, services processes needed needed !or success.” success.” •
•
• •
•
•
•
Aligning projects with the strategic goals of the organization is crucial for project success. Today’s Today’s economic economic climate is unpreceden unprecedented ted by rapid changes in technology, technology, global competition, & nancial nancial uncertainty uncertainty which maes strategy strategy project project alignment even more essential for success. !very major project needs to have a strong linage linage to the strategic plan. The larger & more diverse diverse the organization, organization, the the more di"cult di"cult it is to create & maintain this strong lin. #any organizations have not developed a process that clearly aligns project selection to strategic plan, the result is poor utilization of the organization’s organization’s resources $people, money, e%uipment,, & core competencies. 'rganizations that have a coherent lin of projects to strategy have more cooperation across the organization & perform better on projects. An organization can ensure a lin & alignment when there is integration of projects with the strategic plan.
THE !TRATEGIC MANAGEMENT: An o&'&'* WHY PROJECT MANAGERS NEED TO UNDERSTAND STRATEGY? ()roject management managemen t is at the ape* of strategy & operations. +n the modern evolving organization, project managers will be focused on business aspects, & their role will e*pand from getting the job done to achieving the business results & winning in the maret place.
!TRATEGIC MANAGEMENT % process of assessing (what we are. and deciding & implementing (-hat we want to be and how we are going to get there. provides theme & focus of the organization’s future direction. supports supports consistency of action at every level of the organization. organization. encourages integration a continuous iterative process aimed at developing an integrated & coordinated long
term plan of action. positions the organization to meet the needs & re%uirements of its customers for the long term. re%uires strong lins among mission, goals, objectives, strategy & implementation.
"nderstanding the organization’s mission strategy helps managers to# /. #ae appropriate decisions and necessary adjustments regarding their product or service o0ering. 1. 2e e0ective project advocates by demonstrating how their project contributes to the rm’s mission & e*plain to senior management how their project contributes to the rm’s mission.
MI!TA+E! THAT MANAGER! COMMIT WHEN THE" ,O NOT N,ER!TAN, THE RO$E THAT THEIR PROJECT! P$A" IN ACCOMP$I!HING THEIR ORGANIATION.! !TRATEG"(/ccon o J3P3 ,'c/5) /. 3ocusing on problems or solutions that have low priority strategically. 1. 3ocusing on immediate customer rather than the whole maret place & value chain. 4. 'veremphasizing technology as an end in and of itself. 5. Trying to solve every customer issue with a product or service rather than on focusing on the 167 with 867 of the value. $)areto’s 9aw :. !ngaging in a everending search for perfection. MAJOR DIMENSIONS OF STRATEGIC MANAGEMENT: /. ;esponding to changes in the e*ternal environment & allocating scarce resources. 1. +nternal responses to new action programs aimed at enhancing the competitive position of the rm. 4 ACTIVITIES of STRATEGIC MANAGEMENT: /. ;!<+!- & =!3+>! T?! ';@A>+AT+'>A9 #+BB+'> 1. B!T 9'>@;A>@! @'A9B & '2C!DT+A9E! & 3';#F9AT! BT;AT!@+!B T' ;!AD? @'A9B 5. +#)9!#!>T BT;AT!@+!B T?;'F@? );'C!DTB :. THE !TRATEGIC MANAGEMENT PROCE!!:
WHAT ARE WE NOW
REIEW9REI!E MI!!ION In'n/ En&on'n ('n; # *'/
MI!!ION -- gives the general purpose of the organization. identies what we want to become. +denties the scope of the organization in terms of product or service. )rovides focus for decision maing. Fsed for evaluating organization’s performance. =ecrease the chance of false directions by staeholders. Bets the parameter for developing objectives. TRA,ITIONA$ COMPONENT! OF MI!!ION !TATEMENT!: /. #ajor productsGservices. 1. Target customers & maret 4. @eographical domain. OTHER COMPONENT! OF MI!!ION !TATEMENT!: /. 'rganizational )hilosophy 1. Hey technologies 4. )ublic +mage 5. Dontribution to society I#ore specic mission statements tend to give better results because of a lighter focus. I+f the statement can be anybody’s mission statement, it will not provide the guidance & focus intended.
GOA$! % give global target within the mission. OBJECTIE! J give specic targets to goals. translates the organization’s mission into specic, concrete & measurable terms. Bet targets for all levels of the organization. )inpoint the direction managers believe the organization should move toward. Answer in detail where a rm is headed & when it is going to get there. CHARACTERI!TIC! OF AN OBJECTIE !=!PECIFIC -- be specic in targeting goals. M=MEA!RAB$E -- establish a measurable indicators of progress. A=ATTAINAB$E -- mae objectives assignable to one person for completion. R=REA$I!TIC -- what can realistically be done using available resources. T=TIME RE$ATE, when the objective can be achieved.
A>A9E+>@ & 3';#F9AT+>@ BT;AT!@+!B answers the %uestion (-?AT >!!=B T' 2! ='>! T' ;!AD? T?! '2C!DT+
•
BT!)B +> 3';#F9AT+>@ A BT;AT!@EL /. ;ealistic evaluation of the past & current position of the enterprise. 1. Assessment of the internal & e*ternal environment. 4. Dascading objectives or projects assigned to lower divisions, departments, or individuals. 5. +mplement strategies through projects. MF!BT+'>B /. =oes 1. =oes 4. =oes 5. =oes
T' A>B-!; 3'; D;+T+DA9 A>A9EB+B '3 BT;AT!@+!BL the strategy tae advantage of our core competenciesK the strategy e*ploit our competitive advantageK the strategy ma*imize meeting customer’s needs strategy t within our acceptable ris rangeK
MF!BT+'> T' A>B-!; +> +#)9!#!>T+>@ BT;AT!@+!BL (?ow strategies will be realized given available resourcesK H!E A;!AB '3 BT;AT!@E +#)9!#!>TAT+'>L /. Allocation of resources. 1. 3ormal & informal organization that complements & supports strategies & projects. 4. )lanning & control systems must be in place to be certain project activities necessary to ensure strategies are e0ectively performed. 5. #otivating project contributors. :. )rioritizing projects.
!CENARIO P$ANNING: c'n/o P/nnn % structured process !c'n/o % stories of how we believe things could play out in the longer run. structured process of thining about future possible environments that should have potential high impact to disrupt the way you do business, & then developing potential strategies to compete in this altered environments. !c'n/o P/nnn -- structured process of thining about future possible environments that should have potential high impact to disrupt the way you do business, & then developing potential strategies to compete in this altered environments.
!CENARIO P$ANNING PROCE!!: /. ABB!BB+>@ E'F; D';! 2FB+>!BB & +>=FBT;E clarifying & agreeing on the core business of
the organization & the environment in which it e*ist. 1. )'T!>T+A9 BD!>A;+'B & +#)ADT 2rainstrorming global forces that could have a substantial impact & the way your organization does business. 4. )'T!>T+A9 BT;AT!@+!B assessing what strategies would you use to move the organization to respond to changes given the scenario. 5. T;+@@!;B identifying early indictors for di0erent scenarios & establishing triggers that tell you the event is %uicly approaching & detailed strategic planning is needed.
POTENTIA$ !CENARIO IMPACT: /. Bocial 1. Technological 4. !nvironmental 5. !conomic :. )olitical
POTENTIA$ !TRATEGIE!: (AN!WER >E!TION!) /. -hat strategies should you use assuming the scenario occurs to move the organization respond to the change 1. @iven your core competencies, is your organization capable of changing to operate in the future environmentK TRIGGER!: tell that the event is %uicly approaching & that detailed strategic planning is needed.. upstream factors & driving forces that cause the scenario to move forward. something that must come true for the scenario event to materialize & cause you to tae action. PROJECT PORTFO$IO MANAGEMENT !"!TEM: PROJECT PORTFO$IO % PROB$EM! ENCONTERE, IN IMP$EMENTATION OF PROJECT! WHEN PRIORIT" !"!TEM ,OE! NOT HAE A !TRONG $IN+ TO !TRATEG" /. IMP$EMENTATION GAP -- lac of understanding & consensus of organization strategy among top & middlelevel managers. 1. ORGANIATION PO$ITIC! % 4. RE!ORCE CONF$ICT! # M$TITA!+ING %
BENEFIT! OF PROJECT PORTFO$IO MANAGEMENT: /. 2uilds discipline into project selection process. 1. 9ins project selection to strategic metrics.
4. )rioritizes project proposals across a common set of criteria, rather than on politics or emotion. 5. Allocates resources to projects that align with strategic direction. :. 2alances ris across all projects. N. Custies illing projects that do not support organization strategy. O. +mproves communication & supports agreement on project goals.
PORTFO$IO MANAGEMENT !"!TEM PORTFO$IO MANAGEMENT -- aims to ensure that projects are aligned with strategic goals & prioritized appropriately. ass -hat is strategic to our organizationK provides information that allows people to mae better business decisions. Con'n o? / 5o@'c 5o?oo ': /. Dlassication of a project. 1. Belection of criteria depending upon classication. 4. Bources of proposals. 5. !valuating proposals. :. #anaging the portfolio of projects.
13) C$A!!IFICATION OF A PROJECT --- +IN,! OF PROJECT! IN A PORTFO$IO--/3) COMP$IANCE PROJECT! % projects needed to meet regulatory conditions re%uired to operate in a region. 3)EMERGENC" PROJECT! % projects that need to be done immediately in order to eep the rm in operation. c3) OPPERATIONA$ PROJECT! % projects needed to support current operation. 3)!TRATEGIC PROJECT! % projects that directly support the organization’s longrun mission. 3re%uently directed toward increasing reenueGmaret share. I$oth compliance emergency projects must %e implemented in order !or the &rm not to !ail orsu'er dire penalties or conse(uences. )*roject proposals must %e classi&ed %y type so that appropriate criteria can %e used to evaluate them.
23)!E$ECTION OF CRITERIA ,EPEN,ING PON C$A!!IFICATION3 --- T"PE! OF !E$ECTION CRITERIA---
/3)Fn/nc/ C'/ % use of nancial modelsGstatements to evaluate projects. --- more preferred method to evaluate projects. /31) FINANCIA$ MO,E$! -- appropriate when there is high level of condence associated with estimates of future cash Pows. 3)NonDn/nc/ C'/ % criteria beyond direct nancial return. -----M$TI-CRITERIA !E$ECTION MO,E$----/. CHEC+$I!T % most fre%uently used method in selecting projects. -- uses a list of %uestions to review potential projects & to -- determine their acceptance or rejection. -- allow great Pe*ibility in selecting amng many di0erent types & are easily used across di0erent divisions & locations. -- fails to answer the relative importance or value of a potential project to the organization & fails to allow for comparison with other potential projects. 1. M$TI-WEIGHTE, !CORING MO,E$! % uses several weighted selection -- criteria to evaluate project proposals. -- generally include %ualitative &Gor %uantitative criteria. -- scores are assigned to reach criterion for the project based on its importance to the project being evaluated. )”*rojects with higher weighted scores are considered %etter.”
Po@'c !c''nn M/:
C'/ W'; Po@'c1 Po@'c2 Po@'c Po@'c4 Po@'c Po@'c6
230 / 4 Q 4 / N
30 8 4 : 6 /6 :
230 1 1 1 /6 : 6
23 N 6 6 6 /6 1
130 6 6 1 6 6 6
130 N : 1 N 8 1
30 : / : 6 Q O
66 27 6 2 102
Po@'c n
7
0
10
10
8
8
3)!ORCE! OF PROPO!A$9!O$ICITATION OF PROJECT PROPO!A$! I#anagers must encourage & eep solicitations open to all sources $internalGe*ternal sponsors 43)E&//n 5o5o/3 (;aning proposals & Belection of projects Po@'c !c''nn Poc': )roject proposal =ata Dollection &
;eturn for more
Belf evaluation of project by
)eriodic reassessment of priorities
Belf evaluation of project by
>eed strategic t
;eturn for more
;ejec
?old for ;esources
Assign priority Assign resources Assign )roject manager !valuate )rogress
Pon % discipline, accountability, responsibility, constraints, reduced Pe*ibility, & loss of power. I#anagement will have to ran & weigh, in concrete terms, the objectives & strategies they believe to be most critical to the organization.
3) M/n/n ;' 5o?oo o? 5o@'c3 M/n/n ;' Po?oo % taes the selection system one step higher $the merits of a particular project are assessed within the conte*t of e*isting projects. --- involves monitoring & adjusting selection criteria to rePect the strategic focus of the organization. !'no M/n/''n In5 o Po?oo M/n/''n: /. )roviding guidance in establishing selection criteria that strongly align with the current organization strategies.
1. To annually decide how they wish to balance the available orgenizational esources among di0erent types of projects.
Po T'/ R'5on' (/
PEAR$
$evolutionary improvements to current projects & service
$revolutionary commercial advances using proven technical advances
WHITE E$EPHANT
O"!TER
$onetime showed promise but are no longer viable
$technological breathroughs with high commercial payo0s
