BEcon416---PROJECT MANAGEMENT

(7:40-8:40MWF)
CHAPTER 2
ORGANIZATION STRATEGY & PROJECT SELECTION
Strategy is implemented through projects. Every project should have a clear link to
the organizations strategy.
STRATEGY describes how the organization will compete.
decides the survival of an organization.
Organizations use projects to convert strategy into new products, services &
processes needed for success.

Aligning projects with the strategic goals of the organization is crucial for project
success.
Todays economic climate is unprecedented by rapid changes in technology,
global
competition, & financial uncertainty which makes strategy project alignment
even more
essential for success.
Every major project needs to have a strong linkage to the strategic plan.
The larger & more diverse the organization, the more difficult it is to create &
maintain this strong link.
Many organizations have not developed a process that clearly aligns project
selection to strategic plan, the result is poor utilization of the organizations
resources (people, money, equipment,, & core competencies).
Organizations that have a coherent link of projects to strategy have more
cooperation across the organization & perform better on projects.
An organization can ensure a link & alignment when there is integration of
projects with the strategic plan.

THE STRATEGIC MANAGEMENT: An overview

WHY PROJECT MANAGERS NEED TO UNDERSTAND STRATEGY?
Project management is at the apex of strategy & operations. In the modern
evolving organization, project managers will be focused on business aspects, & their
role will expand from getting the job done to achieving the business results &
winning in the market place.
STRATEGIC MANAGEMENT process of assessing what we are. and deciding &
implementing
What we want to be and how we are going to get there.
-- provides theme & focus of the organizations future direction.
-- supports consistency of action at every level of the 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 & requirements of its
customers for the
long term.
-- requires strong links among mission, goals, objectives, strategy &
implementation.
Understanding the organizations mission & strategy helps managers to:
1.) Make appropriate decisions and necessary adjustments regarding their
product or service offering.
2.) Be effective project advocates by demonstrating how their project contributes
to the firms mission & explain to senior management how their project
contributes to the firms mission.
MISTAKES THAT MANAGERS COMMIT WHEN THEY DO NOT UNDERSTAND
THE ROLE THAT THEIR PROJECTS PLAY IN ACCOMPLISHING THEIR
ORGANIZATIONS STRATEGY(according to J.P. Decamps)
1.) Focusing on problems or solutions that have low priority strategically.
2.) Focusing on immediate customer rather than the whole market place & value
chain.
3.) Overemphasizing technology as an end in and of itself.
4.) Trying to solve every customer issue with a product or service rather than on
focusing on the 20% with 80% of the value. (Paretos Law)
5.) Engaging in a ever-ending search for perfection.
MAJOR DIMENSIONS OF STRATEGIC MANAGEMENT:
1.) Responding to changes in the external environment & allocating scarce
resources.
2.) Internal responses to new action programs aimed at enhancing the
competitive position of the firm.
4 ACTIVITIES of STRATEGIC MANAGEMENT:
1.) REVIEW & DEFINE THE ORGANIZATIONAL MISSION
2.) SET LONG-RANGE GOALS & OBJECTIVES
3.) ANALYZE & FORMULATE STRATEGIES TO REACH
GOALS
4.) IMPLEMENT STRATEGIES THROUGH PROJECTS
5.)
THE STRATEGIC MANAGEMENT PROCESS:

WHAT ARE WE NOW?

REVIEW/REVISE
MISSION Internal
Environment
(strengths &
weaknesses

MISSION -- gives the general purpose of the organization.

-- identifies what we want to become.
-- Identifies the scope of the organization in terms of product or service.
-- Provides focus for decision making.
--Used for evaluating organizations performance.
--Decrease the chance of false directions by stakeholders.
-- Sets the parameter for developing objectives.
TRADITIONAL COMPONENTS OF MISSION STATEMENTS:
1.) Major products/services.
2.) Target customers & market
3.) Geographical domain.
OTHER COMPONENTS OF MISSION STATEMENTS:
1.) Organizational Philosophy
2.) Key technologies
3.) Public Image
4.) Contribution to society
*More specific mission statements tend to give better results because of a lighter
focus.
*If the statement can be anybodys mission statement, it will not provide the
guidance & focus
intended.
GOALS give global target within the mission.
OBJECTIVES give specific targets to goals.
--- translates the organizations mission into specific, concrete &
measurable terms.
-- Set targets for all levels of the organization.
-- Pinpoint the direction managers believe the organization should move
toward.
-- Answer in detail where a firm is headed & when it is going to get there.
CHARACTERISTICS OF AN OBJECTIVE
SSPECIFIC -- be specific in targeting goals.
MMEASURABLE -- establish a measurable indicators of progress.
AATTAINABLE -- make objectives assignable to one person for completion.
RREALISTIC -- what can realistically be done using available resources.
TTIME RELATED -- when the objective can be achieved.

ANALYZING & FORMULATING STRATEGIES

answers the question WHAT NEEDS TO BE DONE TO REACH THE
OBJECTIVES?
determining & evaluating alternatives that support the organizations
objectives & selecting the best alternative.
STEPS IN FORMULATING A STRATEGY:
1.) Realistic evaluation of the past & current position of the enterprise.
2.) Assessment of the internal & external environment.
3.) Cascading objectives or projects assigned to lower divisions, departments, or
individuals.
4.) Implement strategies through projects.
QUESTIONS TO ANSWER FOR CRITICAL ANALYSIS OF STRATEGIES:
1.) Does the strategy take advantage of our core competencies?
2.) Does the strategy exploit our competitive advantage?
3.) Does the strategy maximize meeting customers needs
4.) Does strategy fit within our acceptable risk range?
QUESTION TO ANSWER IN IMPLEMENTING STRATEGIES:
How strategies will be realized given available resources?
KEY AREAS OF STRATEGY IMPLEMENTATION:
1.) Allocation of resources.
2.) Formal & informal organization that complements & supports strategies &
projects.
3.) Planning & control systems must be in place to be certain project activities
necessary to ensure strategies are effectively performed.
4.) Motivating project contributors.
5.) Prioritizing projects.
SCENARIO PLANNING:
Zcenario Planning structured process
Scenarios stories of how we believe things could play out in the longer run.
-- structured process of thinking 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.
Scenario Planning -- structured process of thinking 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.
SCENARIO PLANNING PROCESS:
1.) ASSESSING YOUR CORE BUSINESS & INDUSTRY -- clarifying & agreeing on the
core business of

the organization & the environment in which it exist.

2.) POTENTIAL SCENARIOS & IMPACT -- Brainstrorming global forces that could
have a substantial
impact & the way your organization does business.
3.) POTENTIAL STRATEGIES -- assessing what strategies would you use to move
the organization to
respond to changes given the scenario.
4.) TRIGGERS -- identifying early indictors for different scenarios & establishing
triggers that tell you
the event is quickly approaching & detailed strategic planning is
needed.
POTENTIAL SCENARIO IMPACT:
1.) Social
2.) Technological
3.) Environmental
4.) Economic
5.) Political

POTENTIAL STRATEGIES: (ANSWER QUESTIONS)

1.) What strategies should you use assuming the scenario occurs to move the
organization respond to the change
2.) Given your core competencies, is your organization capable of changing to
operate in the future environment?
TRIGGERS:
--- tell that the event is quickly 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 take
action.
PROJECT PORTFOLIO MANAGEMENT SYSTEM:
PROJECT PORTFOLIO
PROBLEMS ENCOUNTERED IN IMPLEMENTATION OF PROJECTS WHEN
PRIORITY SYSTEM DOES NOT HAVE A STRONG LINK TO STRATEGY
1.) IMPLEMENTATION GAP -- lack of understanding & consensus of
organization strategy among top- & middle-level managers.
2.) ORGANIZATION POLITICS
3.) RESOURCE CONFLICTS & MULTITASKING
BENEFITS OF PROJECT PORTFOLIO MANAGEMENT:
1.) Builds discipline into project selection process.
2.) Links project selection to strategic metrics.

3.) Prioritizes project proposals across a common set of criteria, rather than on
politics or emotion.
4.) Allocates resources to projects that align with strategic direction.
5.) Balances risk across all projects.
6.) Justifies killing projects that do not support organization strategy.
7.) Improves communication & supports agreement on project goals.
PORTFOLIO MANAGEMENT SYSTEM
PORTFOLIO MANAGEMENT -- aims to ensure that projects are aligned with
strategic
goals & prioritized appropriately.
--- asks What is strategic to our organization?
--- provides information that allows people to make better business
decisions.
Content of a project portfolio system:
1.) Classification of a project.
2.) Selection of criteria depending upon classification.
3.) Sources of proposals.
4.) Evaluating proposals.
5.) Managing the portfolio of projects.

1.)CLASSIFICATION OF A PROJECT
---3 KINDS OF PROJECTS IN A PORTFOLIO--a.) COMPLIANCE PROJECTS projects needed to meet regulatory
conditions
required to operate in a region.
b.)EMERGENCY PROJECTS projects that need to be done immediately
in order to
keep the firm in operation.
c.) OPPERATIONAL PROJECTS projects needed to support current
operation.
d.)STRATEGIC PROJECTS projects that directly support the
organizations long-run
mission.
Frequently directed toward increasing reenue/market share.
*Both compliance & emergency projects must be implemented in order for
the firm not to fail orsuffer dire penalties or consequences.
*Project proposals must be classified by type so that appropriate criteria
can be used to evaluate them.
2.)SELECTION OF CRITERIA DEPENDING UPON CLASSIFICATION.
--- TYPES OF SELECTION CRITERIA---

a.) Financial Criteria use of financial models/statements to evaluate

projects.
--- more preferred method to evaluate projects.
a.1) FINANCIAL MODELS -- appropriate when there is high level of
confidence
associated with estimates of future cash flows.
b.)Nonfinancial Criteria criteria beyond direct financial return.
-----MULTI-CRITERIA SELECTION MODEL----1.) CHECKLIST most frequently used method in selecting projects.
-- uses a list of questions to review potential projects
& to
-- determine their acceptance or rejection.
-- allow great flexibility in selecting amng many
different types &
are easily used across different 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.
2.) MULTI-WEIGHTED SCORING MODELS uses several weighted
selection
-- criteria to evaluate project proposals.
-- generally include qualitative &/or quantitative criteria.
-- scores are assigned to reach criterion for the project
based on its
importance to the project being evaluated.
*Projects with higher weighted scores are considered better.

Project Screening Matrix:

Criteria
Weight
Project1
Project2
Project3
Project4
Project5
Project6

2.0
1
3
9
3
1
6

3.0
8
3
5
0
10
5

2.0
2
2
2
10
5
0

2.5
6
0
0
0
10
2

1.0
0
0
2
0
0
0

1.0
6
5
2
6
8
2

3.0
5
1
5
0
9
7

66
27
56
32
102
55

Project
n

10

10

83

3.)SOURCES OF PROPOSAL/SOLICITATION OF PROJECT PROPOSALS

*Managers must encourage & keep solicitations open to all sources
(internal/external sponsors)
4.)Evaluating proposals. (Ranking proposals & Selection of projects)
Project Screening Process:
Project
proposal
Data
Collection &
Backup

Need
strategic fit

Selfevaluation of
project by
criteria

Return for
more

Periodic
reassessment
of priorities

Selfevaluation of
project by
criteria

Return for
more

Rejec
t

Hold for
Resources

Assign priority
Assign resources
Assign Project manager
Evaluate Progress

Prioritizing discipline, accountability, responsibility, constraints,

reduced
flexibility, & loss of power.
*Management will have to rank & weigh, in concrete terms, the
objectives & strategies they believe to be most critical to the
organization.

5.)Managing the portfolio of projects.

Managing the Portfolio takes the selection system one step higher (the
merits of a
particular project are assessed within the context of existing
projects.
--- involves monitoring & adjusting selection criteria to reflect the
strategic
focus of the organization.
Senior Management Inputs to Portfolio Management:
1.) Providing guidance in establishing selection criteria that strongly align
with the current organization strategies.

2.) To annually decide how they wish to balance the available orgenizational
esources among different types of projects.
Priority Team Responsibilities (aka Project Office):
1.) Publishes the priority of every project.
2.) Ensures that the process is open & free of power politics.
3.) Balances projects by type, risk, & resources demand.
BALANCING THE PORTFOLIO FOR RISKS & TYPES OF PROJECTS
--- TYPES OF RISKS --1.) Risk associated with total portfolio of projects, which should reflect the
organizations risk profile.
2.) Specific project risks that can inhibit the execution of a project.
Ex. Schedule cost & technical
Market Risk
Ability to execute
Time to market
Technology advances
PROJECT PORTFOLIO MATRIX (by: David & Jim Matheson) used for assessing
portfolio
BREAD & BUTTER

PEARL

(evolutionary
improvements to
current projects &
service)

(revolutionary
commercial advances
using proven technical
advances)

WHITE ELEPHANT

OYSTER

(one-time showed
promise but are no
longer viable)

(technological
breakthroughs with high
commercial payoffs)