Linking Business Strategy to Project Strategy
Business strategy is determined at the corporate level in a “deliberate” (i.e. planned) or “emergent” (i.e. reactive) response to the external business environment. The success of strategy is purely determined on how well it is executed. Projects serve as the vehicle to implement and execute the corporate strategy. Some firms are project-based organizations and recognize revenue by delivering on contractual projects. However, other firms may perform projects internally as a means to grow the company. In some cases, both situations may exist. Regardless of whether or not projects are internal or external, the alignment of the corporate initiatives with the project components is critical to the long-term position of the company.
The project manager is responsible for the scope, schedule, and budget (triple constraints) at the project level. A project is characterized in section 1.2.1 on page (5) of the Project Management Body of Knowledge (PMBOK Guide) third edition as a progressively elaborated temporary endeavor undertaken to create a unique product, service, or result. The purpose of corporate strategy is to sustain the business whereas the purpose of projects is to deliver objectives and then terminate. In section 1.6 of the PMBOK on page (16) the authors depict the project management context as follows:
“Project management exists in a broader context that includes program management, portfolio management and project management office. Frequently, there is a hierarchy of strategic plan, portfolio, program, project and subproject, in which a program consisting of several associated projects will contribute to the achievement of a strategic plan.”
The important take away from this extraction is the recognition of a hierarchy linking strategy to projects. Below is an illustration of the hierarchical linkage.
Figure 01
Projects are the vehicle used to execute strategic initiatives prompted by the “deliberate” or “emergent” efforts of the organization in an attempt to align the organizational components to the external environmental domains for sustainability. The organization may utilize programs as a means of grouping projects managed and controlled in a similar fashion as a means to achieve efficiencies and effectiveness of resources. On a more grandeur scale, programs and projects that are organized together to execute and deliver on strategic objectives is known as a portfolio. Portfolio management aligns projects and programs with operative goals and objectives which are known as the organizational strategy. Below is a simple illustration of the conceptual relationships previously presented.
Figure 02
Over the next couple of months, I will be conducting a series of five literature reviews. As the contextual analysis unfolds, the first review by Morris and Jamieson expands on the topic of moving strategy from the corporate level to the project level, which leads into the next review by Milosevic and Srivannaboon about a theoretical framework for alignment between these two levels. It is the third review by Johnson who analyzes the topic of drawing the gap closer between projects and strategy. In the fourth review, Breakthrough Performance Management produced an article about tying performance metrics to business strategy. The final review by Webber and Torti is at the individual level of the project manager doubling as client account executives. The compilations of articles critiqued and analyzed were selected to invoke a cognitive exploration of the events, conditions, or interrelationships between corporate strategy and project strategy.
If you want to read the full articles, see the references below for details.
References
Breakthrough Performance Management: Tying Performance Metrics To Business Strategy. (2005, January). Business Credit, Retrieved October 12, 2008, from EBSCO MegaFILE database.
Johnson, L. (2004, June). Close the gap between projects and strategy. Harvard Management Update, 9(6), 3-5. Retrieved October 12, 2008, from EBSCO MegaFILE database.
Milosevic, D., & Srivannaboon, S. (2006, August). A theoretical framework for aligning project management with business strategy. Project Management Journal, 37(3), 98-110. Retrieved October 12, 2008, from EBSCO MegaFILE database.
Morris, P., & Jamieson, A. (2005, December). Moving from corporate strategy to project strategy. Project Management Journal, 36(4), 5-18. Retrieved October 12, 2008, from EBSCO MegaFILE database.
Project Management Institute (PMI). (2004). A guide to the project management body of knowledge (PMBOK Guide) (3rd ed.). Philadelphia, Pennsylvania: PMI
Webber, S., & Torti, M. (2004, February). Project managers doubling as client account executives. Academy of Management Executive, 18(1), 60-71. Retrieved October 12, 2008, from EBSCO MegaFILE database.
Nov 20th, 2008 at 3:27 am
A great topic, but a weak start. Two serious errors in the first paragraph:
– Every company has a strategy that consists of BOTH “deliberate” and “emergent” responses.
– The success of the strategy is NOT determined “solely” by its execution. The wrong strategy or a bad strategy will not produce success no matter how well executed it is. And a really good strategy can survive implementation errors.
In addition, few organizations have the structured hierarchy depicted:
– Project portfolios are seldom integrated at the corporate level. They are usually managed by departments or business units.
– Programs often exist outside both the main project portfolio and the basic corporate hierarchy.
– Projects often overlap both programs and portfolios. This is especially true in the public sector.
On the other hand, I do agree that most organizations (certainly most of my clients) could do a better job of linking project results to strategic direction, so I’ll be interested to see the rest of your analysis.
Duncan
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Nov 20th, 2008 at 9:02 am
Hi Travis,
Like Bill, I think you have a great topic, but I think your model is overly simplistic and represents only one possible incarnation or relationship between Strategy, Programs, Portfolios and Projects.
Another highly regarded and very common model developed by IPA about 20 years back for oil, gas and mining sector, links Asset Management (comparable to Portfolio) to Operations Management (Program) with Project Management. That model works exceptionally well for any organization which is funded through CAPEX and/or OPEX funding strategies, which is to say, most organizations and government agencies.
As a footnote, research by Bill, Ishi Ishikawa, myself and others for GAPPS established, (based on research by Sergio Peregrinelli) there are so many different definitions of “program” and those definitions change depending on what perspective you look at them (through the buyer, seller or financiers perspective) that trying to create a single model to explain the relationship is going to be a challenge.
Bottom line- I think you are off to a good start, but to be complete, you are going to have to address the variations to your model caused by different perspectives of program, and you also need to at least research the “Value Assurance Process” (VAP) adopted by many oil, gas and mining sectors. There are a lot of similarities, but they don’t fit your model exactly.
BR,
Dr. PDG, heading to bed in Jakarta
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Nov 20th, 2008 at 9:09 am
PS: Travis, you should also Google on “Logical Framework” or “LogFrame”. No serious study on linking project management to business strategy would be complete without including the Logical Framework methodology or approach.
While developed around the same time as Earned Value by the same people, LogFrame is used now mostly by bi-lateral International Development Agencies, such as the World Bank, ADB, USAID, UN Projects Office, AusAid etc. But we are seeing a growing interest in the methodology by our clients.
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Dec 2nd, 2008 at 10:56 pm
I echo Bill’s comments — projects, programs, portfolios, and strategy are not nearly so nearly organized in a hierarchy. I see academics and business experts show that diagram all the time, but I rarely see it in practice.
In real life, I see some projects, some programs, and some portfolios intricately linked with strategy through elegant and beautiful means. I also see project, programs, and portfolios that are totally divorced from strategy or even acting against it. There is really no level that is “closer to” or “further away” from the overall strategy of the company.
My best advice to anyone wanting to practice the linking of strategy to their work is to tie strategy as directly as possible to what they actually do. The hierarchy can really get in the way of developing meaningful, helpful links.
I also recommend reading strategic experts like Michael Porter. They define strategy not just as the intent of the top leaders, but also as the competitive landscape, the industry constraints, and the unique activities that the company is doing in that environment.
In my opinion, most of the people talking about strategy from the project, project portfolio, and program side are ignoring the complexity and richness of the strategic planning literature. Strategic planners argue over the quality of good strategy, the right way to formulate it, and even the definition of strategy. In so much of the project-based research, I see strategy portrayed as a much more one-dimensional item.
For instance, I personally rarely talk about “good” or “bad” strategy. I am more concerned with whether the company has a strategy, whether they can articulate it, and whether they are able to advance towards their strategic goals. There are so many possible strategic goals in the universe that I hesitate to call any of them “good” or “bad”. Which is better, the company that achieves the most profit or the one that serves the most customers? I think every company needs to decide for themselves which goals they want to pursue, and none of them are good or bad.
Thanks for opening a great discussion here. I look forward to reading more.
–Alex
http://www.alexsbrown.com
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Dec 2nd, 2008 at 11:42 pm
As an entrepreneur, I find the concept of “strategy” in the context of project management to be somewhat of an oxymoron. I am curious to see what Bill, Alex and other contributors do, but from our perspective, we have a very broad strategy (to remain in business and be profitable!!) and at any given time, we may have 8 or 10 “projects” in some stage of development. (“Irons in the fire”) Depending on the “flying fickle finger of fate”, we move those projects forward or back, depending on the opportunities at hand.
While I do see value in having a general or broad strategy, like having a project plan, it MUST be flexible and subject to change with little or no notice. (Who would have predicted 4 months ago, when oil was at ~$145 a barrel that by December, it would be below $50?)
Bottom line, I question just how much value there is in linking projects to strategy, when we are experiencing chaotic times such as we are living in. And I think flexibility to recognize and exploit emerging opportunities is the only viable strategy.
BR,
Dr. PDG, Jakarta
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Dec 3rd, 2008 at 12:01 am
PS: Alex, Bill (and others if interested),
As we are entrepreneurial consultants, perhaps it would be more beneficial to the readership if, instead of talking about what we advise our clients to do, that we talk about what it is we actually do? “Lead by Example” kind of stuff?
I know from my perspective, I see a push back from our clients on knowledge based credentialing and a growing demand for competency……. So our “corporate strategy” is to move towards competency development, not certifications…..
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Dec 3rd, 2008 at 11:36 am
Paul, I like your plea for us to “lead by example”. I do exactly that in my own practice of my business.
For instance, you mention the volatility of the price of oil. That is not so vital to my own business, because I am in financial services. I have other issues to worry about, like the viability of my clients. Part of my corporate strategy is understanding how merger, acquisition, and shutdown of financial services companies might open new opportunities for my business. I work to ensure that my marketing messages and my available products are ready for an opportunity like that, because it seems probable.
Personally I see little concern about PMI credentials among my clients, beyond the PMP and occasionally the R.E.P. program, so I invest relatively little time and energy in them. When I joined the R.E.P. program, I thought deeply about how that fit into my strategy as a company. I want to differentiate myself from other trainers, and I worried that perhaps the R.E.P. program might make me seem like “just one of the others”. I talked to people to make sure that they understood my brand and that my brand would not be hurt by participation in the program.
These are examples of where I see value in linking projects to strategy. I had a project to join the R.E.P. program. It took multiple steps, time, and money. I considered my overall marketing strategy and brand when executing that project. I considered not pursuing the program, because of concerns about whether it was congruent with my strategy. I only moved forward after deciding that it would help build credibility with a few customers and not hurt my differentiation in the market.
For me, the issue of strategy is very alive and very active in my business, not just in the advice I give to others. Having 8 to 10 “irons in the fire” is one type of strategy; why not have 20 at once? Other companies concentrate on fewer opportunities, others broaden themselves to more. Some focus on price, others on high service. These are all useful strategies.
My strategy is build around a personal, experienced, approachable, realistic way of working with clients. It is high-trust and low-volume. I purposely set a strategy that is not so dependent on the price of oil and other external issues, because that is what works best for me and my business sense. My strategy is highly dependent upon my relationships, though, and I do adapt my strategy and projects continuously based on what I discover about how I can turn those relationships into paying business. I started a year and a half ago thinking I would do mostly consulting and training. That has not turned into sufficient business, so I am expanding into on-line training and products like podcasts and DVDs, which I think my friends and clients would have the means to buy. I learned from my projects, and that influenced my strategies. The changes in my strategies launched new products and projects.
I invite Paul, Duncan, and any other independent business folks to share how these strategy issues affect their business. I agree 100% that generalities and principles are of limited value. Real stories and actual strategies illustrate these issues so much more realistically than the textbook theory.
For instance, I never have done a ranking or scoring system for my “portfolio”. I know what needs to be done, and it is clear what is most important even without any formal prioritization system. I have seen larger companies reject formal prioritization systems, too, for similar reasons. I wish that the project portfolio theorists would move beyond prioritization systems, because they are not as universal or as important as they would seem to be from the articles written. If the authors drew upon real-life examples, I suspect they would find that these types of systems are used by only a limited number of companies for a fairly restricted set of situations.
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Dec 3rd, 2008 at 8:24 pm
Hi Alex,
As always, you provide interesting food for thought and vibrant discussion points.
Given we are “preachers” or “advocates” of integrated portfolio, program and project management, I’d like to pick up your thread and explore how we perceive these three in the context of “strategy” for our organization.
First, as we offer training, consulting and the outsourcing project management professional services (on a fee or @risk basis). Therefore, we consider each engagement or “gig” to be a stand alone project.
As many of our clients are repeat customers, we treat those clients as a “program” using the GAPPS definition of “Large Project”. http://www.globalpmstandards.org/images/programs_table_large.gif
However, we also have other programs in the organization. One program is our course content development. This is an ongoing, nearly continuous set of small projects, which most closely resembles GAPPS “Operational Programs”. The same applies to our internal and external talent identification and development program.
We have two major “portfolios”-
One is our customers, and like a stock investment portfolio, we seek to diversify them as much as possible to minimize the risk of economic downturns impacting any sector, and at the same time, we try to eliminate our “dead beat” clients and replace them with “A” clients.
The second portfolio is our “offerings”- those products or services which our clients are seeking. Again, as with the clients, we try to diversify as much as possible, and our “strategy” is to try to optimize the match between the portfolio of clients and the portfolio of products or services.
The risk we face is, as Alex mentioned, having “too many irons in the fire”. We have found that having 8-10 (The magic number 7, plus or minus two? http://en.wikipedia.org/wiki/The_Magical_Number_Seven,_Plus_or_Minus_Two) works well for us, understanding that by applying a “phase gate” process, we are continually modifying the mix of “irons” we have in the fire at any given time, based on the available resources and our perception (intuition) as to what the future may hold.
Bottom line- While we do not focus too much on strategy (our “strategy” is to be “lean” and “nimble”, ready to adapt to chaotic conditions)what we ARE aggressive about is managing our portfolio of clients and offerings, and we use both program and project management to realize that objective.
BR,
Dr. PDG, Jakarta
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Dec 4th, 2008 at 10:12 am
Folks –
I see a world of difference between how a small consulting firm establishes and implements strategy and how an organization like BMW or the USDoD does it. There may be some common language and concepts at the 35,000 foot level (10,000 meters), but on the ground … apples and peach pits.
And a couple of comments on Paul’s comments …
First, I think it is important to differentiate “portfolio management” from “project portfolio management.” As I said in another post, similar, but not the same.
Second, Paul’s description of his client relationship being managed as a GAPPS “large project program” is debatable. We could also simply treat this as a project (“large” for Paul but not large in the overall scheme of things) or as an operational program or even as a strategic program if the client was in a new country or new industry. I’m not contesting Paul’s characterization; just noting that others might see it differently.
Duncan
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Dec 4th, 2008 at 7:13 pm
Hi Bill et al,
As we learned from the work on defining “program” there are many perspectives as well as “scalability” issues.
While I agree there is a world of difference between companies such as ours and DoD etc, I believe you faced the same problem in writing the PMBoK, hence the reliance on the term “used on most projects, most of the time”. I suspect the same can be said for program and portfolio. At some level of granularity, there is commonality. The big question for me is whether the 35,000′/10,000 meter view is meaningful, given “God lies in the details”. (Rudy Giuliani)
Lastly, given the serious problems that so many large companies are facing, (look at the merger between Nokia and Siemens, Alcatel and Lucent or the failed merger of Daimler and Chrysler or Compaq Computer and HP) and given the fact that most new jobs are being created by start ups and/or small to medium sized firms, I wonder whether the strategies being employed by the small consulting companies aren’t something the “bigger” companies should be emulating?
We have been brought in as consultants several times to talk to Fortune 500 clients because we are a successful entrepreneurial firm. In my PhD research, I also did some preliminary comparisons between project managers and entrepreneurs, and there were indications that “successful” project managers and “successful” entrepreneurs share many behavioral attributes.
BR,
Dr. PDG, Jakarta
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Dec 8th, 2008 at 11:17 pm
Please permit me to ask for a clarification. You have stated that Business strategy is determined .. external environment. Is it right to depend on external environment which generally move in a tradition technological progress of course with varying speed based on resources? The impact of breakthrough and disruptive technologies in many cases upset the determined strategy. How should one guard or be prepared for this, since once investment and action are started any change in external environment may upset time and financial resources.
narasimhan
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Dec 9th, 2008 at 9:20 am
Dr. Narasimhan,
Strategy is definitely set in response to the external environment, but it is not wholly determined by the external environment. Most strategists go through a deliberate process of assessing their environment, but when they create their strategy their are finding a unique place or response to the external environment. The strategy is set by the company with an awareness of external issues, but it is not determined by external issues.
I think Michael Porter’s “Competitive Strategy” does a great job in talking about this interaction. Porter combines deep research into competition and industry with difficult decisions about how your company plans to operate within that environment. The strategy, or plan, needs to be aware of its surroundings, but there are many choices to make.
Porter also deals with fast-moving or revolutionary industries or environments. They demand strategic choices as well, but there are many special issues to consider. I cannot adequately cover all of Porter’s thoughts here, but I highly recommend the book.
–Alex
http://www.alexsbrown.com
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Mar 29th, 2009 at 10:19 pm
Hi Folks,
In researching my book on integrated asset, operations and project management, I stumbled on an EXCELLENT article that explains my perspective on what I see as an inane and inappropriate focus on strategy alone or strategy as being “the solution”. http://www.iveybusinessjournal.com/view_article.asp?intArticle_ID=324
BR,
Dr. PDG, Jakarta
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