portfolio management

A Theoretical Framework for Aligning Project Management with Business Strategy

by Travis K. Anderson, MBA, PMP

In the previous article, “Moving from Corporate Strategy to Project Strategy”, Morris and Jamison expand on the idea of moving strategy from the corporate level to the project level. The next review analyzes an article authored by Milosevic and Srivannaboon who support this movement of strategy through their framework for alignment between these levels.

Business strategy is summarized as a means of creating competitive advantages to achieve sustainability while attracting customers and defending against competitive forces. A generic business strategy typology developed by Porter is used to establish the foundation for evaluating the alignment between project management and business strategy. Porter’s generic strategies are cost leadership, differentiation, and focus. Porter proclaims that firms can achieve a competitive advantage by choosing one of these strategies. However, firms are compelled to focus on a combination of strategies in reaction to global competition. This is termed as the best-cost strategy. Milosevic and Srivannaboon use cost leadership, differentiation, and best cost as the primary business strategies of the analysis. The authors also point to Shenhar’s strategic project leadership framework elements which consist of strategy, organization, process, tools, metrics, and culture.

The authors infer that the competitive attributes of the business strategy drive the focus and content of the project management elements. A pattern revealed through research indicates that organizations can align projects with business strategies into three levels: the strategic, the tactical, and the corrective emergent strategic feedback. Level 1 (the mediating process at the strategic level) is the beginning of the alignment process. At this level strategic managers derive the intended strategy and typically used portfolio management to determine the right projects that would contribute to the organization’s goals. Level 2 (the mediating process at the project level) involves delineating additional detail for the projects selected during Level 1 interactions as a means to ensure proper alignment with the project life cycle. The project life cycle is classified as the planning process and the monitoring process. At this level project managers develop a project management plan that ties back to the business goals and objectives. Level 3 (the mediating process at the emergent strategic feedback level) uses stage gates or milestone reviews to evaluate the project status on scope, schedule, and budget. As the project is executed, emergent actions occur that may change the intended strategy. This level ensures feedback from the project level as a means to allow the business strategy to adapt to its competitive attributes brought on by change. The authors therefore conclude that a combination of intended and emergent strategies is needed to align project management and business strategy.

One can infer that once strategic managers have selected a business strategy with the intention of sustaining the organization that portfolio management can assist in the decision making efforts of selecting the right projects that will contribute to the organizational needs. Also, a standard project lifecycle is needed for aligning the business strategy and the project management elements. Projects organized into portfolios that utilize best practices, common methodologies, and continuous improvement will determine the success of implementing the business strategy. The feedback loop, i.e. stage gates, will make sure that resources are funneled appropriately and non-performing projects are terminated efficiently and effectively. Emergent strategy often occurs as change on projects is inevitable. The strategic feedback provided from the project to the strategic business unit is critical for adapting the strategy transpiring through the mediating processes. Initially aligning the business strategy to the project is one thing, closing the gap between projects and strategy is a whole other story.

References

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.

Project Management Strategy

  1. Linking Business Strategy to Project Strategy
  2. Moving from Corporate Strategy to Project Strategy
  3. A Theoretical Framework for Aligning Project Management with Business Strategy
  4. Close the Gap between Projects and Strategy
  5. Tying Performance Metrics to Business Strategy
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Linking Business Strategy to Project Strategy

by Travis K. Anderson, MBA, PMP

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.

Project Management Strategy

  1. Linking Business Strategy to Project Strategy
  2. Moving from Corporate Strategy to Project Strategy
  3. A Theoretical Framework for Aligning Project Management with Business Strategy
  4. Close the Gap between Projects and Strategy
  5. Tying Performance Metrics to Business Strategy
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Let Them Fail

by Josh November 13, 2008 Leadership

I listened to one of my favorite podcasts yesterday, EconTalk. The episode was a discussion about credit default swaps and more generally about the financial woes we have gotten ourselves into. Then this morning, I read this article in the New York Times, “U.S. Shifts Focus in Credit Bailout to the Consumer”.

[Editor: Digressing so early in the post?] (don’t worry, I’ll tie this into project management at some point)!

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