Chapter 2: Organizational Strategy and Project Selection

"Sacred Cow"

- Often used to denote a project that a powerful, high-ranking official is advocating

Compliance (emergency - must do projects)

- must do project-regulatory conditions. - example: rebuilding a factory cause a tsunami took it down. - usually have penalties if they are not implemented.

Why do project managers need to understand strategy?

1) To make appropriate decisions and adjustments 2) To be effective project advocates

Applying a selection Model

1. Project Classification 2. Selecting a Model 3. Sources and solicitation of Project Proposals. 4. Ranking Proposals and Selection of Projects. 5. Responsibility for Prioritizing.

ROI, Return On Investment

Discount rate

Payback Period Formula

Estimated Project Cost/Annual Savings

Examples of Threats

slowing of economy. maturing life cycle. exchange rates. government regulations.

What are the 2 ways that Selection Criteria for projects defined as?

1) Financial Criteria-Payback and net Present Value or NPV. -Payback: measures the time it takes to recover project investment. -NPV: uses minimum ROI to compute present value of all net cash inflows. 2) Non financial Criteria

What are the 2 major dimensions of strategic management?

1) Responding to changes in the external environment 2) Allocating scarce resources of the firm to improve its competitive position

What are the 4 activities of the strategic management processes?

1) Review and define the organizational mission 2) Analyze and formulate strategies 3) Set objectives to achieve strategy 4) Implement strategies through projects

What are the 3 problems when projects are implemented without a strong priority system?

1) The implementation Gap - refers to the lack of understanding and consensus of organization strategy among top and middle-level managers. 2) Organization Politics- decisions may not be based on facts and sound reasoning but by persuasiveness and power. 3) Resource conflicts and multitasking-problems increase exponentially with the number of projects.

Benefits of Project Portfolio Management

1. Builds discipline into project selection process. 2. Links project selection strategic metrics. 3. Prioritizes project proposals by common set of criteria. 4. Allocates resource to projects that align strategic direction. 5. Balances risk across all projects. 6. Justifies killing projects not supporting strategy. 7. improves communication/ supports agreement on project goals.

Managing the Portfolio System

1. Senior Management Input. 2. The Governance Team Responsibilities. 3. Balancing the Portfolio for Risks and type of Project.

Two Multi-Criteria Selections Modes required by Portfolio Management

1. The Checklist 2. Multi-weighted scoring modes.

Portfolio of Projects by Type

1. compliance projects, must do 2. Strategic projects 3. Operational projects.

Analyze and formulate strategies (SWOT)

Answer "what" needs to be done to reach objectives. Includes "analysis" of customers and their needs. Assessment of internal/external environments. Internal: strengths and weakness. External: opportunities and threats. Key: attempt to forecast.

Strategy Management

the process of assessing "what we are" and deciding and implements "what we intend to be and how we are going to get there."

Questions to ask in Critical Strategic Analysis

Does the strategy take advantage of our core competencies? Does the strategy exploit our competitive advantage? Does the strategy maximize meeting customer needs? Does the strategy fit within our acceptable risk range?

The Checklist Shortcomings

Fails to answer the relative importance or value of a potential project. Fails to allow for project comparison; each project has a different set of positive and negative answers. Ranking is difficult to impossible.

Strategic Management Process Third Stage

How are we going to get there? From Portfolio of strategic choices to strategy implementation to Project selection to Projects.

Review and Define the organizational Mission (Mission Statement)

Identifies "what we want to become" or raison d'etre. Traditional Components of mission Statement include major products and services, target customers and markets, and geographical domain. Components relating directly to business success: organizational philosophy, key technologies, public image, and contribution to society.

Implement Strategies through Projects

Implementation answers the "how" strategies will be realized with given resources. Requires action and task completion. 1. allocation of resources. 2. requires a formal and informal organization complement and supporting. 3. planning and control systems. 4. motivation a major factor. 5. pportfolio management and prioritizing.

Sources and Solicitation of Project Proposals

Issue an RFP, Request for proposal. Bid submitted. bids are evaluated. project acceptance or declination.

Set Objectives to Achieve Strategies

Objectives translate the organization strategy into specific, concrete, measurable terms. Objects set for all levels. Objects answer "where" a firm is headed and "when" it will get there.

The Multi-weighted Scoring Models

Typically uses several weighted selection criteria to evaluate project proposals.

The Checklist

Used a list of questions to review potential projects. Used to determine potential projects acceptance or rejection. Allow great flexibility in selecting many different types of projects. Easily used across different divisions and locations.

Strategic Management Process 1st stage

What are we now? Review/revise mission to/from Internal Environment or the strengths and weakness. Review/revise mission to/from External environment or the opportunities and threats.

Strategic Management Process Second Stage

What do we intend to be? from Internal Environment to Set strategy and objective to Portfolio of strategic choices. From External Environment to Stet Strategy and Objective to Portfolio of strategic choices.

Mission Statements

change frequently. more specific better results from tighter focus. Rule-of-thumb: if the statement can be anybody's mission statement, it will not provide guidance and focus. Sets the parameters for developing objectives.

Strategy

describes how an organization intends to compete with the resources available in the existing and perceived future.

Examples of Opportunities

increasing demand. emerging markets. demographics.

How can organizations ensure a coherent link between project and strategy and project alignment?

integration of project with the strategic plan. prioritizing projects by their contributions to the strategic plan. aim for intended outcomes of clear organization focus, best use of scarce organization resources, i.e. people, equipment capital, and improve communications across projects and departments.

Strategic Management

positions organizations to meet the needs and requirements of its customers for the long term.

Strategic projects

Projects that directly support the organizational long-run mission. -example: new products, research and development.

Operational projects

Projects that needed to support current operations. - improve efficiency of delivery systems, reduce product costs, improve performance. -example: TQM Projects

Objectives characteristics

SMART. S-Specific-be specific in targeting an objective. M-Measurable-establish measurable indicators of progress. A-Assignable- make the objective assignable to one person for completion. R-Realistic-can be realistcally done with resources. T-Time related-duration.