Closing the strategic vision/implementation gap
Introduction and Overview
Rapid technological and business change continues to challenge the competitiveness, even the survival, of firms. Resulting changes to the firm's strategic plan require fast and highly integrated implementation. Frequently, however, implementation approaches are slow and not tightly linked to, nor integrated with, the firm's strategic plan. A gap exists. Implementation of the vision falls short.
Several missing links are identified that cause a gap to exist. These missing links slow down the implementation, and often cause an excellent strategic direction to become dysfunctional. The paper presents the critical integrative links and processes that are essential to attain an integrated and high-velocity implementation.
Next, the paper presents an approach called Strategic Management By Projects (SMBP) that uses the critical integrative links and tightly integrates the strategic plan with its implementation. The process is high velocity, is execution oriented, and is neither easily observed nor quickly duplicated by the competition. It therefore creates the desired sustainable competitive advantage. The SMBP model involves: (1) the critical integrative links, (2) the strategic portfolio of programs and projects, and (3) a project implementation approach that is highly integrative, adapts to changing environments, and seeks to maximize the throughput velocity of the strategic portfolio.
The paper discusses findings from actual case highlights taken from the authors’ experience with several client companies to illustrate key points. These experience-based findings are being validated and modified through a research study that is under way with companies in several different industries.
SMBP has proven to be a successful process in selected companies for closing the strategic vision/implementation gap, and thereby improving or sustaining the firm's competitive advantage in a rapidly changing environment.
Strategic Integration Gap: The Missing Links
Why is there a gap? What is missing? Firms are seeking much more than just survival. The quest is for sustainable competitive advantage. Even if a firm creates a competitive advantage via their core abilities and clear strategic thinking, that advantage frequently is temporary, rapidly fleeting, and not sustainable. In a related study on technology management (Wether, 1994), it was concluded: (1) that integrating technology and business strategies was not sufficient, (2) that a high-velocity “execution oriented paradigm” was needed, and (3) that this could be “neither easily observed nor quickly duplicated” by competitors thereby creating the desired sustainable competitive advantage. How to do this was unspecified.
The call for an execution-oriented paradigm suggests that an integration gap exists between the strategic plan and its implementation. Closing the gap is essential to attain and sustain a competitive advantage. However, a common problem in firms is that several integrative links between the strategic plan and strategic implementation are often missing. The links, often missing, include the following:
1. Focus on Strategic Implementation. Strategic change in firms is largely delivered through multiple simultaneous projects. Substantial interest has developed in processes used to manage multiple projects. Some common names for such processes (Bolles, 1998; Dinsmore, 1997; Ryan, 1997; White & Patton, 1990, 1998) include: Project Based Organization, Integrative Multiple Project Management, Managing Organizations By Projects (MOBP), Modern Project Management, Project Portfolio Management, and Enterprise-Wide Project Management. Upon reviewing these processes, it is clear that the first missing link in implementing the strategic plan is the absence of an implementation process that is focused on the portfolio of strategy-fulfilling projects.
2. Common Top-Down Understanding. The firm's strategic vision and strategic plan are generally created by the top executives of the organization. The plan's implementation is carried out by engineers and other professionals at lower levels of the organization through changes in operations and delivery of projects. Disconnects in both directions are often found to exist in organizations. The strategic plan, particularly the strategies, must be driven down to a portfolio of projects and programs that fulfill the strategic plan. In addition, strategic guidelines must exist to communicate executive intent of the strategic plan throughout the organization. Otherwise, the strategic plan becomes unfocused due to multiple conflicting interpretations at lower levels.
3. Organizational Focal Point. Another missing link is an organizational focal point that is responsible for overseeing the implementation of all the strategic projects. A vertical implementation, rather than a cross-organizational implementation, invariably occurs. Delegating responsibilities to the functional VPs is a common problem.
4. Alignment Across Functions. The fourth missing link is not having a cross-functional group that is responsible for strategic level decisions during implementation. The key here is making priority, resource, and other tradeoff decisions among all of the critically important projects. Separately delegating this to the individual VPs does not always provide integrated solutions. Unclear priorities and competition for resources often result in internal chaos.
5. Executive Transition Mitigators. Frequent turnover of executives at VP and above levels often results in dramatic implementation slowdowns and organizational conflicts. The missing link is the process that will maintain positive organizational inertia, thereby mitigating the negative effects of such transitions. Having project management standards, guidelines, and approaches in place is essential so that all are using the same methods and communicating in the same language throughout the organization, and strategic progress continues during transitions.
6. Feedback Loop. Sustaining competitive advantage over time makes continuous improvement mandatory. Another missing link is a comprehensive set of performance metrics and control reports that enable feedback, organizational learning, and continuous improvement over time. The absence of continuous improvement gives competitors time to learn and duplicate the firm's best practices.
Strategic Management By Projects (SMBP): Proposed Approach
Effective strategic management involves the process of both formulating strategies and then executing those strategies to create a sustainable competitive advantage. However, a perfect strategic plan is meaningless without its effective implementation. Similarly, effective implementation without a good strategic plan will not work in the long term. It is like getting to the wrong place efficiently. Excellence in both the strategic planning and implementation is essential to attaining a sustainable competitive advantage. Either without the other will cause the organization to fall short of expectations. Further, given the missing links often found, achieving both requires tight integrative linkage. Otherwise, a strategic gap exists between the strategic plan and its implementation.
Therefore, the five-staged Strategic Management By Projects (SMBP) approach is proposed for effective strategic management and attainment of a sustainable competitive advantage. SMBP bridges the gap. It is discussed in subsequent sections, and summarized by the following equation.
Conceptual Model: SMBP = SP x CILs x SIBP x Operations x CI
where Strategic Planning (SP) is the normal strategic planning process typically conducted by firms each year. Critical Integrative Links (CILs) are the critical components that tightly link the strategic plan with the strategic implementation. These components include driving the strategies of the plan down to a set of programs and projects. This set is called the strategic portfolio. When implemented, the portfolio will achieve the strategic plan.
Strategic Implementation By Projects (SIBP) is the project management system consisting of the application of processes, tools, and people skills to implement the strategic portfolio and strategic plan. Ongoing Operations (Operations) receives the projects where they become part of the firm's better/faster/cheaper value generation essential for sustaining the firm's competitive advantage. Finally, Continuous Improvement (CI) refers to the feedback and organizational learning which improves the processes in the SP, CILs, SIBP, and Operations stages over time, thereby making these processes even more difficult for competitors to imitate.
Each stage in the SMBP equation must be in place and working well for SMBP to be fully effective. Any time a stage is missing, or working poorly, SMBP becomes ineffective.
Strategic Planning Process
Strategic Planning (SP) refers to a company's normal strategic planning process. This is often different for different industries and companies. Also different approaches can be found in references (Burgelman, 1996; Khalil, 2000; Thompson, 1995). For the purpose of SMBP, let us consider a representative strategic planning process. Overall, an effective strategic plan must possess clear and powerful thinking, and pass the following tests.
1. An assessment of external factors related to company failures, the rapidly changing environment, accelerating technology, and competitive pressures is an integral part of the SWOT (Strengths, Weaknesses, Opportunities, and Threats) analyses.
2. A clear vision is created that describes a clear strategic direction and future end state of the firm.
3. Goals are established that clarify the vision by identifying specifically what the organization intends to attain in order to achieve the vision. (Synonymous terms to goals are strategic goals and strategic objectives. Also, goals describe what is to be achieved, not how. Strategies describe how.)
4. The goals, if all are achieved, collectively attain the vision.
5. Strategies are internally consistent with the vision and goal statements, and their achievability in light of the SWOT analyses.
6. All strategic plan components (vision, goals, SWOT, CCs, strategies) are: integrated, aligned, and attainable.
Strategies are a comprehensive set of actions or activities, which guide and direct the use of the firm's resources (means) to accomplish the organization's vision and goals (ends). They thereby enable a sustainable competitive advantage (ultimate end). Strategies are broad action plan statements. An organization should have only a few strategies.
Critical Integrative Links (CILs)
In the past, and in less chaotic environments, strategies were the final strategic plan outputs and were mostly implemented by delegating responsibility for each strategy to appropriate VPs of the various functional organizations. In today's rapid change environment with strategies requiring numerous cross-organizational change needs and competitive advantage demanding execution-oriented capabilities, such delegation is no longer a solution.
Rapid implementations of strategic plans requires Critical Integrative Links (CILs) to transform the broad plan output into specific integrated action steps and to establish processes that enable the high-velocity strategic implementation needed for a sustainable competitive advantage. Since strategies are short on specifics, they must be driven down to the next level. They rapidly explode into a large number of projects and programs after taking the firm's re-sources, constraints, and alternatives into account. Projects from the strategic plan are the numerous specific cross-organizational changes that are required to implement the strategies, goals, and vision of the strategic plan. For firms in rapid change environments, the volume of change-projects can be quite large.
Programs are also useful in driving strategies to implementation. Programs consist of a group of projects, are multiyear, linked to strategy delivery, and may add infrastructure inside and outside the company, be renewable, and not end.
Strategic Portfolio, the first of the Critical Integrative Links (CILs), is the strategic plan driven down into a portfolio of projects and programs. In the strategic portfolio, all projects map to a strategy or goal, but not necessarily to a program. Some projects are directly related to a goal and are not part of a program. For example, the refurbishment of a building, and many maintenance activities are linked to keeping assets in good order. In addition, we need the ability to create new projects and respond to the competitive or environmental changes during the year, not just at planning. To be execution oriented for competitive advantage, the firm must be flexible and adaptable in the rapidly changing business environment.
Critical Integrative Links (CILs). The Strategic Implementation By Projects (SIBP) process should have the following foundational CILs to integrate and tightly link the strategic plan with the strategic implementation.
1. Strategic Portfolio provides the aligned and integrated focus for effective high-velocity implementation of the strategic plan.
2. Strategic Decision Guidelines (SDG) is a set of guidelines developed as an outcome of strategic planning for making multiproject decisions. The SDG is used during implementation for making decisions and resolving conflicts on project priorities, project delays/modifications/additions, resource contentions, and other multiproject tradeoff decisions. It can also include corporate values and ethics.
3. The Project Steering Team (PST) is chaired by the Manager of Project Management (MPM), consists of five to eight committed individuals who report to the VP levels of the organization, manage project oversight of the Strategic Portfolio, and make/resolve decisions involving multiproject tradeoffs and conflicts.
4. The Project Office is in place and is headed by the MPM, who reports at a fairly high level in the organization (e.g., reports to the President or a VP).
5. The Project Management Reference Guide/Standards is a handbook that defines the company's project management process and standards for all programs and projects in the Strategic Portfolio.
6. The Portfolio Prioritization process used by the PST enables the company to perform resource loading and leveling, and work within its resource capacity. Prioritization also enables the PST to ensure adherence to the strategic direction identified in the strategic plan, and to quickly adapt to sudden competitive changes.
A common concern is the difficulty of achieving executive buy-in of these managing-by-projects-type processes. Executive buy-in is always essential for such processes, but is never easily attained. Benefits seen by executives after early repetitive successes lead to buy-in, and even to executive commitment to the process. In fact, active involvement of executives needs to become a natural and value-added part of the process, since the focus is on the effective and high-velocity implementation of the strategic plan and on sustaining the firm's competitive advantage.
The essential need for tightly linking and integrating the strategic plan formulation and the strategic plan implementation means that firms should go to an SIBP-type process. Focusing on implementing the Strategic Portfolio is focusing on the execution of the strategic plan. The SIBP process should therefore capture the immediate attention and active interest of executive management.
Strategic Implementation By Projects (SIBP)
The CILs above collectively bridge the gap between strategic planning and implementation, and establish the framework for an implementation process infrastructure, which is called Strategic Implementation By Projects (SIBP). The Strategic Portfolio maintains focus on the strategic plan and the other CILs assure that linkages are integrated and tight.
Processes and activities of SIBP include the following:
1. Managing the overall project implementation process using CIL framework and components established above.
2. Overseeing the overall development, management, and implementation of Strategic Portfolio.
3. Setting and updating the Project Prioritization of the Strategic Portfolio.
4. Using and updating the PM Reference Guide and Standards.
5. Applying multiproject CSFs and individual project CSFs (see below).
6. Quickly resolving resource and other cross-organization conflicts.
7. Using metrics (performance measures) for continuous improvement (see next section).
8. Monitoring, controlling and improving the overall multiproject and individual project implementation processes.
9. Overseeing cross-organizational communications on the SIBP process, status, and decisions.
10. Insuring effective change and issue management on an individual project basis.
11. Training and developing functional managers, project managers, and project team members.
12. Getting the projects done!
SIBP results in the highest priority projects being completed with high velocity, while other projects are completed according to their strategic priorities. Some projects are put on-hold until resources are available. Other projects are terminated. SIBP delivers the strategic direction, yet operates within the project resource capacity of the organization.
Of course, there are important considerations for the SIBP process other than the CILs. Some considerations are associated with the effective coordination and communication of numerous projects across organizations. Other considerations are associated with the basics of good individual management of a project. Both of these considerations have been identified in previous papers as Multiproject Critical Success Factors (CSFs) and as Individual Project CSFs (White & Patton, 1990, 1992, 1998). These CSFs will be available upon request at the conference session.
Completed projects are outputs of the SIBP and flow into ongoing operations. Operational processes and activities are not the focus of this paper. While operational excellence is outside the scope of this paper, it must be noted that world-class performance in operations is also a necessary, though not sufficient, condition for SMBP being highly effective and for sustaining the competitive advantage of the firm. Further, there are many metrics that have in the past been used to measure only operational performance that can also be good measures of strategic planning and implementation performance.
Organization Learning (Metrics and CI)
Finally, the last stage in the SMBP model is the feedback to the prior stages for continuous improvement (CI) of each stage and overall organizational leaning. Here the identification and usage of best practice performance metrics is essential for the firm to sustain its competitive advantage. Otherwise, competitors will catch up by learning and imitating the leading firm's best practices.
Metrics of performance come in various sizes, shapes, and levels of sophistication. There should be metrics for each stage (strategic planning, CIL, SIBP, and operations). There may also be metrics useful for measuring the overall effectiveness of sustaining a competitive advantage. Other metrics may be useful for measuring the effectiveness of more than one stage. Metrics are of vital importance but not central to the focus of this paper, so for brevity of the paper the reader is referred to other sources (White & Patton, 1998; Burgelman, 1996; Thompson, 1995).
Continuous Improvement (CI) of each stage (strategic planning, CIL, SIBP, operations), of the Metrics themselves, and of the SMBP overall is a continuous organizational learning process that is essential for sustaining the firm's competitive advantage. Continuous improvement should be evident in updates to the Project Management Reference Guide/Standards, to other elements of the processes and activities in each stage, and to overall improvements to the SMBP Model. The authors expect that the greatest improvements will be attained in the CILs to more tightly integrate all phases, accelerate the velocity of projects, and increase the firm's competitive advantage. In summary, the concept is to start simple and meaningfully improve over time.
Company Experience Highlights
To illustrate bridging the gap between strategic planning and strategic implementation via the SMBP model, it is useful to consider selected highlights of the authors’ experience with several companies. In these examples, specific strategic goals are mentioned as part of the firm's vision. In each case, the strategic portfolio has been established along with other CILs, and the firms manage the strategic implementation via the SIBP process. Also, comparing before and after in each case shows improvement in the firm's delivery of strategic change.
High-Tech Firm Successfully Closes the Strategic Planning/Implementation Gap
A high-tech electronics firm implemented the SMBP model and has continued to sustain a high demand for its products. Consistent with the SMBP approach to strategic planning and strategic implementation, the firm established two key goals toward achieving their strategic vision. Specifically the goals were:
• Reach $1 billion in annual sales in five years from $400 million today (more than double)
• Simultaneously, maintain 10% profitability on sales.
The company used the SMBP approach to implement the strategic plan, including establishing the strategic portfolio, using the other CILs, and applying the SIBP process. The firm also used the program concept and identified a series of projects within programs. The goal attainment was even better than targeted in the goals:
• Sales goal of $1 billion was reached in three years
• Profitability on sales reached 25%, substantially higher than the 10% goal.
Effective program and project management were essential in achieving the goals, including the appropriate involvement of top management during implementation. The company President prioritized the next projects (which were products here) based on the expected profitability of sales orders. Lower profit ventures were left for his competitors.
At all times, top management kept the big picture in mind for decisions during implementation. This is an excellent example of good use of Strategic Design Guidelines (one of the CILs) in practice.
Strategic Portfolio Focus Improves Project Completions and CSP Deliveries
The second case highlight involves a corporate facilities management division of a Fortune 500 firm. The case vividly shows the effect on attaining strategic goals, delivering the strategic project portfolio, and improving performance before and after the SMBP process was implemented. Before SMBP, the division was running approximately 1,000 to 2,000 projects per year with only about 55% to 65% delivered as authorized in the latest approved project plan.
The strategic plan goals called for significant improvements by the facilities management organization to maintain the firm's competitiveness. Specifically, these goals were:
• Deliver facilities projects meeting the CSP (cost, schedule, and performance) as authorized by clients
• Simultaneously reduce the installed cost per square foot
• Maintain the average time to completion.
The division converted to the SMBP approach with the strategic portfolio and its prioritization among the essential CILs and key in the SIBP process. In the third year after SMBP was implemented, the organization completed 1,432 projects with 98% delivering their CSP as promised. Furthermore, of the top 200 priority projects, only 5% required changes to their CSP; that is, 95% delivered the CSP approved in their original project plan! In addition, their organization's strategic goal performance measure of installed cost per square foot was reduced by 60%.
Shrinkage Phenomena When Prioritizing the Strategic Portfolio
The authors’ experience has shown that an interesting phenomenon frequently occurs with the initial implementation of the strategic portfolio prioritization. Upon introduction of the SMBP approach and the definition of the strategic portfolio, the firm initially discovers that they have twice as many projects as was thought. For example, if 50 projects were the initial estimate, then about 100 projects will be discovered before the strategic portfolio is finalized and before the prioritization is started.
During the first six months of monthly project prioritizations, about one third (30–35%) of the projects simply disappear. Various reasons are cited (e.g., couldn't really define the project, bad idea when evaluated more thoroughly against the strategic guidelines, project was not feasible). Expect a one-third shrinkage in projects.
1. An effective strategic plan is not sufficient to sustain a firm's competitive advantage.
2. An effective implementation process is not sufficient to sustain a firm's competitive advantage.
3. A competitive advantage that is sustainable for a firm requires both an effective strategic plan and its effective implementation through the firm's execution-oriented capabilities.
4. The SMBP approach presented does exactly that by requiring both an effective strategic plan driven down to the portfolio of strategic projects level that can be effectively managed by the SIBP process.
5. The Critical Integrative Links (CILs) presented provide the tight linkage to close the gap between the strategic plan and its implementation.
6. A number of processes make up the Critical Integrative Links and SMBP. When one is weak or missing, strategic management will be less effective.
7. Overall, SMBP has already proven to be a successful process in selected companies for closing the firm's strategic vision/implementation gap, and thereby improving and sustaining the firm's competitive advantage in a rapidly changing environment.
Research Under Way
The paper and the conference occurs at the same time the authors have begun a research project with several companies to further explore, validate, and modify some of the findings presented. The paper is based on the authors’ experience with several client companies. The paper and the authors’ experience are the basis for several research hypotheses about the linkage between strategic planning and strategic implementation. They are:
1. A strategic plan can no longer be implemented by delegating through the chain of command.
2. The transition from strategic planning to strategic implementation needs Critical Integrative Links to be effective, and these links are found in firms to varying degrees.
3. The five stages of the Strategic Management By Projects (SMBP) model are serially interdependent. Therefore, if one stage is missing or ineffective, the strategic management effectiveness will be weakened.
4. To sustain competitive advantage over time, the firm must maintain all stages at a high level of effectiveness.
Research is under way by the authors to confirm or change these hypotheses. Initial research findings will be presented at the conference. Research will involve interviews with executives and officers of firms that are directly involved with the strategic planning and strategic implementation processes within their companies.
Final Comments to the Project Management Profession
Getting executive buy-in to embrace project management in their firms is of critical importance to the Project Management Profession. Dialog is essential between executives and Project Management Professionals. Bridging the strategic vision/implementation gap should be of keen interest to both and will facilitate such dialog.
The Project Management Profession should also recognize that the future perceived value of project management in their firms can be dramatically increased by closing the gap via proven project based approaches such as presented in this paper. Project management professionals have long been striving to convince the executives of firms on the value of utilizing project management within their companies. A firm's CEO and top executives are ultimately measured on how rapidly their firm accumulates wealth, which is possible if and only if the firm closes the gap and maintains a sustainable competitive advantage in a rapidly changing environment. Thus, the tight linkage between the strategic plan and its implementation is of critical importance. Executives will be highly attracted to the project management profession when it is clear to them that project management processes can provide integrative linkages to close the gap and improve their firm's strategic performance.
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Proceedings of the Project Management Institute Annual Seminars & Symposium
October 3–10, 2002 • San Antonio, Texas, USA
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