Managing-by-projects

closing the gap requires more

Dr. Donald E. White, Professor, Cal Poly University, San Luis Obispo, CA
John R. Patton, President, Cadence Mgmt Corp, Portland, OR

Introduction and Overview

The project management profession has long been striving to convince executives of firms about the value and use of project management within their companies. Related publications have appeared in at least three areas, including: 1) selling project management to senior executives (Thomas et al 2001), 2) assessing the value of project management (Kwak and Ibbs 2000), and 3) managing organizations by projects (Bolles 1998; Dinsmore 1997; Ryan 1997; White and Patton 1990, 1998). A firm’s CEO and top executives are ultimately measured on how rapidly their firm accumulates wealth to the enterprise, which is possible if and only if the firm maintains a sustainable competitive advantage. The dialogue between senior executives and professionals in project management must therefore be on the basis of sustainable competitive advantage.

Rapid technological and business change continues to challenge the competitiveness, even the survival, of firms. Strategic reasons may cause company failures. Yet a clear and powerful strategic vision and strategic plan are not sufficient to implement the vision and create competitive advantage. Furthermore, even if a competitive advantage is created, it is frequently temporary and not sustainable. Implementation approaches are often too slow and not tightly linked to the firm’s strategic plan. A gap exists. Implementation of the vision falls short. Even a “managing-by-projects” approach may fail to close the gap.

The strategic vision/implementation gap is the focus of this paper and the associated research. 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 research study underway is based on the critical integrative links, the SMBP model, and the authors’ experience in utilizing project management for strategic implementation. The study will validate or modify hypotheses about the linkage between strategic planning (SP) and its implementation. The research will involve several companies in different industries, a questionnaire, and interviews with executives of firms that are directly involved with the SP and strategic implementation processes within their companies. .Initial research findings will be presented at the conference, as well as case highlights to illustrate key points.

Overall, SMBP has proven to be a successful process for closing the firm’s strategic vision/implementation gap, and thereby improving and sustaining the firm’s competitive advantage in a rapidly changing environment. This past success, validating research outcomes, and continued dialogue with top executives on closing the gap and sustaining competitive advantage should be extremely valuable to the project management profession.

Company Failures, Rapid Change, and Directed Turbulence

Let’s first look at today’s strategic environment. There is no question that failed companies, rapid technological and business change, and turbulent environments characterize the landscape in which most companies are competing today.

Why Companies Fail: Reasons are Both Strategic and Operational

Half of the Fortune 500 companies fifteen years ago are not Fortune 500 companies today. Many of these same companies have failed and closed their doors forever. Reasons cited are numerous. One study (Labich 1994) cites a few common reasons for why companies fail including the following.

1. “Failures of Vision” means executives were lacking the vision to see and plan for future obstacles and opportunities. To survive, executives must stretch their imaginations, apply wide-ranging creative paranoia, and ponder new futures driven by new product lines and new technologies.

2. “Identity Crisis” means that executives often don’t understand the fundamentals of their business. They neglect to ask central questions regarding their company’s core expertise and the key drivers in their competitive situation.

3. “Anybody Out There” refers to companies losing touch with their customers and the marketplace. It also relates to advances in technologies that may have a major affect on the marketplace and what is of value to the customer.

4. “The Glue Sticks, and Sticks” has to do with a company continuing to pursue outmoded approaches that worked well in the past, while the competition has grown faster, stronger, and more nimble. The past best method has become an outmoded continually deepening rut. These companies are not learning organizations, a trait essential for the future.

5. “Enemies Within” means employees within the company have become disillusioned, resentful, cynical, or even hostile toward the company and its top managers. Lost employee productivity occurs long before this level of lost leadership and low morale occurs. Highly motivated and productive employees know the importance of their jobs and believe in their executive leadership.

6. “Overcome by Events” refers to daily crisis management in which emergencies are everybody’s urgent focus. There are no officers on the hill above the group that are surveying the battlefield. In each such crisis all officers and employees are engaged in the battle.

The first three of these failure reasons are problems with the strategic direction of the firm, while the last three have to do with approaches in implementing the strategic direction.

Rapid and Accelerating External Change: An Underlying Challenge

The extremely rapid rate of change in the technological, competitive, and business environments is an underlying challenge for firms. It is also the cause for company failures. The exploding pace of technological change is mind-boggling, and creates product substitutes, new businesses, new capabilities, and breakthrough process improvements never before possible.

Yet technology represents only one source of change. Numerous other sources exist which lead to an unpredictable external environment that causes major challenges to the firm. For example, even a rapid change in economic conditions—business booming now and declining next quarter— can cause sudden major challenges. Today, the change is rapid and firms compete in an externally chaotic environment. Success for firms via traditional methods is history.

Attempts to Direct the Resulting Internal Turbulence

External change induces internal change; and the faster the former, the more urgent the later. Many approaches have been applied over the past two decades to help accelerate and provide focus for needed internal changes. These include: accelerating time to market, business process reengineering, advancing technologies, supply chain management, TQM, rightsizing, and numerous team-based and empowerment approaches. Some are fads. Some are here to stay. Yet none in itself is sufficient.

Further, competitive paranoia and urgent, multiple, conflicting, and cross-organizational change needs have led to internal competition, instead of smooth, effective implementation of change. Such a turbulent internal environment calls for a highly flexible process that directs the turbulence and helps integrate the competing cross-organizational needs in a way that is consistent with the organization’s strategic direction and strategic priorities.

Quest for Sustainable Competitive Advantage

Even in turbulent external and internal environments, 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. A related study (Wether et al 1994) in essence concluded the following about technology management.

Integrating Technology and Business Strategy is Not Sufficient.The future of technology management is moving on … focusing on specific technologies to gain a competitive advantage is not enough. Integrating technology and business strategy is only one of the necessary conditions for competitive advantage.

Execution-Oriented Paradigm is Needed. A specific technology may well lead to a competitive advantage. But a sustainable competitive advantage also requires moving beyond integration to an execution-oriented paradigm.For example, one successful high-tech company has the following information technology (IT) project guideline—no project will last longer than six months and at least one deliverable must be installed in ninety days. A sustainable competitive advantage comes, in part, from the organization learning how to constantly improve its technology acquisition and deployment capabilities.

Competitors Can Neither Easily Observe nor Duplicate. This execution-oriented paradigm will quickly yield measurable payoffs and create a sustainable competitive advantage because the strategic edge that results is neither easily observed nor quickly duplicated by competitors.

The execution oriented paradigm proposal did not contain a prescription as to how to carry it out, but it does suggest a gap exists and that transition processes are needed. These transition processes are referred to as missing links below.

Strategic Integration Gap: The Missing Links

Closing the gap that exists between the strategic plan and its implementation 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 and 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.

Moreover, the definition and focus of these processes vary significantly, including: 1) “a collection of projects in the firm,” 2) “reflects the global way of putting classic project management methodology into practice,” 3) “a collection of projects that the firm authorizes and funds, to build its competitive future,” and 4) “organizations focused on implementing the portfolio of the firm’s cross-functional projects.”

Upon reviewing these processes and definitions, it is clear that the first missing link in implementing the strategic plan is often 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 specific initiatives. These initiatives are the 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 un-focused 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 all of 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 trade-off 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. Continued turnover of executives at the VP levels and above 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 (CI) mandatory. Another missing link is a comprehensive set of performance metrics and control reports that enable feedback, organizational learning, and CI over time. The absence of CI 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 and executing those strategies to create a sustainable competitive advantage. A strategy is a comprehensive plan that sets business direction. It guides resource utilization to accomplish an organization’s vision and goals in a way that creates and sustains competitive advantage. The effectiveness of an organization’s strategic plan depends on clear strategic thinking, the achievability of the competitive advantage, and achieving consensus on strategic guidelines for decision-making.

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 efficiently getting to the wrong place. Excellence in both the SP and its implementation are essential to attain and sustain a 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-stage SMBP model 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 SP 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 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 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 refers to a company’s normal SP process. There are many terms associated with SP. They often tend to have confusing or even conflicting definitions. Therefore, for the purpose of SMBP, a standard set of terms is defined below, and is intended to be representative of the SP process.

Vision.The vision statement describes a clear strategic direction and future end-state. Criteria for an effective vision statement include: 1) a clear, brief, and simple statement of the organization’s strategic intent and compelling ideal end-state; 2) going beyond the current scope of activities; 3) articulating what is possible and desirable; in a few words that are compelling, challenging, and realistic, and 4) capable of being internalized, articulated, and acted on by the firm’s stakeholders.

For example, Delta Airlines provides a good example in their vision statement: “… Delta will be the Worldwide Airline of Choice.” Many words may be needed to clarify precisely what is meant by “worldwide,” by “airline,” and by “choice.” It is critical is that the vision must capture that clear, compelling end-state in very few (5–10) words. Then, everybody in the firm can align and be clear on the firm’s strategic direction in their activities. The vision guides their operating decisions, daily activities, and interactions with other employees, customers, and suppliers.

Goals 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 discussed below are the action plan and the framework for how.

A goal statement describes specific results to be accomplished or achieved. Criteria for an effective goal statement include: 1) converts vision statement into target outcomes and performance; 2) represents a commitment to achieving specific performance targets within a time frame; 3) is challenging yet achievable, reachable and not impossible; and 4) directs attention and energy on what needs to be done. Also, a final criterion is that if all the goals are achieved in the collection of goals, then the end-state of the vision will be attained.

Example goal statements include: 1) “to increase annual sales from $1 billion to $2 billion in five years”; 2) “to enter a new market every 18 to 24 months”; 3) “to have 30 percent of sales each year come from new platform products not currently in the firm’s product line,” and 4) “to create leading edge developments in the emerging materials technologies over the next five years.”

Strategic Plan. The strategic plan is the document that contains not only the vision and goals, but a clear set of actions that will attain them. An effective strategic plan must possess clear and powerful strategic 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 must be an integral part of the SWOT (Strengths, Weaknesses, Opportunities, and Threats) analyses.

2. A clear strategic vision must be created that describes the strategic direction and future end state of the firm.

3. Goals must be established that clarify the vision by identifying specifically what the organization intends to attain in order to achieve the vision.

4. The goals, if all are achieved, must collectively attain the vision.

5. Strategies must be 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, strategies) must be: integrated, aligned, and attainable.

In our research, we will assume the above tests have been satisfied for a firm’s strategic plan to be highly effective. The coverage of SP is beyond the scope of this paper. For the brevity of this paper, the reader is referred to other sources (e.g., Burgelman 1996; Khalil 2000; Thompson 1995).

Strategies are a framework for 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). Thus, 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 implementation of strategic plans requires 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 resources, constraints, and alternatives into account. This results in an optimum set of change-projects for the coming year. The optimum set, when implemented, will yield the maximum competitive advantage for the firm.

Projects derived 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. A program is defined as a group of projects managed in a coordinated way to obtain benefits not available from managing them individually. A program usually involves some elements of ongoing operations. Programs are multiyear, linked to strategy delivery, may add infrastructure inside and outside the company, may be renewable, and may not end.

For example, a strategy may be to “grow new business internationally at 20 percent annually.” The associated program might be to “open business in China,” and one of the projects in the program may be to “open a sales office in Bejing.”

Programs are particularly useful in uncertain, high risk, or limited resource situations. A program can make an overall strategy believable and enable high-risk funding to become available in incremental steps (projects). Every year, there may be limited funds available for projects. A common response may be: “we don’t have enough money to undertake this venture (for example a new website) because it is a big ticket item.” With the program architecture in place, the big picture is visible and even though only $100,000 is spent, people see how that investment completes another piece of the overall picture.

Strategic Portfolio, the first of the CILs, is the strategic plan broken down into a portfolio of projects and programs. In the strategic portfolio, all projects must 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 think up 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 are essential inputs to the strategic implementation phase, called SIBP. The SIBP process must 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 SP 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 trade-off 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 5 to 8 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 plan and to quickly adapt to sudden changes in the competitive environment.

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 SP and implementation, and establish the framework for the implementation process called Strategic Implementation By Projects (SIBP). The Strategic Portfolio maintains focus on the strategic plan and the other CILs provide the links to assure an integrated and tight linkage.

SIBP processes and activities include the following.

1. Managing the overall project implementation process via the framework and components established with the CILs previously.

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 Project Management Reference Guide and Standards.

5. Applying multiproject CSFs and individual project CSFs (see next section).

6. Resolving resource and other cross-organization conflicts.

7. Using metrics (performance measures) for CI (see next section).

8. Monitoring, controlling, and improving the multi-project 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 multiple 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, and are summarized below as Multiproject Critical Success Factors (CSFs) and as Individual Project Critical Success Factors (CSFs). High levels of effectiveness on these CSFs are correlated with high levels of maturity in the project management maturity model (Fincher 1997; Ibbs and Kwak 2000). For brevity of this paper, the reader is referred to prior sources by the authors (White and Patton 1990, 1992, 1998).

Multiproject CSFs. Setting up the SIBP process can be a significant challenge. The SIBP process cannot be cumbersome, but must be an adaptable and sustainable. The MPM must be prepared and the SIBP process must maintain focus on the Strategic Portfolio and include the CILs and the following best practice CSFs as a key part of its implementation.

1. Visible top management commitment and support.

2. Simple, flexible, phased stage/gate process.

3. Loose-tight controls capable of operating in rapid change environments.

4. Clear communication of prioritization to align and focus scarce resources on the most important projects.

5. Organizational integration: vertically (top-down)/ horizontally (across functions)/externally (customers, suppliers, partners).

6. Clear, open, timely, free-flowing communications across all levels and functions.

Individual Project CSFs.The fundamentals of good project management for each individual project still applies, must not be ignored, and should adhere to the following.

1. Early formation of qualified cross-functional team.

2. Upfront, clear understanding of customer expectations and project objectives.

3. Repeated customer contact to develop/confirm requirements.

4. Strong project manager.

5. Authority/responsibility/accountability fully delegated to project manager and clearly communicated to organization.

6. Adequate funding and staffing for project.

7. Fully energized, empowered, cohesive and self-directing cross-functional team.

8. Continual team focus on customer and quality excellence.

9. Integrated, flexible techniques for project planning, implementation, control.

Ongoing Operations

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 SP and implementation performance.

Organization Learning (Metrics and CI)

Finally, the last stage in the SMBP model is the feedback to the prior stages for 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 (SP, 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. For brevity of the paper, the reader is referred to other sources (White and Patton 1998, 2001; Burgelman 1996; Thompson 1995).

Continuous Improvement (CI) of each stage (SP, 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. CI 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.

Research Study

The paper and the conference occurs at the same time the authors have just begun a research project with several companies to further explore, validate, and modify some of the findings presented.

Study Focus and Assumptions

The focus of the research study is primarily on the gap that exists between the strategic plan and its implementation, and the CILs to bridge that gap. Secondarily, the study will also focus on the SP and the strategic implementation (SIBP).

In the five-stage SMBP model, the research will assume that ongoing operations and CI will be relatively consistent across the companies studied, and any shortcomings those areas will not mask other results. Informal questions on quality management and improvement processes for each firm will support these assumptions.

Companies targeted for participation in this initial study have the following characteristics: 1) medium to large-sized companies (not too small and not conglomerates; $300 million to $30 billion in sales; and 1,000 to 100,000+ employees), 2) stand alone organizations (separate companies or Strategic Business Units [SBUs] of larger corporation, 3) numerous change needs are required for strategic change, and 4) change needs are highly cross-organizational.

Companies participating to-date come from several industries including: computers, communications, high-tech manufacturing, and semiconductor. These were selected because of the rapid, technological, business, and cross-organizational change dimensions in those industries. Industries avoided due to special circumstances include: aerospace, construction, and retail.

Research Hypotheses

Several research hypotheses come to mind in three categories: 1) those easily accepted, 2) those to be validated or modified based on research study underway, and 3) those requiring a more extensive future research study.

First, the following research hypotheses can be made and accepted based on the experience of the authors’ and others:

1. A strategic plan can no longer be implemented through the chain of command.

2. An effective strategic plan is not sufficient to sustain a firm’s competitive advantage.

3. An effective implementation process is not sufficient to sustain a firm’s competitive advantage.

All three of these hypotheses can be accepted by providing several counter examples that negate the alternate hypothesis of each. The authors’ experience can provide sufficient counter examples.

Secondly, the hypotheses that will be validated or modified in this research study are as follows.

1. The CILs are found in firms to varying degrees.

2. The CILs improve the transition between SP and strategic implementation.

3. The SMBP model, which uses the CILs, is positively correlated with a higher level of strategic management effectiveness.

Finally, there are hypotheses that can be considered in future studies, including the two shown in the following. These hypotheses seem extremely reasonable and can be supported by providing counter examples that negate the alternate hypotheses for each. It would be very reassuring to validate each through research. Such research would likely require a longitudinal study over several years. The two hypotheses are:

1. The five stages of the SMBP model are serially independent. Therefore if one stage is missing or ineffective, the strategic management effectiveness will be weakened.

2. To sustain competitive advantage over time, the firm must sustain all stages at a high level of effectiveness.

Study Methodology

The study methodology uses the SMBP model and Project Management Maturity Model (Fincher 1997; Ibbs and Kwak 2000) along with a questionnaire and additional information. The model, SMBP = SP x CILs x SIBP x Operations x CI, involves five stages (SP, CIL, SIBP, Operations, CI). As with the Project Management Maturity Model, there can be five levels of effectiveness for each of the five stages. As assumed above, the Operations and CI stages are operating at 100 percent effectiveness (i.e., Level 5). For the other three stages (SP, CIL, SIBP), the levels’ effectiveness are determined through responses to the questionnaire.

For each participating firm, questionnaires are completed by at least two people: 1) the strategy executive (e.g., Chief Executive Officer, Chief Strategy Officer, or the equivalent), and 2) the implementation executive (e.g., MPM, Chief Operating Officer , VP of Engineering, or the equivalent).

Additional information is obtained through company documentation provided and through site visits and/or follow-up phone conversations.

Questionnaire

The questionnaire developed takes about 20–25 minutes to complete. There are several questions in each of the following categories:

1. Strategic Planning

2. CILs

• Strategic Portfolio

• Strategic Decision Guidelines

• Project Steering Team

• Project Office

• Project Management Reference Guide/Standards

• Portfolio Prioritization

3. Implementation (SIBP)

4. Business Results

Like the Project Management Maturity Model, there are five levels of effectiveness for each of the first three categories (SP, CILs, SIBP), as well as five levels for each of the six individual or component CIL (e.g., Strategic Portfolio). The first three categories (SP, CILs, SIBP) are stages in the SMBP model. The last category contains before and after business results questions on such items as revenues, profits, return on sales, market share, and new product time-to-market.

Research Results

Preliminary results from the research study will be shared at the conference. Results are expected to show different levels of effectiveness for different phases and for different companies. It is expected that the CIL stage will be relatively lower in effectiveness than the SP and SIBP stages. Consistencies and irregularities will be evaluated. SMBP effectiveness levels will be correlated with business results. The research study findings will be very preliminary, so collaboration with researchers at the conference will be most welcome by the authors.

Company Experience Highlights

In addition to the research study findings over multiple companies, a few select company highlights from the authors’ experience with several companies will be discussed. In each case, the strategic plan and the strategic portfolio have been established along with other CILs, and the firms manage their strategic implementation via the SIBP process. Also, comparing before and after in each case has shown improvement in the firm’s delivery of strategic change. These company experiences directly illustrate bridging the strategic plan/implementation gap via the SMBP model.

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 SP 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 percent 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 percent, substantially higher than the 10 percent 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. The decision was made to leave lower profit ventures 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, increasing project completions, and improving delivery metrics before and after the SMBP process was implemented. Before SMBP, the division was running approximately 1,000 to 2,000 projects per year with about 55 percent to 65 percent delivered as authorized in the latest approved project plan. More precise estimates were not possible due to inadequate records. Note that “delivered as authorized” means that the cost, schedule, and performance (CSP) of the facilities project was approved by,completed, and delivered to the client organization.

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 as authorized by clients

• Simultaneously reduce the installed cost per square foot

• Maintain the average time to completion.

The division utilized 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 percent delivering their CSP as promised. Furthermore, of the top 200 priority projects, only 5 percent required changes to their CSP; that is, 95 percent 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 percent.

Closing the Gap between R&D and New Product Introduction

The next case involves an innovative food product company and their new product/market innovation and introduction process. The firm set a strategic goal of introducing 10–15 new products per year. The strategic portfolio, other CILs, and SIBP processes were set up to encourage the continuous innovation and incubation of high potential new products. In particular, specific targets by phase of the project (product) were set to encourage the continuous stream of high potential new products. The targets were eight projects in the concept definition phase, four projects in the product development phase, and two projects in the market test phase for every one project in the market introduction phase. Following this ratio, the actual mix per year is often 100/50/25/12; that is, for every twelve new products ultimately introduced, 100 ideas began in concept development.

Committing to specific targets by phase enabled continual work on projects in all phases, enough resources to support all phases, and high priority efforts on high potential projects in the market test and introduction phases. Further, it mitigated the tendency for bunching of resources by phase (i.e., all efforts focused on a few projects) and carrying all (or most) potential new products through the market test phase. Thus the number of completions per year (velocity of projects) increased, fewer authorized changes were required because they were fully defined in the earlier phases, and a higher percentage of the cancellations shifted to the earlier phases, liberating development capacity for use on products with the greatest potential for success.

Shrinkage Phenomena when Prioritizing the Strategic Portfolio

The authors’ experience has shown that an interesting phenomena 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 the think they do. For example, if fifty 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 percent) 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.

Conclusions

1. A strategic plan can no longer be implemented by delegating through the chain of command.

2. An effective strategic plan is not sufficient to sustain a firm’s competitive advantage.

3. An effective implementation process is not sufficient to sustain a firm’s competitive advantage.

4. 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.

5. 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.

6. The CILs presented provide the tight linkage to close the gap between the strategic plan and its implementation.

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 Underway

The paper and the conference occurs at the same time the authors have just begun a research project with several companies to further explore, validate, and modify some of the findings presented. The study underway should confirm or change hypotheses made. 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 SP and strategic implementation processes within their companies. Such research may become the basis for a more extensive future research studies focused on SMBP and the gap that must be closed to attain a sustainable competitive advantage.

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. Dialogue 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 dialogue.

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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This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

Proceedings of PMI Research Conference 2002

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