Navigating the seven C's to project success
It's a business fundamental that a strategy must be in place before any operational plans can succeed—do the right things, then do those things right. Toward this end, organizations need to treat their projects as investments and part of their business strategy. What is the primary objective of any enterprise? It is to succeed and generate a benefit for its stakeholders. Typically, organizations do not go from being a thriving enterprise to total collapse overnight. Most failures occur because of several related factors directly tied to the organization's strategic objectives and how the organization positions itself with respect to its environment, both internal and external. The first part of the paper addresses the importance of establishing a solid strategy for the company and the value of being prepared as opportunities for implementing that strategy arise. The second part discusses each of the seven key elements that affect an organization's ability to successfully structure, launch, and execute projects (opportunities) that deliver those benefits.
Stereotypic sailors are often depicted as “crusty old salts” reminiscing about sailing the seven seas. Discovering what lies over the horizon has always been part of the allure. Mariners throughout history have set sail never knowing if they will safely return to their homeport. Why do they leave everything behind and sail away never knowing what lies across the sea? For some it's adventure and the prospect of riches and glory. For others, it's simply a call to duty or because they had no choice.
Companies undertake projects for many reasons: market/industry demand, customer request, regulatory compliance, etc. Regardless of the reason, every project requires an investment of time, people, equipment, materials, and money. Project management discipline encourages that every project be supported by a business case that clearly documents the rationale for undertaking the initiative. Some organizations spend a significant amount of time researching and analyzing the potential impact of their projects—all with the expectation that project investments will increase the organizations overall business position.
There are seven core elements that if considered will contribute to the organization's project decision-making process. The seven elements (7 C's) are: customers, competitors, capabilities, cost, channels, communication, and coordination. Every organization, both large and small, must assess itself against these elements and determine how closely each potential project fits in its ability to support or detract from the organizations strategy and operational objectives.
Charting the Course (Strategy and Opportunity)
A paraphrase of Lewis Carroll's (1898) Cheshire Cat in Alice's Adventures in Wonderland, (1865) “If you don't know where you are going, then any [course] will get you there” (p. 31), implies that there are multiple ways to accomplish an objective, equally effective. The problem is that if you don't know where you are going, how will you know when you have arrived? As with the sailor's charts while sailing the seven seas, the strategic plan charts the organization's course.
The Value of Strategy
Strategic plans themselves do not make the decisions nor do they predict the future. They do help create a common direction and help senior management evaluate the implications of their decisions. Structured properly, strategic planning helps management identify and develop tactical or operational plans that enable the enterprise to respond logically, purposefully, and quickly to environmental changes. It also creates a basis for strategic debate. Management's responsibility is to undertake projects, based on its strategic plan, that enable your company to take advantage of opportunities as they arise and to adjust to any undesirable factors.
However, no strategic plan is perfect or error proof—it is just a plan. Because all planning is future-oriented, the probability of error is high, especially if the strategic plan has been developed under less than desirable circumstances. Remember that one major benefit of planning is to help determine which opportunities (projects) to pursue or continue and which ones to reject, terminate, or modify. It is important to avoid building strategies that reinforce already established positions and perceptions or that just become paperwork exercises that never result in real business decisions. If the strategy does not challenge the status quo and initiate debate, then it will ultimately serve little useful purpose. In addition, because everyone is excited about implementing the strategy. If(Griffith, 2000 p. 236) management is not careful, the learning acquired throughout the strategic planning process may quickly be forgotten or ignored. It is incumbent upon senior managers to keep key stakeholders actively engaged during and after the strategic planning process.
As with any set of navigation charts, the strategic plan sets the overall course against which major objectives are measured. Both need to be validated, and when appropriate, updated or you run the chance of running into a previously unknown obstacle, steering a course that is not correct, or simply drifting along as the wind and currents take you.
For a strategic plan to be effective it must enable your organization to adapt to changes that occur during implementation. Success in sailing involves understanding what you can control – crew selection and rudder angle – and taking advantage of opportunities provided by those elements that are outside of your control – wind direction and current. Successful strategy implementation includes similar considerations and, as with sailing, it is this second item, opportunity, which creates the biggest challenge.
Sun-Tzu in The Art of War (circa 500 BC) stated, “What is of the greatest importance in war is extraordinary speed: One cannot afford to neglect opportunity” (Michaelson, 1998, p. 63). But, how do you recognize an opportunity, assess it, and position yourself to take advantage of that opportunity? Being able to recognize and grasp an opportunity is what differentiates successful organizations from unsuccessful ones. Success does not just happen. There is an old saying, “Success happens when opportunity and preparedness meet.”
Any voyage requires preparation. Preparation comes from thoroughly understanding three primary elements:
- The sea and your vessel—This is your internal and external environment. It is the area where your organization operates. Understanding your business environment is crucial to success. Does it help or hinder your ability to compete? A company might own a major piece of the market, but the internal infighting might be taking valuable energy away from what really matters—gaining or maintaining market share. Are you on an even plane with your competitors? Do you operate in a marketplace that allows you and your competitor to compete equally? If so, then whoever gets to the marketplace first has the advantage. Is the environment equally challenging to everyone in the industry? Perhaps the opportunity is with customers that no one else wants such as those that are considered the toughest, most demanding, etc. Is your industry subject to changes as the market forecast and economic conditions change?
- Obstacles—What and where are hostile ships, sea monsters, and pirates? These are the competitors with whom you must share the ocean: your marketplace. How strong are your competitors within the marketplace and your industry? What do you know about others in the industry and what do you not know? You need to take a hard look at what is available within the marketplace. Unless what you have is significantly different or is for a niche market, then customers have a choice. What makes you and your product any different from anything else currently available? Without a significant difference, you will not have much advantage over your competitors. Be aware of what your competitors are doing and not doing. To quote Yogi Berra, “you can see a lot just by observing.” (Griffith, 2000 p. 236) However, since you will rarely have all the information you would like to have regarding the competition the quality of the information is also important.
- The crew—Take a good look at yourself and your shipmates. How skilled are the sailors, what type of leadership is provided by the captain and the officers, how much experience does everyone on board have? How well you know yourself and those around you will determine how effectively you are able to complete your voyage. What are your internal strengths and weaknesses with respect to the marketplace, your
A key to assessing opportunities is to get the right information at the right time from the right sources. A corollary to the “if you don't know where you are going” phrase is “if you ask the wrong questions, do the answers really matter?” If you don't know what information you need and don't need, then all information appears to be important.
Every sea captain makes choices on a daily basis that will affect the remainder of the voyage. The captain knows that to making appropriate course corrections require timely and accurate information from the navigator. The navigator's primary responsibility is to know where the ship is located at any point in time. Today this is accomplished by using sophisticated global positioning systems (GPS.) During earlier times, sextants and other mechanical means were employed. Regardless of the tools used, the readings are useless unless you have a reference point such as the navigation charts, the sun, and the North Star. In a business, it is the strategic plan.
Knowing your current position and distance from your objective are critical. A simple method used by sailors is known as distance to the horizon and line of sight. Distance to the horizon, based on line of sight, is a simple calculation that uses your eye-level height above sea level. There are many applications of this technique, one of which is to provide a reference point for communicating the location of obstacles or obstructions that might create risks for the ship and crew.
Using the same principle, all project opportunities need to be assessed against our core competencies or abilities (height above sea level) compared to how far away the objective is (horizon.) The further the objective, the greater the risk and potential for failure.
Setting Sail (Choosing the Right Opportunities)
Defining Your Core Competencies
In 2001, Chris Zook and James Allen wrote Profit from the Core, followed in 2004 by Zook's sequel Beyond the Core. Both books address the principles of expanding your business and growing strategically by considering several core business dimensions or competencies. Since every business has a core with an expanding and often complex set of growth opportunities or adjacencies. The critical challenge is being able to define clearlyyour core competencies. According to Zook (2001, p.15), there are some basic questions that can be asked:
- What are the most potentially profitable, franchise customers and what real benefit/value do you offer them? (Remember value is measured many ways, not just in pure dollars and cents.)
- What are your most differentiated and strategic capabilities and what makes you any better than the other providers?
- What are your most critical product offerings and how are they any better than what are currently available?
- What are your most significant distribution channels for getting your products and services to your customers?
- What other critical strategic assets (patents, name recognition, etc.) do you have that contribute to the business?
Every new ship, before it begins routine operations, will undergo several sea trials to test its capabilities and to demonstrate that ship and crew are all “sea worthy.” The ship and crew are defining and base lining its core skills and capabilities. Any system not passing the evaluation program are noted and corrected before being certified as operational ready. The same holds true for your business. Unless your company can answer these questions, you should consider your expansion plans until they can be answered. Several management tools such as business plans, business cases, commercialization plans, and marketing plans will help with the answers.
Distance from the Core
In ancient times, it was not uncommon for sailing vessels to sail always within sight of land. After all no one knew what was over the horizon. Getting away from the shoreline meant traveling further into the unknown. There were several factors that determined how far into the ocean a captain and the crew were willing to sail including fear, skill of the crew, size of the ship, knowledge of the captain, and tools available (sextant, sails, oars). Businesses have the same consideration—how far away from our core competencies are we willing to go? As illustrated in Exhibit 1, the further away from the core you get the greater the opportunity for diversity, but also the lower the probability of success.
Success declines and diversity increases with distance from the core (adapted from Zook, 2004, p88)
The 7 C's
Zook (2004, p. 58) stated that the organizations whose cores map closer to the natural boundaries of the business and are in a stable industry are much better able to look at moving further beyond their cores. The problem though is how many companies fit these criteria given the dynamics of the global economy. There are five dimensions that Zook (2001, pp. 86–87) determined whether an investment (project) might make sense. Two additional dimensions have been included that cannot be ignored because they facilitate the process.
These seven dimensions (7C's) are: customers, competitors, capabilities, capital, channels, communication, and coordination.
- Customers—Does the new opportunity target your existing customer base, an existing customer in a new area, or are you trying to reach a completely new set of customers? The closer you stay to your core, the more you know the markets’ preferences and buying habits. Core customers are typically the preferred target because they have much more experience with your product or service, are more loyal, and may view the cost of switching to be too high. Seth Godin (2003, p. 41) also stressed the importance of understanding the customer. He emphasized that not all customers are the same. You need to differentiate your customers and find the group that is the most profitable. Also, identify who in the market is likely or willing to move beyond and existing product or service. If you can figure out how to meet the needs of either group (even if the need is a niche) you have a greater probability of success should you move outside of your normal comfort zone. For example, are you targeting an existing customer with a new product service such as a local delicatessen that has decided to offer delivery service to nearby offices during lunch hours or are you trying to get into the gourmet catering service?
Another aspect is to understand is what is important to your customer. Do you really know what the customer wants and can you communicate the benefit to be received by the customer, in very clear terms? Throughout his book, Jump Start Your Business Brain, Doug Hall (2001) continually asked the question “What are the overt benefits?” Are the benefits specific, direct, and obvious? For example, consider a customer buying a new automobile. The sales person comments that the automobile will go from 0 to 60 miles per hour in 4.2 seconds. The benefits are going to be perceived differently if the buyer is an engineer or an average commuter. The engineer is likely to think of the vehicle with respect to weight versus gas mileage, drag to thrust ratio, and so on. The average commuter could not care less. To them the benefits are sensory—feel the wind blowing through your hair and your head being pushed back against the leather seats as you accelerate from 0 to 60 in 4.2 seconds. Which one of these is your primary customer?
- Competitors—Competition is probably the main reason why organizations will try to move into a new area. Whether it is a move because your competitors are there and if you don't move, you will be left behind, or there is little or no competition and you see an opportunity to fill the void. It is important to identify who are the existing and potential competitors. Obviously the further you move away from your core business, the more competitors you will encounter. If there are very few competitors, then you need to understand thoroughly why. Is the reason simply that your move is revolutionary and you are the first to move in that direction; or are there no customers because it is cost prohibitive or has too low of a profit potential? Also, consider the actual product. Will the project produce a “me-too” product—one that your competitors have and if you don't have it, you might be viewed by the market as a lesser-provider – or will it give you a “leap-frog” advantage over your competitors by being something new and innovative?
When comparing yourself to your competition, Hall (2001) wrote that it is important to determine what really differentiates your product or service from what is currently available. This difference is what customers really use to decide if working with you or a competitor is based on value or price. When there is no perceived meaningful difference between offerings, then price becomes the primary, if not exclusive, decision criterion. If this is the case, then you are not offering anything more than another commodity in a low margin commodity market. Robert Cooper, Scott Edgett, and Elko Kleinschmidt (2002, p. 225) found that lowering price as a strategy is only half as effective as those that add value.
- Capabilities—Can your new project utilize existing or complementary skills, talents, and technology or will it require a next generation, state-of-the-art, or totally new capability? Your likelihood of success is significantly greater if you have the capability already in place or can acquire it through other means such as strategic partnering. Many companies have found themselves in trouble because they wanted to expand into a different customer or product base without having the capability readily available. So what do they do? They typically acquire a capability through a merger or acquisition, etc. Simply stated, they buy into it only to find themselves selling off the acquisition because it took them too far outside of their core competencies.
Capabilities and knowledge establish credibility and credibility leads to confidence. Our capabilities provide for us what Doug Hall, (2001, p. 91) referred to the real reason to believe. Remember the benefit is what you are offering the customer. The reason to believe is how you are going to deliver what you promised. Customers, internal and external—including management, often withhold their final commitment until they feel confident that you can make good on your promise to deliver. If given an overall perception that what is being offered will be mediocre, not all of the polish and shine will change that perception. Don't forget: knowledge is power. You need to know as much about your project and product as possible and how it fits within your organization. Credibility is established through a number vehicles and media. For example:
- Personal experience: It is important for some projects to provide an opportunity for the customer to experience, see, and feel what they are going to get. This is one of the reasons why prototyping and modeling are such valuable project management tools. When proposing a new project idea, what has been your experience with the decision makers? What has been their experience with you?
- Credentials: Credentials influence most customers. Why do doctors, lawyers, and dentists have diplomas and certificates hanging all over their walls? Why do you put the Project Management Professional (PMP)® credential behind your name on your business card? By emphasizing your
- Guarantees: Are you willing to put your reputation on the line and stand behind your stated benefits?
- Testimonials: What do others say about you? There is a general saying that if someone likes something they will tell three people; if they are NOT satisfied they will tell 15. Just look at the growth of Web services such as Angie's List® and other similar sites. Testimonials matter.
Have you ever though what would happen if you told the whole truth about your capabilities?
- Capital: Most organizations want to grow but do not have the resources to do so. Can your proposed project be accomplished using existing resources or will additional resources be required, including financial resources? The more you can rely solely on available resources the better. If external funding and resources are required, what is the magnitude and timing of investment versus expected revenues? How many companies have you known or heard about that became over-leveraged in order to move into a new market or expand it existing customer base?
- Channels: How will the project results be made available to the market place and end users? Do you dominate the supply chain or have a partnership with someone who does? How you get the project results to the customer is sometimes more challenging that developing the product in the first place. There is significant difference in how you get the product to market. If you have always used direct access, such as a specialized distributor, and decide to use an indirect access method such as a major “big box” retailer like Lowe's® or Home Depot®, then the acceptance criteria becomes substantially different. It can become even more challenging if you are trying to move toward an Internet or Web-based approach.
- Communication: Businesses operate on information and the quality of the information matters Are your key stakeholders actively engaged to ensure that the right information is gathered and communicated throughout the business case development and analysis processes? If they are, how are they involved? If not, why not? If expansion means establishing, increasing, or modifying your communication process, then you need to determine by how much. Simply adding an additional chain store in the same city (only one-step away from the core) is not likely to create major communication problems for your company. However, acquiring an existing business in a very new market place and geography will likely create many communication issues.
- Coordination: Integrating all of the other C's will require that you have a clear understanding of the big picture. The greater the number of competencies that are two or more levels away from your core the more difficult it will be to make sure that all the pieces are fully integrated. Factors to consider regarding coordination and maintaining synergy include the extent to which other parties are involved versus working alone, how much risk and uncertainty is associated with each move, and the degree to which the seven C's are local or global.
Profitable growth can be a challenge, especially as and solid opportunities become harder to find and develop. To be successful in an uncertain and changing world, all organizations must select and execute projects that provide real benefits to all stakeholders. However, constant pressure from internal management, stockholders, investors, and politicians to set higher and higher goals has never been greater. As a result, the targets set are often so unrealistic that management makes restructuring, acquisition and project management decisions that move them beyond their core abilities. Zook (2004) stated that 75% of the major business disasters of the past decade were caused by or worsened by over-expanding beyond the core.
Growth choices are some of the most significant any organization can make. Any decision has some impact on the stakeholders involved. The key is to make logical decisions with the core as the foundation, while exploring the unknown where the opportunities lie.
The pessimist complains about the wind; the optimist expects it to change;
the realist adjusts the sails.
—William Arthur Ward (Caswell, P. 214)
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© 2009, Lowell D. Dye
Originally published as a part of 2009 PMI Global Congress Proceedings – Orlando, Florida