OPM3®--the path to organizational achievement of strategic business improvement

Introduction

In today’s global competitive environment, organizations are seeking methods that improve their ability to deliver on their strategy. This paper will demonstrate how the use of OPM3^® will help an organization improve its performance.

This paper will follow a progression of practical steps to demonstrate how the foundation of organizational project management maturity in the structure and execution of project management helps an organization translate its strategy into successful outcomes, consistently and predictably. It starts with a discussion of the problems that organizations are facing globally with project management performance.

Once the problems are understood, the paper will define several important concepts that will aid the reader in understanding the methods and solution that organizational project management maturity will provide. For projects to consistently deliver on strategy, they must employ best practices in project management and investment management throughout the total product life cycle. It is through this marriage of project management with product management that project management maturity becomes inexorably linked to the achievement of the business strategy.

By means of a fictitious case study, this paper will walk the reader through an organizational project management assessment using OPM3, and will show the improvement and subsequent business benefits, and will contrast this with alternative approaches frequently employed by organizations. The case will explore the problems of the organization as well as the best practices solutions that are used to achieve the desired business results.

Finally, this paper will step through a scenario that demonstrates the value of organizational project management maturity.

The Problem

As organizations look back across the last couple of years and their success at delivering their organizational strategy with projects, they are realizing that they are still not hitting the mark. In fact, recent studies are showing that “Corporations throughout the world are losing billions in wasted project spending. One of the biggest contributing factors to this waste is a severe lack of alignment between projects and corporate strategy” (Stanleigh, 2006).

Two recent publications have eloquently pointed out some of the symptoms that organizations are experiencing worldwide (Ivey Business Journal, 2006; KPMG, 2005). Following is a synopsis of their key points:

Ivey Report

1. “Metrics and best practices for project management are few and far between, which is one reason why many projects fail.”
2. “One of the main problems” is that “projects are not aligned with organizational goals.”
3. Organizations are experiencing “a failure to implement strategic project management best practices.”
4. Organizations are experiencing “a failure to implement a strategic project management measurement system.”

KPMG Survey

1. “Inadequate benefits management processes prevent the articulation of program and project success and this creates a largely unquantifiable degree of benefits leakage.”
2. Many organizations fail to define financial benefits in their business cases for project creation and delivery.
3. Many “project proposals are often clouded with political agendas and are not transparent regarding the ultimate objective for the organization.”
4. A majority of organizations continue to focus on the traditional measures of project success of “on time” and “on budget” and fail to include measures of strategic business value.
5. A majority of organizations “either have no, or only an informal benefits management process” for aligning and managing the value relationship between strategic value decisions, project value delivery, and operational value fulfillment.
6. A majority of organizations do not practice baselining current business performance as a means to gauge and measure improvement.

In addition to the issues raised by these publications, there still exists a language barrier between business management and project management. The majority of project managers still are unable to communicate project management in business terms. Part of this communication is the inability to relate business success measures at the project level, and not tying project management to business performance.

One final problem that needs to be discussed is the unwillingness of organizations to commit to long-term process performance improvement. In this world of instant communications, organizations are not staying the course on completing their objectives to achieve continuous improvement. Frankly said, there is a lack of an organizational perspective to project management. Too few organizations appreciate the benefits that flow from an approach to the fulfillment of strategic value that aligns all business activity with strategy and that actively manages business value.

How are organizations going to bridge the gap between business performance improvement and organizational project management? Let’s start by exploring some important concepts.

Some Important Concepts

The first concept to understand is project management maturity (PMM). PMM is concerned with using the project management life cycle and the processes defined and being used in the organization, and then maturing those processes. A typical generic life cycle includes three phases of processes: Initial, Intermediate, and Final. These phases have processes that are executed in the phase and that hand off to the next phase. The phases include processes that charter a project, build a project scope, plan, schedule, execute, control, approve, close, and transition. With a defined lifecycle and processes described for each phase of the lifecycle, an organization would then mature those processes. Maturing processes is concerned with applying process improvement stages to the existing process. This methodology, defined by Deming and Shewhart (1987), applies four stages of development to the existing processes. These stages of process improvement include Standardize, Measure, Control, and Continuous Improvement. Each stage has activities that must be performed in order to achieve completion of the stage. For example, in the standardize stage an organization will:

1. Assign process ownership
2. Document the process
3. Communicate the process
4. Implement the process across the organization.

The organization would typically mature their processes by applying the standardization activities, then move on to measuring the processes, controlling them, and finally moving them to continuous improvement.

The next concept we will explore is organizational project management (OPM). OPM is defined as “the application of knowledge, skills, tool and techniques to organizational and project activities to achieve the aims of an organization through projects” (PMI, 2003). It is a broad-based approach that defines the systematic management of projects, programs, and portfolios in alignment with the achievement of strategic goals.

Project management is sometimes thought of as a discipline applied to a single project, whereas organizational project management embraces the enterprise-wide business of project management. The assumption is that there is correlation between an organization’s capabilities in project, program, and portfolio management and its ability to implement its strategy. OPM is about translating strategy into successful outcomes consistently and predictably. It is the business of project management – connecting value decision making with value delivery and fulfillment.

Now that we’ve defined organizational project management, let’s explore organizational project management maturity. Maturity is the degree to which an organization understands and applies OPM to improve the implementation and fulfillment of its strategy. Organizations that mature their organizational project management have adopted a process-improvement approach. They have identified the gaps in maturity that reduce business performance. They then apply the appropriate disciplines to achieve continuous improvement. Along with achieving continuous improvement, an organization that has reached maturity has become “best in class” in the business of project management.

Now that we’ve defined organizational project management and organizational project management maturity, let’s investigate organizational project management maturity models. A maturity model is a disciplined and repeatable approach to achieving organizational project management maturity. Additionally, an OPMM Model (OPM3) contains industry best practices in organizational project management. Exhibit 1 depicts the OPM3 approach.

Exhibit 1 – The OPM3^® cycle

In this approach, the organization first verifies their understanding of the model. The second step of the model’s approach is to assess the organization’s maturity against industry best practices in all domains of organizational project management. This assessment is evidence-based and provides objective data on what the organization is currently doing. The assessment establishes a baseline for improvement.

Once the current maturity is understood, the organization determines the appropriate level of maturity they wish to achieve. They then plan the improvements they will put into place to achieve the desired maturity.

Once the improvements have been completed, the organization then determines if they wish to implement more improvements or stop the cycle if they are satisfied with the results at this point in time. In this case, it is important to agree when the situation will be reviewed again, so as not to lose the momentum of continual improvement.

This general methodology points the organization toward continuous process improvement in organizational project management performance.

Now we’ll demonstrate how OPM3 works in practice, by considering a fictitious case study.

A Case Example

The New World Video organization has been in the video gaming industry for approximately seven years. When the organization first launched they were one of the sole providers for the most popular video gaming systems in the world. In 2000, they were able to focus on a single gaming system and exclusively delivered games for that system. Since then they have expanded into delivering games for the top three gaming systems. Their primary focus has been a strategy of product leadership. Every game they deliver is based on a go-to-market strategy with set market launch windows. The development of each game is handled as a project, which is managed by a product portfolio executive. They implemented a portfolio management discipline about three years ago.

Since their inception, they have faced some stiff competition. In fact, in 2000 they were able to capture 15% of the video gaming market. Their market penetration has been steadily declining since then. When a product is launched, it is seldom within the market window requested and the product ROI is usually below the expected ROI. To make matters worse, product performance is usually missing the projected revenue target and, worse still, a number of products were developed that failed to make it to launch because they really did not align to what the market was requesting. They have also had to recall a product when one of their games did not work at all after it had reached consumers.

After considering a number of possible interventions to improve one or another aspect of the way they manage projects, New World Video has learned about organizational project management maturity models and has decided to invest in this diagnostic approach to improve its business results. By doing so, they hope to undertake a root cause analysis of the problems with their processes.

They started the assessment process with a needs analysis to establish the organizational objectives of New World Video. This was an absolutely critical step in the process of improvement, since it both pointed to the scope of improvements that were called for, and to the financial and business benefits that could be expected to flow from the improvements.

With the objectives established, they then conducted a full assessment that analyzed all departments and all aspects of their processes and practices for all domains of organizational project management. Interviews were conducted with multiple roles in the organization, including the organization leadership, process owners, user of the processes, and recipients of the processes. The approach that they used was evidence-based. In this assessment the organization’s processes and practices were compared to industry best practices, using a comprehensive OPM3 assessment.

The assessment pointed to issues in operational and quality areas. The most significant finding, though, was concentrated in product development, in the market performance area. An audit last year found that the Research and Idea Generation areas were solid in their performance. The Product Creation and Delivery areas showed gaps in critical management processes impacting market performance, including problems with the handoff from Research to Product Delivery. The portfolio management processes that had been established three years ago were not functioning effectively in a number of ways:

1. Project evaluation and selection was highly subjective, with political influence and power playing a significant role in the absence of generally agreed upon and widely used measures of strategic performance. For example, scores were low on best practices designed to drive measurements through the organization, such as 6130 (Collect Project, Program, Portfolio Success Metrics), and 1530 (Use Formal Performance Assessment).
2. Project authorization was similarly flawed, with different standards being applied to different projects, depending upon the degree of support from senior management. The expected business performance was not established using standard procedures, or by applying commonly agreed upon criteria. For example, when considering 1640 (Optimize Portfolio Management), it was clear that capabilities such as 1640.040 (the organization determines whether the projects contribute to portfolio competitive success) were simply not implemented.
3. Not surprisingly in the light of (1) and (2) above, portfolio review and adjustment were based, at best, on subjective market analysis, in the absence of solid data produced by proven processes. It was impossible, for example, to score anything for 1640.030.10 – Balanced Portfolio, because Project Portfolio was not balanced to achieve the highest amount of return for acceptable risk.

Even the project management processes in product delivery, which the company considered to be one of its core competencies, were not functioning as well as they should be in such a competitive market situation. For example,

1. Project chartering and scoping was often skimped, and thus presented misleading expectations of business performance). For example, scores were low in such best practices as 1010 (Project Initiation Process Standardization) and 1320 (Project Scope Verification Process Standardization).
2. Unsurprisingly, this meant that project scheduling suffered, with consequent problems in predictability, as well. Indeed, the scores were very poor for 1770, since Project Schedule Development Process measures were not established, assembled, and analyzed.
3. Project execution and control, which resulted in serious issues with business performance were also identified. Best Practices such as 2460 (Project Plan Execution Process Control) were not implemented, so that it was impossible to control the stability of project plan execution.

With the findings of the assessment known and understood, New World Video determined that it would concentrate its first improvement efforts in the product development area. They decided to implement the following best practices and capabilities in the portfolio management domain:

1. Project evaluation and selection (measures of strategic performance) - The organization implemented a strategic measurement system consisting of a suite of metrics that showed how the whole project portfolio was delivering as measured against the organization’s strategy. These metric systems included measures of strategic goal achievement, financial contribution, asset maintenance and development, end user satisfaction, risk profile, and resource capability. The measures were then communicated organization-wide as the basis to select projects and balance the portfolio to achieve the strategic goals. The strategic measures were then translated into business management measures that provided the organization with metrics that could be used to gauge the performance of the portfolio. Measures such as average cycle time, resource productivity, numbers of new products, percentage of revenue derived from new products, and percentage of new products launched successfully delivered, in turn created a baseline for aligned business performance management.
2. Project authorization (expected business performance) - In the area of project authorization, the organization implemented a process to communicate strategic and business performance measures to the project teams. Additional processes were implemented to complete the project authorization cycle, such as the first point below in the project domain, following the project management chartering process. Then the organization implemented a standard way to assess the value of the project to the organization, resulted in projects being consistently evaluated throughout the entire project lifecycle.
3. Portfolio review and adjustment (market analysis) – The strategic measures and business management measures that were implemented in the first portfolio process improvement step above are used now in a new process for portfolio review. This periodic review process evaluates the entire portfolio against changing market conditions and uses measures to monitor market movement. Finally, the organization implemented a process for adjusting the portfolio based on the changing market conditions.

In the project management domain, the organization implemented the following improvements, based on the findings of the assessment and the organization’s objectives:

1. Project chartering and scoping (expected business performance) – Continuing with the project authorization process that was established in the portfolio domain, the organization implemented a process to include strategic and business performance measures in project charters. A further process was also implemented that brought the same strategic and business performance measures into the project scope statement, ensuring the objectives are aligned from the strategy through the portfolio to the project.
2. Project scheduling (predictability) – The organization standardized their schedule development processes to create more project predictability in delivering within the projected market window. New standardized processes for schedule measurement and control were also implemented.
3. Project execution and control (business performance) - In order to achieve its business objectives, the organization implemented a process to build business management metrics into project monitoring and decision processes. The organization projects will now track and report on benefits management and investment analysis information that aligns the focus of the project team with that of the sponsoring business. The organization will analyze the project’s status and the impact on expected/projected business results, so that the overall picture reveals the extent to which New World’s desired strategic business outcomes are being fulfilled. As well as improving business performance, this will also go some way toward reducing the gap between the language used by business management and that used by project management.

It took several months to put the improvements in place, but once they were in place, the organization immediately started seeing changes to their product development bottom line. Exhibits 2 and 3 describe the impacts realized from the improvements that were put into place.

Exhibit 2 – Business Impact Associated with Portfolio Management

Exhibit 3 – Business impact associated with project management

The Business of Organizational Project Management

Nine months after the improvements were completed, New World Video experienced firsthand the impacts of adopting an organizational project management maturity model. New World had a new game in development that was projected to have an NPV of $2.5 million with a breakeven at 10 months. They had also projected that they had approximately one year before competitors would be able to launch competing products that would start to erode their market share.

New World’s market intelligence group had learned that a competitor planned to introduce a similar product with an additional feature to New World’s product. This competitor’s product would halve the market window to six months. This information was analyzed during the Portfolio Review and Adjustment process that had been established after the assessment months earlier (see Exhibit 4).

Exhibit 4 – Value delivery process (the scope of improvements identified through OPM3)

The Business Impact Analysis process that was established was then executed based on this new information. New World determined that three options were available to them at this point:

1. Accelerate market entry of the new game to maintain the original market window
2. Incorporate the new feature into the new game with a reduced market window
3. Cancel the new game project and reallocate resources to another new product

Because the organization was clear about their alignment to strategy and the business management measures that they would employ to gauge the performance of the portfolio, the next step of their analysis was easy. They created NPV and breakeven calculations for each of the different scenarios.

1. Accelerate: NPV= $500k with BE 15 months
2. Incorporate: NPV = $2.0M with BE 12 months
3. Canceling: NPV = $1.75 M with BE 18 months

No matter what scenario the organization decided to use, the important point is that they made their decision based on facts that allowed them to manage the portfolio to a successful outcome using the processes that they had implemented after adopting an organizational project management maturity model. This model helped them align and adjust organizational project management performance to achieve the strategic business goals. Installing business benefit measurement helped them align their project decisions with expected value form project investments.

More important, New World Video is building a culture of continuous process improvement in organizational project management as the means to strategic organizational excellence. They have started down the path of committing to the business value of being a best in class organization. They have built an infrastructure for the business of organization project management—the effective development and application of project management skills and competency toward the achievement of organizational goals.

Avoiding the Pitfalls: Common Interventions That Lead to Failure

When they rejected one or more ad-hoc improvement measures in favor of a rigorous company-wide OPM3 assessment, New World recognized that what they were embarking upon amounted to nothing less than a full-blooded program of change. This change program was to be built on the solid foundation of a detailed and impartial analysis of the root causes of the problems being experienced; some of which their OPM3 assessment helped them to identify. Incidentally, these root causes also addressed New World’s ability to manage such change programs. Although New World knew that the identification of problems did not automatically lead to the implementation of improvements, they also knew that the rigorous OPM3 assessment was the key to their success. Together with the brutal facts about declining market penetration, the OPM3 assessment was the basis for establishing a great enough sense of urgency to force New World Video into the change process.

Based on this, New World Video could build a culture of continuous process improvement. Either this culture with the right employee and leadership values and behaviors were there to start with, or it had to be built as part of the improvement effort. No matter what, it is commonly agreed that, together with a great enough sense of urgency, commitment from the top is the prime key to the successful outcome of the improvement process (Dale & Cooper, 1992).

And this top-management commitment might be hard to find, especially if the organization is not in an immediate crisis or if the root cause of the low maturity was inappropriate leadership, values, and behaviors – exactly the leadership, values, and behaviors not needed to transform the organization to a higher maturity level. Hence initiating the improvement process requires an aggressive cooperation of many individuals who can motivate people to help get the effort going (Kotter, 1995).

Another reason New World Video succeeded in transforming into a culture of continual improvement is that the guiding coalition of leaders created and communicated a sensible and focused vision that was appealing to all stakeholders. Recognizing the importance of the so-called (and misnamed) “soft factors,” they were able to win the hearts and minds of the employees using every possible communication channel. To make it clear to everybody that top management was serious about the change, they chose to set an example of right behavior by starting with their own conduct of portfolio management.

They involved HR to make sure that obstacles in the reward and appraisal systems were removed, and at the same time they recognized and rewarded employees involved in the change effort for both short-term and long-term wins.

Although they planned to become a learning organization where continuous improvement was in the seat of honor, they didn’t have a specific year where they said “We’ll be a culture focused on continuous improvement.” They just knew that they wanted to, and then kept pushing consistently towards that, building upon work done earlier, compounding the investment of effort (Collins, 2001).

In contrast to many organizations finding themselves in a similar situation, New World Video avoided the traps of rushing to implement an intervention based on intuition, on hopefulness, or on a desire to implement “the latest thing” by way of fashionable management techniques. As Albert Einstein was reputed to have said, “You cannot solve a problem using the thinking that created it,” and yet all too often, organizations that lack the culture, the systems, and the processes to manage change effectively set about the act of transforming their ability to manage change through “improvement initiatives” that fail to recognize the irony of what they are trying to do. It is like trying to lift yourself off the floor by pulling at your own bootlaces.

The value of using the right approach to solving the issues in cases like New World Video is that in the short-term, where benefits are highly indirect, it is possible to create awareness and a sense of urgency (that is, creation of the organizational turning point) that can lead to a solid foundation upon which to build the more advanced capabilities. Thus the short term becomes the first step toward the long term, an approach where the organization steers itself toward its chosen strategic destination, using a dashboard of measures that provide it with valuable aids to navigation.

This is as true for governmental and voluntary organizations as it is for commercial for-profit ones. The only difference will be in the actual measures used in the suite of metrics.

The Building Blocks of a Business Case for an OPM3 Assessment

Of course, in the real world, any improvement initiative such as that undertaken by the fictional New World Video needs to be founded on a solid business case. So how can you set about establishing such a case? Here are some questions to answer and considerations to bear in mind.

(1) The starting point for any business case is, “Why might the organization want to make such an investment? What are the benefits that can be expected?” This is far from simple to answer, since an improvement in organizational project management can be expected to offer multiple improvements as varied as:

• Greater predictability in terms of cost and schedule results
• Reduced waste in terms of cancelled projects, and projects that consume resources without contributing to the achievement of strategic objectives
• Improved productivity of scarce resources
• Improved delivery of benefits from individual projects and programs
• Greater capital efficiency on the creation of new capital assets and the refurbishment or modification of existing ones.

That is why, in the example described in this paper, the initial needs analysis was so important. Even prior to the OPM3 assessment, New World Video was very clear about the business objectives that would be necessary in order to achieve their strategy, and the benefits that would flow from the achievement of these objectives.

(2) Once the intended benefits have been clearly defined, the second step is to relate the specific activities that are to be undertaken, to the deliverables they will produce, and thus to the benefits that will flow from each deliverable.

Here, it is important to distinguish between the initial OPM3 assessment, which diagnoses the current situation, and the improvement actions that flow from this. The assessment itself will offer few benefits—it will simply open the door to allow the correct improvement actions to be identified. It is the specific improvement actions that will themselves deliver the benefits identified in step 1.

What that means in practice is that the business case for an OPM3 assessment needs to be bundled together with the benefits that can be expected from improvement actions (identified as desirable in step 1), in order to define the scope of an “assessment and improvement” program, such as that undertaken in our case study by New World Video. The initial proposal arising from the needs analysis can be thought of as an “outline business case” which can be used to gain approval for the funds to carry out the assessment. Once the assessment has been conducted, and a detailed improvement plan designed, then a “full business case” can be constructed that shows how the planned improvement actions will lead to the desirable benefits.

In the “full business case,” there is a causal chain to be established that demonstrates how improvement actions lead to improved project, program and/or portfolio practices and processes, which in turn lead to improved business results. Each link in the chain must be established, and the business case should include a program of metrics to demonstrate each of the three links in the chain in the correct sequence: improvement action completed, practices and processes improved, results delivered.

(3) Once the improvement program has been scoped and related directly to benefits through the causal chain, then the necessary financial calculations can be completed to relate the program costs to the anticipated benefits. This constitutes the financial “skeleton” of the business case. A business case, however, is much more than its financial skeleton. It is an account (in story form) of why the organization needs to do this right now, and why this is the ideal solution to business challenges that all stakeholders will recognize (when it is explained to them) as being challenges that must be responded to in an appropriate manner.

(4) In presenting the business case to the funding authority, therefore, the story needs to be told in a compelling way, not making light of the risks that threaten such a program:

• If led by “process or project management enthusiasts” or by people who do not understand the essence of the business case, the program can focus people’s attention on internal processes rather than on the results.
• If carried out insensitively to the corporate culture (or in an organization that already suffers from this problem) it can develop its own cumbersome bureaucracy.
• If not led by an appropriately senior and competent executive sponsor, the process quality can be delegated to experts rather than to the people doing the work.
• If led by too timid an executive sponsor, the program may not demand sufficiently radical organizational reform.
• If regarded simply as a mechanical “process re-engineering” program, it may not recognize the crucial nature of incentive, and fail to demand changes in management compensation to reflect changing organizational priorities.
• If led by a “just do it” sponsor, it can appeal simply to faddism and “quick-fixism”.
• If the new or modified processes are too inflexible, and involve too many cumbersome steps, then the program may fail to encourage an appropriate level of entrepreneurship and innovation culture.
• If the new or modified processes fail to reflect the essential nature of the people working in the organization (or those that the organization is seeking to attract), then the program may be “lifeless” or “soul-less” and lead to “fossilization.”

Of course, the OPM3 assessment helps with the plot of this story in more ways than one. It is ironic that by its very nature, an OPM3 assessment will inevitably shed light on the likelihood of success of the improvement program. It clearly illustrates the organization’s ability to deliver strategic change consistently and predictably, and thus highlights specific pitfalls that represent particular threats to any proposed program to improve OPM and OPMM. The assessment results should shape not only the scope, but also the strategy, of the well-formed improvement program.

Conclusion

This paper identifies the problems in today’s global market that are impacting the success of organizational investments in projects. It points to the roles of organizational project management, organizational project management maturity, and organizational project management maturity models in helping organizations address common problems and increase the value of investment in projects.

Using a fictitious case study, this paper illustrated the business and benefits management capabilities of OPM and OPMM, and showed how OPM3, used sensitively, can direct businesses to target specific high-leverage improvements and avoid the common pitfalls identified in the Ivey and KPMG reports. It also illustrated how OPM can lead to aligned business performance management decision making, and showed what that can look like. In contrast, the paper explored some of the more common pitfalls that organizations fall into, and that result in the business problems outlined at the start of the paper.

Finally, the paper suggested how to set about building a business case for an OPM3 assessment and improvement program, by identifying areas in an organization where OPM and OPMM can deliver specific improvements leading to the achievement of strategic business improvement.