Project Management and Strategy PDF

2.1. Why Project Managers Need to Understand Strategy Strategic alignment ​ IT projects must align with the organization’s mission and strategy and organizational culture and practices. ​ Project managers can ○​ make appropriate decisions and adjustments ○​...

2.1. Why Project Managers Need to Understand Strategy Strategic alignment ​ IT projects must align with the organization’s mission and strategy and organizational culture and practices. ​ Project managers can ○​ make appropriate decisions and adjustments ○​ be effective project advocates 2.2. Strategic Management Process Strategic management ○​ The process of assessing “what we are” and deciding and implementing “what we intend to be and how we are going to get there.”  ○​ A continuous, iterative process aimed at developing an integrated and coordinated long-term plan of action. ○​ It requires strong links among mission, goals, objectives, strategy, and implementation. ​ Two Major Dimensions of Strategic Management: ○​ 1. Respond to changes in the external environment and allocate the firm’s scarce resources to improve its competitive position. ○​ 2. Internal responses to new action programs aimed at enhancing the firm's competitive position. Four Activities of the Strategic Management Process 1.​ Review and define the organizational mission ​ Mission: What we want to become ​ Components of a mission statement ​ major products and services ​ target customers and markets ​ geographical domain ​ organizational philosophy ​ key technologies ​ public image ​ contribution to society 2.​ Analyze and formulate strategies ​ What needs to be done to reach objectives ​ Steps ​ A realistic evaluation of the past and current position of the enterprise ​ An assessment of the internal and external environments ​ A common method for this step is the SWOT analysis ​ Strengths: Internal, positive factors ​ Weaknesses: Internal, negative factors ​ Opportunites: External (no control), positive factors ​ Threats: External, negative factors  ​ 3.​ Set objectives to achieve strategies. S Specific Be specific in targeting an objective M Measurable Establish a measurable indicator(s) of progress A Assignable Make the objective assignable to one person for completion R Realistic State what can realistically be done with available resources T Time-related State when the objective can be achieved, that is, duration 4. Implement strategies through projects ○​ How strategies will be realized, given available resources, ○​ Project Portfolio management and prioritizing projects 2.3. The Need for a Project Priority System ​ Without a proper priority system,  ○​ Problem 1: Behavioral Biases. ​ Optimism bias ​ Uniqueness bias ○​ Problem 2: The Implementation Gap. ​ The lack of understanding and consensus of organization strategy among top and middle-level managers. ○​ Problem 3: Organization Politics. ​ Sacred cow ○​ Problem 4: Resource Conflicts and Multitasking. ​ The problems of project interdependency and the need to share resources. 2.4. Project Portfolio Management ​ Definition: Means for monitoring and controlling the organization’s strategic projects ​ Links projects directly to the goals and strategy of the organization ​ Seven common characteristics of highly successful strategic projects ○​ It creates a unique competitive advantage and/or exceptional value for its stakeholders. ○​ It requires a long period of project definition dedicated to defining a powerful vision, a clear need, and a successful execution approach. ○​ It creates a revolutionary project culture. ○​ It needs a highly qualified project leader who is unconditionally supported by top management. ○​ It maximizes the use of existing knowledge, often in cooperation with outside organizations. ○​ It uses integrated development teams with fast problem-solving capabilities and the ability to adapt to business, market, and technology changes. ○​ Its project team has a strong sense of partnership and pride. ​ Benefits ○​ Builds discipline into the project selection process. ○​ Links project selection to strategic metrics. ○​ Prioritizes project proposals across a common set of criteria, rather than on politics or emotion. ○​ Allocates resources to projects that align with strategic direction. ○​ Balances risk across all projects.  ○​ Justifies killing projects that do not support the organization's strategy. ○​ Improves communication and supports agreement on project goals. ​ Project Classification 2.5. Phase Gate Model ​ Is a series of gates that a project must pass through in order to be completed. ​ Its purpose is to ensure that the organization is investing time and resources in worthwhile projects that contribute to its mission and strategy. ​ Each gate is associated with a project phase and represents a decision point. ​ A gate can lead to three possible outcomes: go (proceed), kill (cancel), or recycle (revise and resubmit). 2.6. Selection Criteria Financial Criteria ​ The Payback Model: ○​ Measures the time the project will take to recover the project investment. ○​ Desires shorter paybacks.  ○​ Is the simplest and most widely used model. ○​ Emphasizes cash flows, a key factor in business. ○​ Formula: ​ ○​ Limitations of the Payback Method: ​ Ignores the time value of money. ​ Assumes cash inflows for the investment period (and not beyond). ​ Does not consider profitability. ​ Net Present Value (NPV) ○​ Uses management’s minimum desired rate of return (discount rate) to compute the present value of all net cash inflows. ○​ Prefers positive NPV to negative NPV. ○​ Desires higher positive NPVs. ○​ Is more realistic because it considers the time value of money, cash flows, and profitability. ○​ Formula: ​ Non-Financial Criteria ​ Examples of strategic objectives are: ○​ To capture a larger market share. ○​ To make it difficult for competitors to enter the market. ○​ To develop an enabler product, which by its introduction will increase sales in more profitable products. ○​ To develop core technology that will be used in next-generation products. ○​ To reduce dependency on unreliable suppliers. ○​ To prevent government intervention and regulation ​ Two Multi-Criteria Selection Models ○​ Checklist Models:  ​ Use a list of questions to review potential projects and to determine their acceptance or rejection. ​ Allow greater flexibility in selecting among many different types of projects and are easily used across different divisions and locations. ​ Fail to answer the relative importance or value of a potential project to the organization and does not allow for comparison with other potential projects. ○​ Multi-Weighted Scoring Models: ​ Use several weighted selection criteria to evaluate project proposals. ​ Include qualitative and/or quantitative criteria. 2.7. Applying a Selection Model 1. Project Classification: ​ Deciding whether the project fits with the organization's strategy. ​ Selecting a Model. ○​ Weighted scoring criteria seem the best alternative because: ​ They reduce the number of wasteful projects using resources. ​ They help to identify project goals that can be communicated using the selection criteria as corroboration. ​ They help project managers understand how their project was selected, how their project contributes to organization goals, and how it compares with other projects. 2.​ Sources and Solicitation of Project Proposals: ○​ Within the organization. ○​ Request for Proposal (RFP) from external sources (contractors/vendors). 3.​ Ranking Proposal and Selection of Projects: ○​ Evaluating each proposal in terms of feasibility, potential contribution to strategic objectives, and fit within a portfolio of current projects. ○​ Rejecting or accepting the projects based on given selection criteria and current portfolio. ○​ Prioritizing projects by senior management. 2.9. Managing the Portfolio System ​ Senior Management Input: ○​ Provides guidance in establishing selection criteria that strongly align with the current organization strategies. ○​ Annually decides how to balance the available organizational resources (people and capital) among the different types of projects. ​ Governance Team Responsibilities: ○​ Publish the priority of every project. ○​ Ensure the selection process is open and free of power politics. ○​ Evaluate the progress of current projects. ○​ Constantly scan the external environment to determine if the organization's focus and/or selection criteria need to be changed. ​ Balancing the portfolio for risks and types of projects ○​ A classification scheme for R&D organizations ○​ ○​ Risk considerations in project selection ​ Both costs and benefits are uncertain ​ Benefits are more uncertain ​ Uncertainty about: ​ Timing ​ What will be accomplished? ​ Side effects ​ There are many ways of dealing with risk ​ Can make estimates about the probability of outcomes ​ Subjective probabilities ​ Pro forma documents