How often have you been involved in a project where there was no clear reference to the organisation’s strategy in the project charter? Or worse, when no one can give you details of the corporate strategy so you can ensure your project is aligned? Ask around what the strategy is and people say they don’t know, or it is nothing to do with them – ‘just ask senior management’.
In theory, it is the role of the project manager to understand how a project links back to a strategy, but the reality is never as simple as that. How many projects start without a business case and clearly defined benefits? How many projects have you known where the business justification is created retrospectively?
As a result, projects can appear as standalone activities for many working on them, divorced from strategy and day-to-day operations. Although this is usually the result of a disconnect between strategy and implementation, vanity projects sometimes arise that have no link to strategy, but satisfy the needs and desires of the controller of resources, who may be the CEO, CIO etc. However, the fundamental purpose of all projects is to support the delivery of a strategy. So, how can this work in practice?
Firstly, it is important to understand what goes into a strategy. A strategy is not a summary of the goals of an organisation: the corporate vision and mission statement fulfil this role. A strategy is developed to ensure an enterprise delivers appropriate, sustainable benefits to stakeholders over the medium to long term.
Strategy development involves assessing the position of an enterprise in terms of the macroeconomic environment, commonly known as PESTEL (political, economic, social, technological, environmental, legal); the industries and sectors it operates in; and its markets, customers and competition.
Enterprises in the public or government sector are also exposed to these factors, but the weight given to each macro factor is different, and markets or competition might be constrained.
In addition to the external environment, an enterprise must assess the internal environment, in terms of capabilities—resources, skills, finances, etc—and culture, as these will constrain strategic options.
Completing a strategic assessment allows organisations then to define the strategy at different levels within the enterprise:
Business strategy: concerned with how to compete in particular markets through pricing or differentiation, competition or collaboration.
Corporate strategy: deals with the scope of activities, such as market penetration, market or product development, diversification and consolidation.
Organisational and resourcing strategy: focusing on how corporate functions best contribute to other strategies. Centralised or distributed control; organisational structure; operate or outsource; financing and technology.
Given the number of variables involved, a strategy has to evolve over time as the factors change. For some enterprises, this change will be slow, sometimes punctuated by sudden large shifts; government departments are probably familiar with this kind of change, but it also affects mature industries, such as miners with the recent, rapid collapse of commodity prices that has led to a re-assessment of investment projects.
For others, especially in dynamic industries such as new technology businesses, a review of the strategy might take place every few months where competitors enter the market or staff turnover is high. An example is the dotcom era of the late 1990s where startups were announced daily and pundits talked of the ‘war for talent’.
Whatever the environment, formulating strategies requires control, analysis and review, which has led to the development of portfolio management processes and tools.
Portfolio management in large corporations traditionally sat within the corporate strategy group, but this role increasingly falls under the remit of an enterprise project management (EPM) team or portfolio management office. The EPM is responsible for recommending program and project selection, which is achieved through scenario analysis – creating scenarios to decide which produces an optimal portfolio against selected business drivers.
Once a portfolio has been selected, it is crucial that adequate control is exercised to ensure a complex set of programs and projects are coordinated effectively.