Chapter 2 Flashcards
Why PM’s Need to Understand Strategy
PM’s must respond to changes with appropriate decisions about future projects and adjustments to current projects.
PM’s who understand their organization’s strategy can become effective advocates of projects aligned with the firm’s mission.
What if They Don’t Understand?
Mistakes caused by not understanding the role of projects in accomplishing strategy:
Focusing on problems or solutions with low strategic priority.
Focusing on the immediate customer rather than the whole market place and value chain.
Overemphasizing technology that results in projects that pursue exotic technology that does not fit the strategy or customer need
Trying to solve customer issues with a product or service rather than focusing on the 20% with 80% of the value (Pareto’s Law).
Engaging in a never-ending search for perfection only the project team really cares about.
Strategic Management
Requires every project to be clearly linked to strategy.
Provides theme and focus of firm’s future direction.
Responding to changes in the external environment—environmental scanning
Allocating scarce resources of the firm to improve its competitive position—internal responses to new programs
Requires strong links among mission, goals, objectives, strategy, and implementation.
4 Activities of the Strategic Management Process
Review and define the organizational mission
Set long-range goals and objectives
Analyze and formulate strategies to reach objectives
Implement strategies through projects
Characteristics of Objectives
SMART
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 – When the objective can be achieved; duration
Project Portfolio Management: The Need for a Strong Project Priority System
The Implementation Gap
Organization Politics
Resource Conflicts and Multitasking
The Implementation Gap
The lack of understanding and consensus on strategy among top management and middle-level (functional) managers who independently implement the strategy.
Organization Politics
Project selection is based on the persuasiveness and power of people advocating the projects.
Resource Conflicts and Multitasking
Multi-project environment creates interdependency relationships of shared resources which results in the starting, stopping, and restarting projects.
Benefits of Project Portfolio Management
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 strategy.
Improves communication and supports agreement on project goals.
Design of a project portfolio system:
Classification of a project Selection criteria depending upon classification Sources of proposals Evaluating proposals Managing the portfolio of projects.
Portfolio of Projects by Type
Compliance (must do) projects
Strategic projects
Operational project
Selection Criteria
Financial models: payback, net present value (NPV)
Non-financial models: projects of strategic importance to the firm.
Multi-Weighted Scoring Models
Use several weighted selection criteria to evaluate project proposals.
A Portfolio Management System:
Selection Criteria
Multi-Weighted Scoring Models