In Search of Long-Term Value

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I am writing after having just finished conducting a seminar in Bahrain and am preparing to fly back to London tomorrow morning.

For the third year in a row, CIOs identified project alignment with the strategy as the number one management priority in a CIO magazine survey. And for the first time, CEOs rated "meeting other strategic objectives (e.g., reputation of your business, entering a new market, securing access to natural resources)" as more important than "maximizing financial or shareholder return" or "meeting or exceeding a specific financial return" (e.g., return on invested capital).

In most organizations, business heads select the majority of projects. Those projects are then submitted as part of an annual budget allocation process, with the selection often based on these functional managers' needs, not as a response to an aligned strategy.

Often these initial proposals have to be cut back when budgets are reduced. And because the current organizational focus is on short-term results, the projects that are cut are mostly those that would produce long-term results. But the recent economic downturn has brought into light the failure of the short-term financial profit approach and the need to look for longer-term sustainable value. Recent surveys show the interests of top management are shifting; increasing competitive advantage and the ability to adapt to change have become foremost in their priorities.

The key to delivering this value is in the development of an integrated portfolio-program-project approach supported by a sound governance system. Typically, executive stakeholders agree on the strategic objectives that will produce competitive advantage. At the program level, they are translated into business benefits. Project deliverables are then defined to produce new capabilities that will enable the realization of these benefits.

As project results are measured and benefits are assessed, the program and the strategy are modified to adapt to changing circumstances. This, in turn, gives the organization the necessary agility to stay competitive in a challenging environment and to realize value consistently.

Posted by Michel Thiry on: March 24, 2009 10:30 AM | Permalink

Comments

Maureen Gan
Dear Michel It was an interesting thought and comment which you had shared. I am working at a shipping company, based in Singapore and the process of governing a portfolio of IT projects and programs to meet the business needs is a challenging one for many of us. I agree that you had stated the pointers on ensuring that projects meet short term goals and long-term benefits. However, the tools to realise this is not easy to implement. Pure finacial measures like NPV and ROI could be taken when projects started. However, unless we are rigourous to track the ROI data over the years, it would not make meaningful senses. If you could share your experience on how projects are being selected and prioritised in this tough times, we can surely learn from it. The terms "benefits" is an important consideration - especially for larger scale projects. We had a set of qualitative and quantitative benefits that Project and Program Managers need to define with the business owners. If someone could shed some light to improve this "benefits realisation", it would be helpful too. Thanks very much. Regards Maureen Gan PMP

Michael Torkildsen
Michael, I think the problem you have stated may be attributed to Myers-Brigg personality types ENTJ who are described as Executives or Field Marshals. I’d say a majority of PMs and CEO are this type (I know I am). We don’t naturally focus on the feel good nature of projects or business strategy. In addition we are normally too busy with work to achieve these secondary goals. But slow times are the perfect time for businesses to take up these causes and put a softer image on their business. It would also be to our (ENTJ types) to hire a Sensing Feeling type to work on these softer tactical efforts. (the other) Michael T. MtBOK.wordpress.com

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