Strategy is a heavily used and misused word. It is regularly confused with tactics and often conveys some level on importance. Due to our culture, people work it into their project titles and resumes trying to increase their perceived importance. It works, as most people see the word and think elite, long-range, and far-thinking. To some degree, it is; however, it may not be the most critical aspects to a company. Are strategic projects really the highest priority?
What is Strategy?
Let us start by understanding strategies definition. In the mid-1990s, Michael Porter published probably the most accepted business definition of the word in a whitepaper titled, oddly enough, What is Strategy? It may be the most referenced white paper on the subject. Per Porter:
“Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.”[i]
Two words should stand out—difference and value. He effectively argues that operational effectiveness is not strategy because it does not make an organization unique. Companies cannot survive without continually improving operational effectiveness, but operational effectiveness does not make them different from their competitors and, hence, is not strategy.
Types of Business Activities
Using either strategic or operational as classification implicitly prioritizes initiatives and projects. But operational can be subclassified into operational efficiency, compliance, and maintenance. This expands Porter's binary classification from—strategic and operational—to the four major types of projects—strategic, operational efficiency, compliance, and maintenance.
Strategic Projects: These projects focus on increasing the number of customers or revenue in areas that have the best long-term advantage over competitors. Examples are projects that implement new capabilities that competitors do not have, such as new innovative products or creating direct purchasing options when all your competitors use distributors. Strategic projects can affect the top and bottom line for the company.
Operational Projects: Operational efficiency projects enable organizations to save either time or money in operations or new product creation. Examples include, lean initiatives, manufacturing or purchasing process improvements, and the like. Operational projects tend to affect the bottom line quickly.
Compliance Projects: Without successfully completing compliance projects, organizations will have to abandon some aspect of their business. Not meeting new regulations, whether governmental, standards groups, or those from partner companies, will completely isolate the organization from specific customer sectors, if not risking running afoul of the legal system. Examples of compliance projects are Sarbanes-Oxley compliance (legal), electronic data interchange required from clients or suppliers (standards), or software licensing audits (contractual). Compliance projects tend to affect the company’s top line revenues capabilities.
Maintenance Projects: Maintenance projects include restriping parking lots, upgrading to the latest version of operating systems, training employees, and replacing roofs. They rarely contribute much if any to the bottom line directly and function to preserve assets—whether those are making people happy to prolonging the useful life of an asset. The effects are long-range and when neglected will negatively affect the company’s top and bottom line.
The Value Factor
The second component in Porters definition is value. Competitive difference seems easy to quantify relative to the term value. Value, like beauty, is in the eye of the beholder. However, value is the actual measure of a project’s success. If a project delivers value, executives will forgive being over budget or late relatively quickly—depending on the circumstances.
For instance, if a project is supposed to provide a component of Sarbanes-Oxley compliance, is 40% over budget, but provides more value than originally anticipated by reducing the expected bureaucracy, the overage may be forgotten. However, if the project is building a new semiconductor technology (an industry with high competition and low margins) and is either over budget or late, the window of opportunity may close before there is a satisfactory return on investment—even if the technology was improved in the process.
Why it Matters
These distinctions are not academic. These classifications of type and value drive the priority and the level of dedication and attention projects will get from executives (see Figure 1). When companies are flush with money or have few crises, project priorities are set rather idealistically. When revenue slumps or an urgent and unexpected issue arrises requiring executive attention, priorities change. The problem is that the reprioritization usually comes with little notice and no fanfare. Suddenly, executive sponsors do not attend meetings or return emails and phone calls. Teams, and even middle managers, are left bewildered at the sudden silence. Executive sponsors seemingly disengage from projects as they refocus attention on the new objective. Taking a quick review of the inherent priorities might lead to a better understanding of why executives disappear. It could be that the strategic or maintenance project is no longer as important as other operational or compliance projects.
What it Means to You
For you it is simple. If you want job security, then focus on compliance projects. They may sound mundane and boring. However, they rarely are cancelled. If you can specialize even more and develop an expertise on compliance with operational efficiency (being able to deploy a compliance project without the inefficiencies of bureaucracy), you have combined both high priority and value. This is the foundation for a very lucrative career.
If you are insistent on a flashy title that focuses on strategy, then prepare yourself for a life of high risk, ups and downs of the economy, and a more whimsical interpretation of value.
Michael Porter’s work What is Strategy? was published in 1996 by Harvard Business Review and is both revered and reviled. Twenty years later people quote to support or refute his thesis. Some think it is too rigid, while others see it as the definitive work. The truth is in the middle depending on the situation. In my latest book,In Filling Execution Gaps: How Executives and Project Managers Turn Strategy into Successful Projects, I use this definition to show how companies can use his concepts to establish a common understanding of the company, maintain alignment, and help govern projects. The absence of common understanding, misalignment with goals, and ineffective governance are just three of the six gaps that plague organizations. The other three gaps are disengaged executive sponsors, poor change management, and lackluster leadership. In Filling Execution Gaps, I explain these gaps and identify solutions to fill them. Available at Amazon or your favorite bookseller.
Ranking challenges on a project, culture has to be in the top five root causes for failure. An ally in that is Kristine Briežkalne who contacted me a few weeks ago to get my thoughts. After all having worked in Taiwan, Singapore, Korea, Japan, Israel, United States, and Canada, I wear many scars of both blatant and subtle cultural violations. I also know that within a culture one person's success is often another person's failure. Kristine, a masters candidate studying at Riga International School of Economics and Business Administration, is writing her thesis on culture and project success. So, after dispelling concerns about clicking on some random email link, I completed her survey (please feel free to take it yourself). She has some interesting views and presented me with a Venn diagram showing four aspects of a project (business, client, project management, and growth perspectives) and how they intersected. As the diagram is part of her Master's thesis, I will let you ponder the how to label the overlapping areas (an eye-opening exercise).
Ignoring Culture Begets Failure
Anyone running an international project will be in for a nasty surprise if they ignore culture and expect their project to succeed. Will a US-based delivery team actually be able to claim success in an Israeli delivery if they do not forfeit scope on a regular basis? Will they succeed in Asia if the client loses face at any point? It is doubtful. Understanding success criteria has to be done very early on, long before the project starts. You can deliver your definition of value (much different then scope, schedule, and budget) to all parties and never get asked back to do another project. Or, maybe your culture does not care about repeat customers.
It Is All About Value
We need to get back to the basics of describing success. Too many companies define it in terms of scope, schedule, and budget. Yet most customers, regardless of culture, say that if a project delivers something they will not use, it is a failure (regardless of whether it met the scope, schedule, and budget). Granted, some cultures need to save-face and say the project was a success whether or not they like it. Hence, the challenge is determining the value in the eyes of those who have the most clout.
I am steadfast in the belief that value is the measure of success. That, however, just creates one more definition to resolve—value. I am not arguing semantics. Focusing on value, rather than success, creates a different mindset. People include intangibles when they describe value. They realize the value for the delivery organization is different than value for the customer. Cost is a huge component of customer value and margin for the delivery group. So is usability and referenciblity, respectively. Some cultures value low cost, others saving face, some argue in more scope, others look to efficiency for value. It depends on the frame you view it through (see Table 1).
The Wood Stove
Recently my wife and I bought a thermocouple-driven fan for our wood burning stove. It was expensive as fans go at about $110 (USD). (Walmart sells personal fans, which are close to the same size, for about 10% of that cost.) I would not trade it for boxes of Wally World other fans. It sits atop of the stove silently recirculating hot air. Would others see the value? A few people would. Would people question me paying that much for a fan? Yes… but a little less after they sat in front of the stove on a cold winter night. I am way over budget on the fan, but I am happy because I see value.
Culture has a huge impact on success. They questions are:
I suggest you take Kristine's survey, help her out, and see what her results are. Or, you can add a comment below.
For some of you, I have news: Project managers deliver value. If you are still stuck on achieving cope, schedule, and budget, you are destined to failure. As with all simple statements, this much easier said than done. Projects managers must assemble adaptable teams that use flexible and lean methodologies. Arrogantly selling the latest technology or tool is narcissistic. Focus on the customer. Be vigilant at ensuring the information is always available for the customer to reassess the project's value and for the project team to reevaluate their proposal.
Maintaining Project Value
The first task is determining the customer's initial value objective. Most projects start with the premise that they provide considerable value. However, numerous assumptions are made in justifying that value. Many of these ill-founded hopes fail to survive the test of time, being proven false in the early stages of the project. As we all know, time begets change. Realities adjust as the customer learns about the product's possibilities, business models morph, and challenges arise in building the product. The project must transform to meet these needs and the project manager must lead this shifting vision.
At times, it is more than a gradual shift. Elucidation of major difficulties, discovery of poorly understood requirements, and loss of business segments, name a few reasons to step back and reconsider the project's premise. The most radical change a project manager can propose is terminating the project. Once the projected value falls dangerously close to zero, the value proposition is invalid and the only sensible solution is ceasing the project. This is not failure. It is leadership at its finest.
Facilitating Increased Value
Value is the benefit less the cost. Costs are generally quantifiable; however, benefits are often intangible. Goodwill, trust, esthetics, and usability are but a few attributes that can add significant value to a deliverble. In addition to defining the project's cost, project managers must help the customer enumerate all of the benefits.
For the customer to define value, project managers must supply the information on how the product will or could function. There are no constraints to the original concept, added costs, thrown away work, or extensions to the delivery date. The task is to objectively deliver the complete story and let the customer decide the next step.
The project manager cannot say no to every change the customer requests. The PM has to understand gthe value of the deliverables as well if not more than the customer. He or she must work with the customer's team and help them create and maintain its vision, understand its issues, and guide it toward a solution that delivers a value-laden product in the shortest possible time at the least cost.
Grooming the Team
This does not come from sitting at your desk working with spreadsheets. It comes from understanding the businesses needs, the state of the deliverable, the team's capabilities, and the challenges of selling change.
Developing the customer's confidence and trust is the first step. A cohesive, agile, dynamic team is the primary ingredient in doing so. Integrating your team with the customer's, educating them on the customer's business, and immersing them in the customer's pain will drives success. This creates a responsive and customer focused team. It reduces the tendency of teams to build products with the latest gadgets that add little to the value.
Maintaining confidence is more difficult. This requires a culture and methodology that is adaptive. Too many times, we use draconian processes to manage projects—methodologies that strive for operational excellence as opposed to product excellence. Granted, some customers (i.e., healthcare, government, or military) require a thorough paper trail for every functional outcome, no matter how low its probability of occurrence. These are far from a majority of projects. Even in these projects, however, it is worth questioning the validity of the overhead and proposing new solutions.
On one government project we worked on progress was at a standstill as certain people on the project would not let contract resources give any direction citing that giving direction was an "inherently governmental" function. A little research and drilling down to the four-page Federal Acquisition Regulation (FAR) Subpart 7.5-Inherently Governmental Functions" and you learn that once the plan is approved (this is inherantly governmental function) that a contractor can do any work to implement that plan, as the resources have been commited by a government employee. People learned the term "inherently governmental" through hearsay and had never read what it really meant. Hence, anyone could use it in any way they pleased—usually to their benefit. Clearing up the definition, broke the log jam and the project sailed forward.
Delivering a project's features and functions on time and within budget is incommensurate with a successful project and a happy customer. Dozens of environmental factors affect a project's value. Successful project managers carefully watch these factors and lead the customer through the process of discovery, defining appropriate changes that maximize their project's value. Losing sight of the project's value will inevitably result in failure.