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.