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PROJECT MANAGEMENT
Chapter 2:
Organizational Strategy & Project selection

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Strategy is implemented through

projects, Every project should have a
clear link to the organizations
strategy.

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Why PMs need to understand Strategic

Management process ?
Changes in the organizations strategy
Project managers must respond to changes with appropriate decisions about future
projects and adjustments to current projects.
Project managers who understand their organizations strategy can become effective
advocates of projects aligned with the firms mission.

Projects are the means to achieve strategic objectives of the

organization.

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What if PMs dont understand Strategic

Management process ?
Focus on problems or solutions that have low priority strategically.
Focus on the immediate customer than whole market and value chain.
Overemphasizing technology as an the ultimate requirement resulting
in projects with exotic technology that doesnt fit into the strategy or
customer need.
Trying to solve every customer issue with a product or service.
Engaging in never ending search for perfection that no one really cares
about.

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Strategic Management process: Overview

Strategic Management
Provides the theme and focus of the future direction for the firm.
Responding to changes in the external environmentenvironmental
scanning
Allocating scarce resources of the firm to improve its competitive position
internal responses to new action programs
Requires strong links among mission, goals, objectives, strategy, and
implementation.

Strategic management provides the theme and focus of the future direction of the
organization. It supports consistency of action at every level.

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Strategic Management process: Overview

Four of Activities of the
Strategic Management Process
1. Review and define the
organizational mission.
2. Set long-range goals and
objectives.
3. Analyze and formulate
strategies to reach
objectives.
4. Implement strategies
through projects

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Characteristics of objectives
Objectives translate the organizational mission into specific, concrete,
measurable terms

S Specific Be specific in targeting an objective

M Measurable Establish a measurable indicator(s) of progress
A Assignable Make it assignable to one person for completion
R Realistic Realistically state what be done with available resources
T Time related Ensure a deadline for completion for closure

If your objectives can be anybodys statement, it will not provide the

guidance and focus needed.

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Analyze and formulate strategies

Formulating strategy
Includes determining and evaluating alternatives that support the
organizations objectives and selecting the best alternative.
Analyze who are the customers and what are the needs as they see
them
Scan your internal and external environments
From this analysis, critical issues and a portfolio of strategic choices
emerge.

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Implement strategies through projects

Implementation
Allocation of resources
Requires a formal and an informal organization that complements and
supports strategy and processes
Planning and control systems.
Prioritizing projects.

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Project portfolio management problems

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
The multi-project environment creates interdependency relationships of shared
resources which results in the starting, stopping, and restarting projects.

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Benefits of Project Portfolio Management

1. Builds discipline into project selection process.
2. Links project selection to strategic metrics.
3. Prioritizes project proposals across a common set of criteria,
rather than on politics or emotion.
4. Allocates resources to projects that align with strategic direction.
5. Balances risk across all projects.
6. Justifies killing projects that do not support organization strategy.
7. Improves communication and supports agreement on project
goals.

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Portfolio of projects by type

1.Compliance projects
Usually have penalties if not
implemented
2. Operational projects
To support operations
3. Strategic projects
Which support organizations
long run mission.

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A Portfolio Management System

Selection Criteria
Financial: payback, net present value (NPV), internal rate of return
(IRR)
Non-financial: projects of strategic importance to the firm.

Multi-Weighted Scoring Models

Use several weighted selection criteria to evaluate project proposals.

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Financial Models

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Financial Models
The Net Present Value (NPV) model
Uses managements minimum desired rate-of-return (discount rate) to
compute the present value of all net cash inflows.
Positive NPV: the project meets the minimum desired rate of return and
is eligible for further consideration.
Negative NPV: project is rejected.

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Project screening matrix

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Applying a selection model

Project Classification
Deciding how well a strategic or operations project fits the organizations
strategy.
Selecting a Model
Applying a weighted scoring model to bring projects to closer with the
organizations strategic goals.
Reduces the number of wasteful projects
Helps identify proper goals for projects
Helps everyone involved understand how and why a project is selected

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Project proposals
Major Project Proposal

Risk Analysis

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Project Screening Process

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Priority analysis
Priority Analysis

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Project portfolio matrix

Bread-and-butter projects
Involve evolutionary
improvements to current products
and services.
Pearls
Represent revolutionary
commercial advances using
proven technical advances.
Oysters
Involve technological
breakthroughs with high
commercial payoffs.
White elephants
Projects that at one time showed
promise but are no longer viable.
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Case 2.2

Film Prioritization

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Next session

Project organization
Reading: Case study on Orion System

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