Explain why it is important for project managers to understand theirorganization’s strategy.
Here you have the case study that is needed also, you need to review some answers from Chapter 2 which I included in the files – Avoid plagiarism
– proper referencing
– Answer every question 200-250 words
– Try to justify marks and question requirementss
Requirements:
2-12-22-32-42-52-62-72-82-9page 28CHAPTERTWO2Organization Strategy andProject SelectionLEARNING OBJECTIVESAfter reading this chapter you should be able to:Explain why it is important for project managers to understand theirorganization’s strategy.Identify the significant role projects contribute to the strategic direction of theorganization.Understand the need for a project priority system.Distinguish among three kinds of projects.Describe how the phase gate model applies to project management.Apply financial and nonfinancial criteria to assess the value of projects.Understand how multi-criteria models can be used to select projects.Apply an objective priority system to project selection.Understand the need to manage the project portfolio.
2.12.22.32.42.52.62.72.8page 29OUTLINEWhy Project Managers Need to Understand StrategyThe Strategic Management Process: An OverviewThe Need for a Project Priority SystemProject ClassificationPhase Gate ModelSelection CriteriaApplying a Selection ModelManaging the Portfolio SystemSummary A vision without a strategy remains an illusion.
page 30—Lee Bolman, professor of leadership, University of Missouri–Kansas City.Strategy is fundamentally deciding how the organization will compete.Organizations use projects to convert strategy into new products, services,and processes needed for success. For example, Intel’s major strategy is oneof differentiation. Intel relies on projects to create specialty chips forproducts other than computers, such as autos, security, cell phones, and aircontrols. Another strategy is to reduce project cycle times. Procter andGamble, NEC, General Electric, and AT&T have reduced their cycle timesby 20–50 percent. Toyota and other auto manufacturers are now able todesign and develop new cars in two to three years instead of five to seven.Projects and project management play the key role in supporting strategicgoals. It is vital for project managers to think and act strategically.Aligning projects with the strategic goals of the organization is crucialfor business success. Today’s economic climate is unprecedented by rapidchanges in technology, global competition, and financialuncertainty. These conditions make strategy/project alignmenteven more essential for success.The larger and more diverse an organization, the more difficult it is tocreate and maintain a strong link between strategy and projects. How can anorganization ensure this link? The answer requires integration of projectswith the strategic plan. Integration assumes the existence of a strategic planand a process for prioritizing projects by their contribution to the plan. Akey factor to ensure the success of integrating the plan with projects is anopen and transparent selection process for all participants to review.This chapter presents an overview of the importance of strategicplanning and the process for developing a strategic plan. Typical problemsencountered when strategy and projects are not linked are noted. A genericmethodology that ensures integration by creating strong linkages of projectselection and priority to the strategic plan is then discussed. The intendedoutcomes are clear organization focus, best use of scarce organizationresources (people, equipment, capital), and improved communication acrossprojects and departments.
2.1 Why Project Managers Need toUnderstand StrategyLO 2-1Explain why it is important for project managers to understand their organization’sstrategy.Project management historically has been preoccupied solely with theplanning and execution of projects. Strategy was considered to be under thepurview of senior management. This is old-school thinking. New-schoolthinking recognizes that project management is at the apex of strategy andoperations. Shenhar speaks to this issue when he states, “It is time toexpand the traditional role of the project manager from an operational to amore strategic perspective. In the modern evolving organization, projectmanagers will be focused on business aspects, and their role will expandfrom getting the job done to achieving the business results and winning inthe marketplace.”1There are two main reasons project managers need to understand theirorganization’s mission and strategy. The first reason is so they can makeappropriate decisions and adjustments. For example, how a project managerwould respond to a suggestion to modify the design of a product to enhanceperformance will vary depending upon whether his company strives to be aproduct leader through innovation or to achieve operational excellencethrough low-cost solutions. Similarly, how a project manager wouldrespond to delays may vary depending upon strategic concerns. A projectmanager will authorize overtime if her firm places a premium on getting tothe market first. Another project manager will accept the delay if speed isnot essential.The second reason project managers need to understand theirorganization’s strategy is so they can be effective project advocates. Projectmanagers have to be able to demonstrate to senior management how theirproject contributes to their firm’s mission in order to garner their continuedsupport. Project managers need to be able to explain to stakeholders why
page 31certain project objectives and priorities are critical in order to secure buy-inon contentious trade-off decisions. Finally, project managers need toexplain why the project is important to motivate and empower the projectteam (Brown, Hyer, & Ettenson, 2013).For these reasons project managers will find it valuable to have a keenunderstanding of strategic management and project selection processes,which are discussed next.2.2 The Strategic Management Process: AnOverviewLO 2-2Identify the significant role projects contribute to the strategic direction of theorganization.Strategic management is the process of assessing “what we are” anddeciding and implementing “what we intend to be and how we are going toget there.” Strategy describes how an organization intends to compete withthe resources available in the existing and perceived future environment.Two major dimensions of strategic management are responding to changesin the external environment and allocating the firm’s scarce resources toimprove its competitive position. Constant scanning of the externalenvironment for changes is a major requirement for survival in a dynamiccompetitive environment. The second dimension is the internal responses tonew action programs aimed at enhancing the competitive position of thefirm. The nature of the responses depends on the type of business,environment volatility, competition, and the organizational culture.Strategic management provides the theme and focus of the futuredirection of the organization. It supports consistency of action at every levelof the organization. It encourages integration because effort and resourcesare committed to common goals and strategies. See Snapshot from Practice
2.1: Does IBM’s Watson’s Jeopardy Project Represent a Change inStrategy? Strategic management is a continuous, iterative process aimed atdeveloping an integrated and coordinated long-term plan of action. Itpositions the organization to meet the needs and requirements of itscustomers for the long term. With the long-term position identified,objectives are set, and strategies are developed to achieve objectives andthen translated into actions by implementing projects.Strategy can decide the survival of an organization. Most organizationsare successful in formulating strategies for the course(s) they should pursue.However, the problem in many organizations is implementing strategies—that is, making them happen. Integration of strategy formulation andimplementation often does not exist.The components of strategic management are closely linked, and all aredirected toward the future success of the organization. Strategicmanagement requires strong links among mission, goals, objectives,strategy, and implementation. The mission gives the general purpose of theorganization. Goals give global targets within the mission. Objectives givespecific targets to goals. Objectives give rise to the formulation of strategiesto reach objectives. Finally, strategies require actions and tasks to beimplemented. In most cases the actions to be taken represent projects.Figure 2.1 shows a schematic of the strategic management process andmajor activities required.FIGURE 2.1 Strategic Management Process
page 32Four Activities of the Strategic Management ProcessThe typical sequence of activities of the strategic management process isoutlined here; a description of each activity then follows.1. Review and define the organizational mission.2. Analyze and formulate strategies.3. Set objectives to achieve strategies.4. Implement strategies through projects.
SNAPSHOT FROM PRACTICE 2.1Does IBM’s Watson’s Jeopardy Project Represent aChange in Strategy?*IBM’s investment in artificial intelligence paid off. In February 2010, millionsof people were glued to their television sets to watch IBM’s Watsonoutclass two former champion contestants on the Jeopardy quiz show.Watson performed at human expert levels in terms of precision,confidence, and speed during the show.Does Watson represent a new strategic direction for IBM? Not really. The Watsonproject is simply a manifestation of the move from computer hardware to a servicestrategy over a decade ago.WATSON PROJECT DESCRIPTIONArtificial intelligence has advanced significantly in recent years. Watson goes beyondIBM’s chess-playing supercomputer of the late 1990s. Chess is finite, logical, andreduced easily to mathematics. Watson’s work is ill-defined and involves dealing withabstraction and the circumstantial nature of language. Since Watson’s system canunderstand natural language, it can extend the way people interact with computers.The IBM Watson project took three intense years of research and development by acore team of about 20. Eight university teams working on specific challenge areasaugmented these researchers.Watson depends on over 200 million pages of structured and unstructured data and aprogram capable of running trillions of operations per second. With this informationbackup, it attacks a Jeopardy question by parsing the question into small pieces. Withthe question parsed, the program then searches for relevant data. Using hundreds ofdecision rules, the program generates possible answers. These answers are assigned aconfidence score to decide if Watson should risk offering an answer and how much tobet.WHAT’S NEXT?Now that the hype is over, IBM is pursuing their service strategy and applying theknowledge gained from the Watson project to real business applications. Watson’sartificial intelligence design is flexible and suggests a wide variety of opportunities inindustries such as finance, medicine, law enforcement, and defense. Further extensionsto handheld mobile applications that tap into Watson’s servers also hold great potential.IBM has zeroed in on providing healthcare solutions and has begun design of such aprogram.
page 33SeanGallup/Getty ImagesTo create a “doctor’s consultant” program would likely follow a design platform similarto Watson’s. For example, it would be able toData mine current medical documents to build a knowledge base.Integrate individual patient information.Use the system’s complex analytics to select relevant data.Use decision rules to provide physicians with diagnostic options.Rank options, with confidence levels for each option.Creating a doctor’s consultant solution will not replace doctors. Although the systemholds tremendous potential, it is humanmade and depends on the database, dataanalytics, and decision rules to select options. Given the doctor’s consultant input, atrained doctor makes the final patient diagnosis to supplement physical examination andexperience.The Watson project provides IBM with a flexible component to continue their decade-old strategy, moving IBM from computer hardware to service products.*D. Ferrucci, E. Brown, J. Chu-Carroll, J. Fan, D. Gondek, A. Kaylanp, A. Lally, J.Murdock, E. Nyborg, J. Prager, N. Schaefer, and C. Wetty, “Building Watson,” AIMagazine, Fall 2010, pp. 59–79.Review and Define the Organizational MissionThe mission identifies “what we want to become,” or the raison d’être.Mission statements identify the scope of the organization in terms of itsproduct or service. A written mission statement provides focus for decisionmaking when shared by organizational managers and employees. Everyonein the organization should be keenly aware of the organization’s mission.For example, at one large consulting firm, partners who fail to recite themission statement on demand are required to buy lunch. The mission
page 34statement communicates and identifies the purpose of the organization to allstakeholders. Mission statements can be used for evaluating organizationperformance.Traditional components found in mission statements are major productsand services, target customers and markets, and geographical domain. Inaddition, statements frequently include organizational philosophy, keytechnologies, public image, and contribution to society. Including suchfactors in mission statements relates directly to business success.Mission statements change infrequently. However, when the nature ofthe business changes or shifts, revised mission and strategy statements maybe required.More specific mission statements tend to give better results because of atighter focus. Mission statements decrease the chance of false directions bystakeholders. For example, compare the phrasing of the following missionstatements:Provide hospital design services.Provide data mining and analysis services.Provide information technology services.Provide high-value products to our customer.Clearly the first two statements leave less chance for misinterpretation thanthe others. A rule-of-thumb test for a mission statement is that, if thestatement can be anybody’s mission statement, it will not provide theguidance and focus intended. The mission sets the parameters fordeveloping objectives.Analyze and Formulate StrategiesFormulating strategy answers the question of what needs to be done toreach objectives. Strategy formulation includes determining and evaluatingalternatives that support the organization’s objectives and selecting the bestalternative. The first step is a realistic evaluation of the past and currentposition of the enterprise. This step typically includes an analysis of “whoare the customers” and “what are their needs as they (the customers) seethem.”
page 35The next step is an assessment of the internal and externalenvironments. What are the internal strengths and weaknesses of theenterprise? Examples of internal strengths or weaknesses are corecompetencies, such as technology, product quality, management talent, lowdebt, and dealer networks. Managers can alter internal strengths andweaknesses. Opportunities and threats usually represent external forces forchange such as technology, industry structure, and competition.Competitive benchmarking tools are sometimes used to assess current andfuture directions. Opportunities and threats are the flip sides of each other.That is, a threat can be perceived as an opportunity, or vice versa. Examplesof perceived external threats are a slowing of the economy, a maturing lifecycle, exchange rates, and government regulation. Typical opportunities areincreasing demand, emerging markets, and demographics. Managers orindividual firms have limited opportunities to influence such externalenvironmental factors; however, notable exceptions have been newtechnologies such as Apple using the iPod to create a market to sell music.The keys are to attempt to forecast fundamental industry changes and stayin a proactive mode rather than a reactive one. This assessment of theexternal and internal environments is known as the SWOT analysis(strengths, weaknesses, opportunities, and threats).From this analysis, critical issues and strategic alternatives areidentified. Critical analysis of the strategies includes asking questions: Doesthe strategy take advantage of our core competencies? Does the strategyexploit our competitive advantage? Does the strategy maximize meetingcustomers’ needs? Does the strategy fit within our acceptable risk range?These strategic alternatives are winnowed down to a critical few thatsupport the basic mission.Strategy formulation ends with cascading objectives or projectsassigned to lower divisions, departments, or individuals. Formulatingstrategy might range around 20 percent of management’s effort, whiledetermining how strategy will be implemented might consume 80 percent.Set Objectives to Achieve StrategiesObjectives translate the organization strategy into specific, concrete,measurable terms. Organizational objectives set targets for all levels of the
organization. Objectives pinpoint the direction managers believe theorganization should move toward. Objectives answer in detail where a firmis headed and when it is going to get there. Typically objectives for theorganization cover markets, products, innovation, productivity, quality,finance, profitability, employees, and consumers. In every case, objectivesshould be as operational as possible. That is, objectives should include atime frame, be measurable, be an identifiable state, and be realistic. Doran(1981) created the memory device shown in Exhibit 2.1, which is usefulwhen writing objectives.EXHIBIT 2.1 Characteristics of Objectives 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 State when the objective can be achieved, that is, duration Each level below the organizational objectives should support thehigher-level objectives in more detail; this is frequently called cascading ofobjectives. For example, if a firm making leather luggage sets an objectiveof achieving a 40 percent increase in sales through a research anddevelopment strategy, this charge is passed to the Marketing, Production,and R&D Departments. The R&D Department accepts the firm’s strategy astheir objective, and their strategy becomes the design and development of anew “pull-type luggage with hidden, retractable wheels.” At this point theobjective becomes a project to be implemented—to develop the retractable-wheel luggage for market within six months within a budget of $200,000.In summary, organizational objectives drive projects.Implement Strategies through ProjectsImplementation answers the question of how strategies will be realized,given available resources. The conceptual framework for strategyimplementation lacks the structure and discipline found in strategyformulation. Implementation requires action and task completion; the latterfrequently means mission-critical projects. Therefore, implementation mustinclude attention to several key areas.
page 36First, task completion requires resources. Resources typically representfunds, people, management talents, technological skills, and equipment.Frequently, implementation of projects is treated as an “addendum” ratherthan an integral part of the strategic management process. However,multiple objectives place conflicting demands on organizational resources.Second, implementation requires a formal and informal organization thatcomplements and supports strategy and projects. Authority, responsibility,and performance all depend on organization structure and culture. Third,planning and control systems must be in place to be certain projectactivities necessary to ensure strategies are effectively performed. Fourth,motivating project contributors will be a major factor for achieving projectsuccess. Finally, areas receiving more attention in recent years are portfoliomanagement and prioritizing projects. Although the strategyimplementation process is not as clear as strategy formulation, all managersrealize that without implementation, success is impossible.Although the four major steps of the strategic managementprocess have not been altered significantly over the years, the view of thetime horizon in the strategy formulation process has been altered radicallyin the last two decades. Global competition and rapid innovation requirebeing highly adaptive to short-run changes while being consistent in thelonger run.2.3 The Need for a Project Priority SystemLO 2-3Understand the need for a project priority system.Implementation of projects without a strong priority system linked tostrategy creates problems. Three of the most obvious problems arediscussed in this section. A priority-driven project portfolio system can goa long way to reduce, or even eliminate, the impact of these problems.Problem 1: The Implementation Gap
In many organizations, top management formulate strategy and leavestrategy implementation to functional managers. Within these broadconstraints, more detailed strategies and objectives are developed by thefunctional managers. The fact that these objectives and strategies are madeindependently at different levels by functional groups within theorganization hierarchy causes manifold problems.Following are some symptoms of organizations struggling with strategydisconnect and unclear priorities.Conflicts frequently occur among functional managers and cause lack oftrust.Frequent meetings are called to establish or renegotiate priorities.People frequently shift from one project to another, depending on currentpriority. Employees are confused about which projects are important.People are working on multiple projects and feel inefficient.Resources are not adequate.Because clear linkages do not exist between strategy and action, theorganizational environment becomes dysfunctional, confused, and ripe forineffective implementation of organization strategy and, thus, of projects.The implementation gap is the lack of understanding and consensus oforganization strategy among top and middle-level managers.A scenario the authors have seen repeated several times follows. Topmanagement pick their top 20 projects for the next planning period, withoutpriorities. Each functional department—Marketing, Finance, Operations,Engineering, Information Technology, and Human Resources—selectsprojects from the list. Unfortunately, independent department prioritiesacross projects are not homogenous. A project that rates first in the ITDepartment can rate 10th in the Finance Department. Implementation of theprojects represents conflicts of interest, with animosities developing overorganizational resources.If this condition exists, how is it possible to implement strategyeffectively? The problem is serious. One study found that only about 25percent of Fortune 500 executives believe there is a strong linkage,consistency, and/or agreement between the strategies they formulate andimplementation. In a study of Deloitte Consulting, MacIntyre reports,
page 37“Only 23 percent of nearly 150 global executives considered their projectportfolios aligned with the core business.”2Problem 2: Organization PoliticsPolitics exist in every organization and can have a significant influence onwhich projects receive funding and high priority. This is especially truewhen the criteria and process for selecting projects are ill-defined and notaligned with the mission of the firm. Project selection may be based not somuch on facts and sound reasoning as on the persuasiveness and power ofpeople advocating projects.The term sacred cow is often used to denote a project that a powerful,high-ranking official is advocating. Case in point, a marketing consultantconfided that he was once hired by the marketing director of a large firm toconduct an independent, external market analysis for a new product the firmwas interested in developing. His extensive research indicated that therewas insufficient demand to warrant the financing of this new product. Themarketing director chose to bury the report and made the consultantpromise never to share this information with anyone. The director explainedthat this new product was the “pet idea” of the new CEO, who saw it as hislegacy to the firm. The director went on to describe the CEO’s irrationalobsession with the project and how he referred to it as his “new baby.” Likea parent fiercely protecting his child, the marketing director believed that hewould lose his job if such critical information ever became known.Project sponsors play a significant role in the selection and successfulimplementation of product innovation projects. Project sponsors aretypically high-ranking managers who endorse and lend political support forthe completion of a specific project. They are instrumental in winningapproval of the project and in protecting the project during the criticaldevelopment stage. The importance of project sponsors should not be takenlightly. For example, a PMI global survey of over 1,000 projectpractitioners and leaders over a variety of industries found thoseorganizations having active sponsors on at least 80 percent of theirprojects/programs have a success rate of 75 percent, 11 percentage pointsabove the survey average of 64 percent. Many promising projects havefailed to succeed due to lack of strong sponsorship.3
page 38The significance of corporate politics can be seen in the ill-fated ALTOcomputer project at Xerox during the mid-1970s.4 The project was atremendous technological success; it developed the first workable mouse,the first laser printer, the first user-friendly software, and the first local areanetwork. All of these developments were five years ahead of their nearestcompetitor. Over the next five years this opportunity to dominate thenascent personal computer market was squandered because of internal in-fighting at Xerox and the absence of a strong project sponsor. (Apple’sMacIntosh computer was inspired by many of these developments.)Politics can play a role not only in project selection but also in theaspirations behind projects. Individuals can enhance their power within anorganization by managing extraordinary and critical projects. Power andstatus naturally accrue to successful innovators and risk takers rather than tosteady producers. Many ambitious managers pursue high-profile projects asa means for moving quickly up the corporate ladder.Many would argue that politics and project management should notmix. A more proactive response is that projects and politics invariably mixand that effective project managers recognize that anysignificant project has political ramifications. Likewise, topmanagement need to develop a system for identifying and selecting projectsthat reduces the impact of internal politics and fosters the selection of thebest projects for the firm.Problem 3: Resource Conflicts and MultitaskingMost projects operate in a multiproject environment. This environmentcreates the problems of project interdependency and the need to shareresources. For example, what would be the impact on the labor resourcepool of a construction company if it should win a contract it would like tobid on? Will existing labor be adequate to deal with the new project—giventhe completion date? Will current projects be delayed? Will subcontractinghelp? Which projects will have priority? Competition among projectmanagers can be contentious. All project managers seek to have the bestpeople for their projects. The problems of sharing resources and schedulingresources across projects grow exponentially as the number of projectsrises. In multiproject environments the stakes are higher and the benefits or
penalties for good or bad resource scheduling become even more significantthan in most single projects (Mortensen & Gardner, 2017).Resource sharing also leads to multitasking. Multitasking involvesstarting and stopping work on one task to go and work on another project,then returning to the work on the original task. People working on severaltasks concurrently are far less efficient, especially where conceptual orphysical shutdown and start-up are significant. Multitasking adds to delaysand costs. Changing priorities exacerbate the multitasking problems evenmore. Likewise, multitasking is more evident in organizations that have toomany projects for the resources they command.The number of small and large projects in a portfolio almost alwaysexceeds the available resources. This capacity overload inevitably leads toconfusion and inefficient use of scarce organizational resources. Thepresence of an implementation gap, of power politics, and of multitaskingadds to the problem of which projects are allocated resources first.Employee morale and confidence suffer because it is difficult to make senseof an ambiguous system. A multiproject organizational environment facesmajor problems without a priority system that is clearly linked to thestrategic plan. See Exhibit 2.2, which lists a few key benefits of ProjectPortfolio Management; the list could easily be extended.EXHIBIT 2-2Benefits of Project Portfolio ManagementBuilds discipline into project selection process.Links project selection to strategic metrics.Prioritizes project proposals across a common set of criteria, rather than on politics oremotion.Allocates resources to projects that align with strategic direction.Balances risk across all projects.Justifies killing projects that do not support organization strategy.Improves communication and supports agreement on project goals.2.4 Project Classification
page 39LO 2-4Distinguish among three kinds of projects.Many organizations find they have three basic kinds of projects in theirportfolio: compliance (emergency—must do), operational, and strategicprojects. (See Figure 2.2.) Compliance projects are typically those neededto meet regulatory conditions required to operate in a region; hence, theyare called “must do” projects. Emergency projects, such as buildingan auto parts factory destroyed by a tsunami or recovering acrashed network, are examples of must do projects. Compliance andemergency projects usually have penalties if they are not implemented.FIGURE 2.2Project ClassificationOperational projects are those that are needed to support currentoperations. These projects are designed to improve the efficiency ofdelivery systems, reduce product costs, and improve performance. Some ofthese projects, given their limited scope and cost, require
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
