Project Management Strategy by Business Approach
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Iulie 2010 |
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ERNST & YOUNG S.R.L. |
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The economic downturn has forced many companies to accelerate their plans to achieve performance improvements and generate cost efficiencies, to remain competitive and improve profit margins. However, while companies focus on the deliverables at the end of the project, many overlook the benefit of investing time at the front-end in ensuring the project management approach supports corporate strategies and is the most efficient and effective to execute.
This article delves deeper into the different types of project management approaches and the scenarios in which they are most effective, giving some flavor by using real examples of the challenges some of our clients have faced and demonstrating how companies can reach a decision for an effective management approach to their projects.
There are two leading project management approaches today: traditional waterflow (PMBOK, PRINCE2) and adaptive (AGILE). The two approaches differ and can produce different results.
Traditional approaches manage scope, budget and timeframe as three objectives of equal importance, with special emphasis on planning and forecasting to improve the success of project management.
Adaptive approaches tend to favor one objective over the others, with emphasis on creating an environment in which the business can change and adapt rapidly to different economic, operating and competitive conditions. Management teams who adopt an adaptive approach to project management usually believe that long-term planning and forecasting are erroneous and costly.
When deciding which approach to adopt, management teams should ask themselves:
- Which approach is most likely to achieve our objectives for the project?
- Should different approaches be used for different elements of the project? If so, which approach best suites each element?
- Can methodologies be effectively combined?
In order to answer the questions above, management teams need to find a link between their business strategies and their project management approach.
While projects that are similar in nature to business strategies can be planned similar to business strategies, they remain subject to uncertainty. Assuming that “uncertainty” (both level and reaction to) plays a significant role in determining a company’s approach to project management strategies, companies need to consider:
- How does my company usually respond to uncertain situations and decide “what do we do next?”
- What is the link between our corporate and project management strategies?
- To what extent will IT play a role in deciding the best approach?
- Will the organization’s ability to execute strategies have any influence on determining the best approach?
“What to do next? The case for non-predictive strategy”
Depending on where an organization is within its life cycle, it may be seeking to either position the organization within a changing macro and micro environment (usually applicable to market followers) or will be seeking to construct their own future from within (usually applicable to new ventures and market leaders).
Positioning strategies are either focused or planning – developing more robust and comprehensive tools and strategies to predict changes in externally driven environments – or focused on adaptation – navigating their way through a changing environment.
Constructing strategies attempt to shape markets in the future through either a visionary approach - creating new strategies based on the company's strength – or a transformation approach – seeking to collaborate with other companies to bring a new or stronger offering to the market.
Both positioning and constructing strategies use different approaches depending on how confident the firm is in its ability to predict changes or how they want to cope with that given uncertainty:
• Predictive strategies are designed to handle lower levels of uncertainty, where vital factors are predictable, e.g., no frequent changes expected in market requirements seeking to identify exactly which direction to take and the actions needed to achieve objectives. Positioning strategy does this by using a "no regrets" tool that helps position where the market is heading. Visionary strategy is also clear about the end result, but is more flexible in how the vision can be achieved.
• Non-predictive strategies are designed to handle higher levels of uncertainty, such as introducing a brand new product on the market where market reaction is unknown with an understanding that not all predictions are equal in terms the likelihood of forecast becoming reality and looking backwards most of them appear to be erroneous. Adaptive approaches are going step by step by shortening the foreseen horizon and incrementally recognizing where they are not necessarily predicting where they will be. In an adaptive approach both the cycle of action and market feedback are short. Transformative approaches want to "control", which means driving the situation e.g., creating market demand rather than navigating within an exogenously given environment and as such represent the highest levels of uncertainty, in which stakeholders are committing their resources to help shaping the end result. Transformative approaches have different motivations compared to all other approaches, because they are more process driven (rather than driven by goals), seeking affordable loss (rather than expected return) and leveraging opportunities (rather than avoiding contingency plans or scenarios you do not foresee).
Figure 1 illustrates the framework of a "What to do next" business management strategy.
- Visionary and transformative approaches will generate a wider range of innovations
- Transformative approaches will generate the most number of innovation opportunities
- Non-predictive strategies cost less to formulate and execute than predictive strategies
- Costs of failures resulting from non-predictive strategies are likely to be lower
