DRIVING BUSINESS STRATEGY THROUGH PROJECT PRIORITISATION

(A SURVEY OF EXECUTIVES)

Dr. David Hinks (PhD Cambridge)

Copyright © Caritas 2004

EXECUTIVE SUMMARY

The Problem
There is a trend for Australian companies to define long term strategies (often over five years) to
position their businesses within a desired market segment. Annual business plans are then
developed to direct the implementation of these strategies.

However, because business directions change with market demand, there is a need to revisit and
revise these strategies and plans. The outcome is that longer term projects can become
misaligned as strategies change over time.

The Solution
An investigation by Caritas Consulting has revealed that strategic drive is often impeded by
project resource constraints and that many companies are implementing low value or redundant
projects. Periodic project prioritisation can help to ensure that both new and existing projects
remain aligned to business strategy.

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INTRODUCTION

Survival of the Fittest

In 1859 Charles Darwin made a landmark observation - in order to survive, a species must remain
adaptable to a changing environment. In the modern economy, much the same can be said of a
business.

Within any competitive business environment (one in which two or more companies share the
same goal) there exists an ongoing race. Progression towards the goal is normally achieved
through a program of projects aimed at improving the company’s competitive standing.

Whilst the majority of companies have well established project selection criteria, fewer seem able
to reach agreement on each project’s relative contribution towards business strategy. Given such
circumstances, it remains difficult for management to determine where best to allocate their finite
project resources so as to maximise the drive towards business goals.

In the race for profit and survival, the winners may well be those companies who effectively
prioritise their projects, allowing them to reach their goals more quickly and efficiently than their
competitors.

State of the Nation

In 2003, Caritas undertook an investigation into the project delivery capabilities of Australian
businesses. The investigation took the form of a structured questionnaire designed to test a
number of hypotheses, including:

1. Project resource constraints impede strategic drive;

2. Companies have redundant projects; and
3. Companies do not prioritise their projects by their strategic contribution.

Participants included executives from 57 companies selected from Australia’s Top-200 and Fast-
Growth listings. This report details our findings.

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RESULTS

Hypothesis One: Project Resource Constraints Impede Strategic Drive

To test our first hypothesis we asked participants to comment on whether they believed that
project resource constraints (financial or human) compromised the strategic drive of their
organisation. Our findings are summarised in Figure One.

Figure One
Impact of Project Resource
Constraints on Strategic Drive

100%

80%
Respondents

60%

40%

20%

0%
No Impact Negative Impact

Hypothesis Two: Companies have Redundant Projects

The second hypothesis that we wished to test was that companies have redundant projects. To
evaluate this, we asked participants to determine the percentage of total projects not making a
clear and direct contribution to an existing business goal. Responses were grouped into
redundancy bands (<10%, 10 to 20% and >20%) and were plotted against % respondents (Figure
Two.)

Figure Two
Project Redundancy in Participating Companies

100%
80%
Respondents

60%
40%
20%
0%
<10% 10-20% >20%
Project Redundancy

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Hypothesis Three: Companies do not Prioritise Projects by their Strategic Contribution
To test our final hypothesis, participants were asked to comment on the maturity of their existing
project prioritisation methodology (Figure Three). Maturity ratings were defined as:

1. None: no prioritisation of projects;

2. Ad-hoc: some prioritisation by individual executives; and
3. Mature: periodic, business-wide prioritisation of projects based upon strategic contribution.

Figure Three
Project Prioritisation Maturity

100%

80%
Respondents

60%

40%

20%

0%
None Ad-hoc Mature

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DISCUSSION

The impact that project resource constraints have upon the strategic drive of an organisation
appears to be significant, with 84% of companies surveyed claiming to be adversely affected
(Figure One). With redundant or low value projects (Figure Two) drawing from a finite pool of
project resources, it stands to reason that the delivery of high value projects will suffer
accordingly.

It is surprising to learn that few of the organisations surveyed have a mature project prioritisation
methodology in place (Figure Three). Whilst 45% of companies undertook ad-hoc prioritisation,
this was normally performed by individual executives and reflected a contribution towards their
own Key Performance Indicator (KPI) rather than to the overall strategic direction of the company.

The Bias Issue

One of the key issues for any business seeking to prioritise a list of projects is the removal of
individual bias over project value and the reaching of agreement over resource allocation. At the
very heart of this issue lies the KPI.

Whilst there can be little doubt that KPI’s play an important role in focussing effort, their presence
is also the source of diverging viewpoints over the relative strategic contribution of multiple
projects.

The reality is that unless an organisation can establish a robust approach to directly compare the
true values of its projects, it remains likely that it will continue to resource projects that (whilst no
doubt important to an individual) may not be the optimum spend for the business as a whole.

Given the level of pressure exerted upon project managers to deliver value, surely the very least
that can be expected of an executive team is that all project resources are being allocated to
projects of highest value to the business.

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CONTACT CARITAS
Caritas is a management consultancy specialising in end-to-end strategy definition and delivery
services. For further information on how your organisation can benefit through project
prioritisation, please contact David Hinks at davidhinks@caritas.com.au or Graham Davidson at
grahamdavidson@caritas.com.au.

ACKNOWLEDGEMENTS
The author would like to acknowledge the contribution made by survey participants and Caritas
staff.