DRIVING BUSINESS STRATEGY THROUGH PROJECT PRIORITISATION (A SURVEY OF EXECUTIVES

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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 FastGrowth 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% Respondents 80% 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% Respondents 80% 60% 40% 20% 0% <10% 10-20% Project Redundancy >20%

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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% Respondents 80% 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.

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