Unit 1:Overview of

Projects

Organization Strategy
and Project Selection
What is Strategy?
 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 one of differentiation. Its projects
target innovation and time to market.
 Aligning projects with the strategic goals of the organization is crucial for
project success.
 Today’s economic climate is unprecedented by rapid changes in
technology, global competition, and financial uncertainty. These
conditions make strategy/project alignment even more essential for
success.
 Every major project needs to have a strong linkage to the strategic
plan. The larger and more diverse an organization, the more
difficult it is to create and maintain this strong link.
 Ample evidence still suggests that many organizations have not
developed a process that clearly aligns project selection to the
strategic plan. The result is poor utilization of the organization’s
resources—people, money, equipment, and core competencies.
 Conversely, organizations that have a coherent link of projects to
strategy have more cooperation across the organization, perform
better on projects, and have fewer projects.
Why Project Managers Need to
Understand Strategy?

 There are two main reasons why project managers need to understand their
organization’s mission and strategy.
 The first reason is so they can make appropriate decisions and adjustments.
For example, how a project manager would respond to a suggestion to
modify the design of a product to enhance performance will vary depending
upon whether his company strives to be a product leader through innovation
or to achieve operational excellence through low cost solutions.
 Similarly, how a project manager would respond to delays may vary
depending upon strategic concerns. A project manager will authorize
overtime if her firm places a premium on getting to the market first. Another
project manager will accept the delay if speed is not essential
 The second reason project managers need to understand their
organization’s strategy is so they can be effective project
advocates.
 Project managers have to be able to demonstrate to senior
management how their project contributes to their firm’s mission.
Protection and continued support come from being aligned with
corporate objectives.
 Project managers also need to be able to explain to team members
and other stakeholders why certain project objectives and
priorities are critical. This is essential for getting buy-in on
contentious trade-off decisions.
The Strategic Management Process
 Strategic management is the process of assessing “what we are” and
deciding and implementing “what we intend to be and how we are
going to get there.”
 Strategy describes how an organization intends to compete with the
resources available in the existing and perceived future environment.
 Two major dimensions of strategic management are responding to
changes in the external environment and allocating scarce resources of
the firm to improve its competitive position.
 The second dimension is the internal responses to new action programs
aimed at enhancing the competitive position of the firm. The nature of
the responses depends on the type of business, environment volatility,
competition, and the organizational culture.
Four Activities of the Strategic
Management Process
 The typical sequence of activities of the strategic management
process is outlined here; a description of each activity then
follows:
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.
 Review and Define the Organizational Mission
 Mission statements identify the scope of the organization in terms of its product or
service.
 A written mission statement provides focus for decision making when shared by
organizational managers and employees. Everyone in the organization should be
keenly aware of the organization’s mission.
 The mission statement communicates and identifies the purpose of the organization to
all stakeholders.
 Mission statements can be used for evaluating organization performance.
 Traditional components found in mission statements are major products and services,
target customers and markets, and geographical domain. In addition, statements
frequently include organizational philosophy, key technologies, public image, and
contribution to society.
 Example: Tesla Inc.
"To accelerate the advent of sustainable transport by bringing compelling
mass-market electric cars to market as soon as possible."
 Mission statements change infrequently. However, when the nature of the
business changes or shifts, a revised mission statement may be required.
 For example, Steve Jobs of Apple Computer envisioned the use of computer
technology beyond the PC desktop. His mission was to look at computer
technology as the vehicle for work and entertainment. As a result he developed
the iPod for selling music and masterminded the development of animated
movies such as Finding Nemo through the Pixar organization.
 More specific mission statements tend to give better results because of a tighter
focus. Mission statements decrease the chance of false directions by
stakeholders.
 Set Long-Range Goals and Objectives
 Objectives translate the organization mission into specific, concrete,
measurable terms. Organizational objectives set targets for all levels of
the organization.
 Objectives pinpoint the direction managers believe the organization
should move toward.
 Objectives answer in detail where a firm is headed and when it is going
to get there.
 Typically, objectives for the organization cover markets, products,
innovation, productivity, quality, finance, profitability, employees, and
consumers.
 In every case, objectives should be as operational as possible. That is,
objectives should include a time frame, be measurable, be an
identifiable state, and be realistic.
 Each level below the organizational objectives should support the
higher level objectives in more detail; this is frequently called
cascading of objectives.
 For example, if a firm making leather luggage sets an objective of
achieving a 40 percent increase in sales through a research and
development strategy, this charge is passed to the marketing,
production, and R&D departments.
 The R&D department accepts the firm’s strategy as their objective, and
their strategy becomes the design and development of a new “pull-type
luggage with hidden retractable wheels.”
 At this point the objective becomes a project to be implemented—to
develop the retractable wheel luggage for market within six months
within a budget of $200,000.
 Analyze and Formulate Strategies to Reach Objectives
 Formulating strategy answers the question of what needs to be done to
reach objectives.
 Strategy formulation includes determining and evaluating alternatives
that support the organization’s objectives and selecting the best
alternative.
 The first step is a realistic evaluation of the past and current position of
the enterprise. This step typically includes an analysis of “who are the
customers” and “what are their needs as they (the customers) see them.”
 The next step is an assessment of the internal and external environments.
What are the internal strengths and weaknesses of the enterprise?
 Examples of internal strengths or weaknesses could be core
competencies, such as technology, product quality, management talent,
low debt, and dealer networks.
 Managers can alter internal strengths and weaknesses.
 Opportunities and threats usually represent external forces for change such as technology,
industry structure, and competition.
 Opportunities and threats are the flip sides of each other. That is, a threat can be perceived as
an opportunity, or vice versa.
 Managers or individual firms have limited opportunities to influence such external
environmental factors.
 However, one can attempt to forecast fundamental industry changes and stay in a proactive
mode rather than a reactive one. This assessment of the external and internal environments is
known as the SWOT analysis (strengths, weaknesses, opportunities, and threats).
 From this analysis, critical issues and a portfolio of strategic alternatives are identified.
 These alternatives are compared with the current portfolio and available resources; strategies
are then selected that should support the basic mission and objectives of the organization.
 Critical analysis of the strategies includes asking questions: Does the strategy take advantage
of our core competencies? Does the strategy exploit our competitive advantage? Does the
strategy maximize meeting customers’ needs? Does the strategy fit within our acceptable risk
range?
 Strategy formulation ends with cascading objectives or projects assigned to lower divisions,
departments, or individuals.
 Implement Strategies through Projects
 Implementation answers the question of how strategies will be realized, given available
resources.
 Implementation requires action and completing tasks. Therefore, implementation must
include attention to several key areas.
 First, completing tasks requires allocation of resources. Resources typically represent
funds, people, management talents, technological skills, and equipment. Multiple
objectives place conflicting demands on organizational resources.
 Second, implementation requires a formal and informal organization that complements
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 project activities
necessary to ensure strategies are effectively performed.
 Fourth, motivating project contributors will be a major factor for achieving project
success.
 Finally, an area receiving more attention in recent years is prioritizing projects.
Portfolio Management System
Ques. What is Project Portfolio and What is Portfolio management system?
 A project portfolio refers to a collection of projects or programs that an
organization is currently undertaking or planning to undertake. These projects
are typically aligned with the organization's strategic objectives and are managed
collectively to maximize their contribution to overall business goals.
 Project Portfolio Management (PPM) is the centralized management of one or
more project portfolios to achieve strategic objectives.
 The primary goals of PPM include selecting and prioritizing projects, allocating
resources effectively, managing risks, and ensuring that projects align with the
organization's overall strategy.
 PPM involves making decisions about which projects to initiate, continue,
prioritize, or terminate based on their alignment with organizational goals,
available resources, and potential benefits.
 Design of a project portfolio system should include classification of a project,
selection criteria depending upon classification, sources of proposals, evaluating
proposals, and managing the portfolio of projects.
 Classification of the Project
❑ Many organizations find they have three different kinds of projects in their portfolio:
compliance and emergency (must do), operational, and strategic projects.
❑ Compliance projects are typically those needed to meet regulatory conditions
required to operate in a region; hence, they are called “must do” projects. They are
proactive measures to ensure that an organization operates ethically, legally, and in
accordance with industry standards. Emergency projects, such as rebuilding a
soybean factory destroyed by fire, meet the must do criterion. Compliance and
emergency projects usually have penalties if they are not implemented.
❑ Examples:
1) Data Protection and Privacy Compliance: Implementing measures to comply with
the General Data Protection Regulation (GDPR) by updating data handling practices,
obtaining consent, and enhancing data security.
2) Health and Safety Compliance: Ensure a safe and healthy work environment for
employees and comply with occupational health and safety regulations. Conducting
safety audits, implementing safety protocols, and providing training to employees on
safety measures.
❑ Operational projects are those that are needed to support current operations. These
projects are designed to improve efficiency of delivery systems, reduce product costs,
and improve performance.
❑ Total quality management (TQM) projects are examples of operational projects.
Conducting a TQM initiative to identify and eliminate defects in manufacturing
processes, thereby improving product quality.
❑ Examples:
1) Technology Implementation: Introduce or upgrade technology solutions to improve
operational capabilities. Implementing a new Enterprise Resource Planning (ERP)
system to streamline and integrate various business functions, such as finance,
human resources, and supply chain management.
2) Supply Chain Optimization: Improve the efficiency and responsiveness of the
supply chain. Implementing a new inventory management system to optimize stock
levels, reduce lead times, and improve overall supply chain efficiency.
3) Customer Service Enhancement: Improve the customer service experience and
satisfaction. Implementing a Customer Relationship Management (CRM) system to
streamline customer interactions, track customer feedback, and enhance customer
support processes.
❑ Finally, strategic projects are those that directly support the organization’s
long-run mission. They frequently are directed toward increasing revenue
or market share. Examples of strategic projects are new products, research,
and development.
❑ Examples:
1) Market Expansion: Enter new markets or expand the organization's
footprint in existing markets.
2) Digital Transformation: Embrace digital technologies to enhance
business processes, customer experience, and overall competitiveness.
3) Sustainability and Corporate Social Responsibility (CSR): Integrate
sustainability practices and fulfill social responsibilities. Implementing
projects to reduce environmental impact, enhance social responsibility
programs, or achieve specific sustainability certifications.
 Question. You manage a hotel resort located on the South Beach on the Island in
Hawaii. You are shifting the focus of your resort from a traditional fun-in -the- sun
destination to eco-tourism. (Eco-tourism focuses on environmental awareness and
education.) How would you classify the following projects in terms of compliance,
strategic, and operational?
a) Convert the pool heating system from electrical to solar power.
b) Build a 4-mile nature hiking trail.
c) Renovate the horse barn.
d) Replace the golf shop that accidentally burned down after being struck by lightning.
e) Launch a new promotional campaign with Hawaii Airlines.
f) Convert 12 adjacent acres into a wildlife preserve.
g) Update all the bathrooms in condos that are 10 years old or older.
h) Change hotel brochures to reflect eco-tourism image.
i) Test and revise disaster response plan.
j) Introduce wireless Internet service in café and lounge areas.
 Selection Criteria
 Although there are many criteria for selecting projects, selection criteria are typically
identified as financial and nonfinancial.
 Financial Models
For most managers financial criteria are the preferred method to evaluate projects. These
models are appropriate when there is a high level of confidence associated with estimates of
future cash flows. Here are certain criteria that can be considered:
❑ Return on Investment (ROI):
Measures the financial gain or loss generated relative to the initial investment in the
project.
❑ Net Present Value (NPV):
Evaluates the present value of future cash flows generated by the project, considering
the time value of money.
❑ Payback Period:
Determines the time it takes for the initial investment to be recovered from the project's
net cash inflows.
❑ Internal Rate of Return (IRR):
Identifies the discount rate that makes the NPV of the project zero,
indicating the project's rate of return.
❑ Profitability Index (PI):
Calculates the ratio of the present value of future cash flows to the
initial investment.
❑ Cost-Benefit Analysis:
Compares the total costs of the project to its expected benefits,
providing a comprehensive view of economic feasibility.
❑ Cash Flow Analysis:
Examines the expected cash inflows and outflows over the project's
life to ensure positive and consistent cash flows.
 Non-Financial Criteria:
 Financial return, while important, does not always reflect strategic importance.
 The sixties and seventies saw firms become overextended by diversifying too much. Now
the prevailing thinking is that long-term survival is dependent upon developing and
maintaining core competencies.
 Companies have to be disciplined in saying no to potentially profitable projects that are
outside the realm of their core mission. This requires other criteria be considered beyond
direct financial return.
 For example, a firm may support projects that do not have high profit margins for other
strategic reasons including:
❑ To capture larger market share
❑ To make it difficult for competitors to enter the market
❑ To develop an enabler product, which by its introduction will increase sales in more
profitable products
❑ To develop core technology that will be used in next-generation products
❑ To reduce dependency on unreliable suppliers
❑ To prevent government intervention and regulation
 Here are certain criteria that can be considered:
❑ Strategic Alignment:
❑ Assesses how well the project aligns with the overall strategic goals and
objectives of the organization.
❑ Market Demand and Positioning:
❑ Considers the demand for the product or service and its positioning in the
market.
❑ Technical Feasibility:
❑ Evaluates whether the required technology and expertise are available or
can be developed within the organization's capabilities.
❑ Regulatory Compliance:
❑ Ensures that the project complies with relevant laws and regulations,
reducing legal risks.
❑ Environmental and Social Impact:
❑ Considers the project's impact on the environment and society, ensuring
sustainability and positive social contribution.
❑ Organizational Capability:
Evaluates the organization's capacity to undertake and manage the project,
considering human resources, infrastructure, and organizational culture.
❑ Stakeholder Analysis:
Identifies and analyzes key stakeholders involved in or affected by the project
to manage expectations and gain support.
❑ Timeline and Resource Constraints:
Assesses the project's timeline and resource requirements to ensure realistic
planning and execution.
❑ Cultural and Change Considerations:
Evaluates how the project might impact the organizational culture and
readiness for change.
❑ Risk Tolerance:
Assesses the organization's willingness and ability to manage and mitigate
potential risks.
 Sources and Solicitation of Project Proposals
 As you would guess, projects should come from anyone who believes his or
her project will add value to the organization.
 Project proposals can originate from various sources, both internal and
external to an organization. Here are common sources of project proposals:
 Internal Sources:
❑ Employees: Employees directly involved in day-to-day operations may
propose projects based on their insights into process improvements or
challenges.
❑ Management and Leadership: Top-level management may propose strategic
projects aligned with the organization's vision and long-term goals.
❑ Innovation Teams:
Research and Development (R&D): Specialized teams focused on
innovation and research may propose projects aimed at technological
advancements and new product development.
 External Sources:
❑ Customers and Clients: Customer feedback, complaints, or requests may
inspire projects to improve products, services, or customer experience.
❑ Suppliers and Business Partners: Suppliers and business partners may propose
joint projects that benefit both parties or improve supply chain efficiency.
❑ Competitor Analysis: Analyzing competitors' strategies and successes may lead
to project proposals aimed at gaining a competitive edge.
❑ Institutions: Collaborating with universities or research institutions may lead to
joint projects driven by academic and industry collaboration.
❑ Government Initiatives and Grants: Governments may encourage project
proposals by offering grants or funding for initiatives that align with specific
priorities.
❑ Community and Social Initiatives: Collaboration with non-governmental
organizations (NGOs) or non-profits may lead to projects that address social or
environmental issues.
By considering project proposals from a variety of sources, organizations can ensure
a well-rounded portfolio of initiatives that align with strategic goals, respond to
market demands, and foster innovation and continuous improvement.
A Proposal Form for
an Automatic Vehicular
Tracking (AVL) Public
Transportation Project
 Soliciting project proposals involves actively seeking and inviting individuals
or organizations to submit their ideas or plans for a particular project.
 Steps for Soliciting Project Proposals:
❑ Define the Objectives and Scope: Clearly articulate the purpose, objectives,
and scope of the project. Provide detailed information about what the
organization is seeking and the problem or opportunity the project aims to
address.
❑ Develop Evaluation Criteria: Establish clear and specific criteria for
evaluating project proposals. Criteria may include alignment with
organizational goals, feasibility, innovativeness, budget considerations, and
the potential for impact.
❑ Create a Request for Proposals (RFP) or Call for Submissions: Draft a
formal document, such as an RFP or a call for submissions, outlining the
project details, submission requirements, and evaluation criteria. Include
information about deadlines, contact persons, and any specific formats or
templates for proposals.
❑ Promote the Opportunity: Publicize the project opportunity through various
channels. This could include internal communications within the organization,
external newsletters, websites, industry publications, and social media
platforms.
❑ Engage Stakeholders: Identify and engage key stakeholders who may
be interested in submitting proposals. This could include employees,
clients, partners, or external experts who could bring valuable
perspectives to the project.
❑ Host Information Sessions or Webinars: Conduct information
sessions or webinars to provide potential proposers with additional
insights into the project, answer questions, and clarify expectations. This
can enhance the quality of proposals and encourage participation.
❑ Establish a Submission Process: Set up a formal submission process
that is user-friendly and allows proposers to submit their ideas
efficiently. This may involve creating an online submission portal, email
submissions, or physical submissions, depending on the organization's
preferences.
❑ Clarify Legal and Ethical Considerations: Clearly communicate any
legal or ethical considerations related to the project, including
intellectual property rights, confidentiality requirements, and any
restrictions on the use of certain technologies or methodologies.
❑ Set Evaluation Timelines: Establish a timeline for the evaluation
process, including deadlines for proposal submission, review periods,
and the announcement of selected proposals. Communicate this timeline
clearly to all potential proposers.
❑ Conduct a Fair and Transparent Evaluation: As proposals are
received, ensure a fair and transparent evaluation process. Use the pre-
defined criteria to assess each proposal and involve relevant stakeholders
in the evaluation process.
❑ Notify Selected Proposers: Once the evaluation process is complete,
notify the selected proposers and provide feedback on the reasons for
selection. Be transparent about the decision-making process.
❑ Communicate Results: Communicate the results of the solicitation
process to all participants, including both selected and non-selected
proposers. Provide constructive feedback where possible.
 Ranking Proposals and Selection of Projects
 Culling through so many proposals to identify those that add the most value requires a
structured process.
 Data and information are collected to assess the value of the proposed project to the
organization and for future backup. If the sponsor decides to pursue the project on the
basis of the collected data, it is forwarded to the project priority team (or the project
office).
 Given the selection criteria and current portfolio of projects, the priority team rejects or
accepts the project. If the project is accepted, the priority team sets implementation in
motion.
 Next Figure is a partial example of an evaluation form used by a large company to
prioritize and select new projects.
 The form distinguishes between must and want objectives. If a project does not meet
designated “must” objectives, it is not considered and removed from consideration.
 Organization (or division) objectives have been ranked and weighted by their relative
importance—for example, “Improve external customer service” carries a relative
weight of 83 when compared to other want objectives.
Managing the Portfolio System
 Managing the portfolio takes the selection system one step higher in that the
merits of a particular project are assessed within the context of existing
projects.
 At the same time it involves monitoring and adjusting selection criteria to
reflect the strategic focus of the organization. This requires constant effort.
 The priority system can be managed by a small group of key employees in a
small organization. Or, in larger organizations, the priority system can be
managed by the project office or the enterprise management group.
1. Senior Management Input
❑ Management of a portfolio system requires two major inputs from senior
management.
❑ First, senior management must provide guidance in establishing selection
criteria that strongly align with the current organization strategies.
❑ Second, senior management must annually decide how they wish to balance
the available organizational resources (people and capital) among the
different types of projects.
❑ A preliminary decision of balance must be made by top management (e.g.,
20 percent compliance, 50 percent strategic, and 30 percent operational)
before project selection takes place, although the balance may be changed
when the projects submitted are reviewed.
❑ Given these inputs the priority team or project office can carry out its many
responsibilities, which include supporting project sponsors and representing
the interests of the total organization.
2. The Priority Team Responsibilities
❑ The priority team, or project office, is responsible for publishing the priority of every
project and ensuring the process is open and free of power politics.
❑ For example, most organizations using a priority team or project office use an electronic
bulletin board to disperse the current portfolio of projects, the current status of each
project, and current issues. This open communication discourages power plays.
❑ Over time the priority team evaluates the progress of the projects in the portfolio. If this
whole process is managed well, it can have a profound impact on the success of an
organization.
❑ Constant scanning of the external environment to determine if organizational focus
and/or selection criteria need to be changed is imperative!
❑ Periodic priority review and changes need to keep current with the changing
environment and keep a unified vision of organization focus.
❑ For example, communicating which projects are approved, project ranks, current status
of in-process projects, and any changes in priority criteria will discourage people from
bypassing the system.
3. Balancing the Portfolio for Risks and Types of Projects
 A major responsibility of the priority team is to balance projects by
type, risk, and resource demand.
 This requires a total organization perspective. Hence, a proposed
project that ranks high on most criteria may not be selected because the
organization portfolio already includes too many projects with the same
characteristics— e.g., project risk level, use of key resources, high cost,
nonrevenue producing, long durations.
 Balancing the portfolio of projects is as important as project selection.
Organizations need to evaluate each new project in terms of what it
adds to the project mix. Short-term needs need to be balanced with
long-term potential. Resource usage needs to be optimized across all
projects, not just the most important project.