Business and Project Strategy Alignment
In the past, the strategy formulation process was assumed to be highly ordered and neatly integrated within various organisational processes. The outcome was the strategic plan that presented the organisation's goals, policies and actions as a coherent whole. Guidance was provided by well-known frameworks such as Porter's dimensions of cost-leadership, differentiation and focus (Porter 1980), and the product analysis of stars, cash cows or dogs of the Boston Consulting Group (Pearce and Robinson 1997).
With an increasingly volatile environment, a more dynamic and entrepreneurial approach is needed to succeed in strategy implementation (Young et al. 2012). This is particularly relevant to organisations in which strategy is actioned through the execution of projects. However, it appears that organisations struggle in linking project activities with business strategy and not much guidance is provided in the current project management literature (Aubry et al. 2007). A holistic approach to business/project strategic alignment is required (Young et al. 2012) so that only projects aligned with strategic business objectives are approved, funded and prioritised for development.
One approach is to determine value measures at the project level and to link them to those of the organisation. Strategic initiatives of the project become aligned with the strategic activities of the corporation. Value is created by projects in the context of the organisation's mission and business needs and is defined in business terms such as cost optimisation, increased revenues and market share, and improved customer satisfaction. Figure 2.1 provides an example of the alignment between business and project strategy. It shows business strategy in four areas and how project strategies are matched to them. The first strategy is to maximise business opportunities through being creative and innovative. Projects that produce unique products or services meet this objective and will receive organisational support. For another objective, to use knowledge to gain operational improvements, projects will have to demonstrate that knowledge is shared between project members and a 'lessons learned' repository is maintained. Aligning project activities with business goals is a continuous process and should not be perceived as a one-off task.
Figure 2.1 Alignment of business and project strategy
HIERARCHICAL AND CYCLICAL ALIGNMENT APPROACHES
The hierarchical approach to alignment is much used because it represents the traditional project manager's view of a functional and rational world. Business strategy is determined by top management and goals are cascaded down to projects. Figure 2.2 provides an example of value measures and delivery responsibilities. At the project management level, measures are about project management, project risk and project outcomes. Further up the hierarchy, project values are aligned with business operational values. An example is 'learning from experience' at the project level, which translates into 'sharing of knowledge' at the organisational level. It is at this stage that project management and business management have equal responsibilities for delivering expected values. When values are quantified in 'bottom line' terms at the highest level, value delivery is part of business management.
Figure 2.2 Hierarchy of business and project values
The hierarchical approach, however, is increasingly being discredited (Young et al. 2012) because it is based on a number of assumptions that do not reflect modern business. For example, it relies on a stable environment in which goals are predefined and strategy alignment can be achieved by following a relatively simple and objective process. This may no longer be the case in environments characterised by volatility and uncertainty, and in which alignment is facilitated rather than controlled.
The alternative approach to extracting business value from projects is to examine their life cycle. Du and Shi (2007) developed and tested a model for linking business strategy to project strategy via project portfolio and programme management. The model was applied within a large Chinese company that handled 80-100 projects of various kinds every year, including industrial and civil engineering, and highway and bridge constructions, costing millions of dollars. The model itself was considered by the authors as simple in concept but practical in application as well as complex in richness. They termed the four interrelated phases object ('what should do'), portfolio ('what can do'), decision ('how to do'), and action ('do it!').
When the concept is applied to business and project strategy, governance and management, Figure 2.3 emerges. Business strategy in the model determines what should be done within the organisation to maximise the opportunities provided by projects. The strategies are 'interpreted' to determine what can be done within the scope of project strategy. To guide the project, not only in managing the project but also to maximise its contribution to business success, project governance processes and structures come into play. They provide a high-level overseeing role for project activities. Project management itself implements strategy.
Figure 2.3 Cyclical approach to business/project alignment
Figure 2.4. Alignment between business/project strategy and project risk management
There are various ways in which the generic cyclical approach can be adapted to suit the organisation and its environment. Hartman and Ashrafi (2004) incorporated the approach in their SMART™ project management framework. It aims to achieve a balance between business issues ('what are we trying to achieve?'), technology ('how are we going to do this?') and social issues ('who is involved and whom do we affect by the changes created by this project?'). SMART™ is an acronym for Strategic Management (the project needs to be of value to the sponsor organisation for it to be successful), Alignment (of stakeholders and the project team with the objectives of the project), Regeneration (a regenerative team that practises open communication and has a propensity to take risk) and Transitional (the ability to manage complexity, uncertainty, change and risk).