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BEcon416-Chapter2 (Organization Strategy & Project Selection)
BEcon416-Chapter2 (Organization Strategy & Project Selection)
(7:40-8:40MWF)
CHAPTER 2
ORGANIZATION STRATEGY & PROJECT SELECTION
Strategy is implemented through projects. Every project should have a clear link to
the organizations strategy.
STRATEGY describes how the organization will compete.
decides the survival of an organization.
Organizations use projects to convert strategy into new products, services &
processes needed for success.
Aligning projects with the strategic goals of the organization is crucial for project
success.
Todays economic climate is unprecedented by rapid changes in technology,
global
competition, & financial uncertainty which makes strategy project alignment
even more
essential for success.
Every major project needs to have a strong linkage to the strategic plan.
The larger & more diverse the organization, the more difficult it is to create &
maintain this strong link.
Many organizations have not developed a process that clearly aligns project
selection to strategic plan, the result is poor utilization of the organizations
resources (people, money, equipment,, & core competencies).
Organizations that have a coherent link of projects to strategy have more
cooperation across the organization & perform better on projects.
An organization can ensure a link & alignment when there is integration of
projects with the strategic plan.
REVIEW/REVISE
MISSION Internal
Environment
(strengths &
weaknesses
3.) Prioritizes project proposals across a common set of criteria, rather than on
politics or emotion.
4.) Allocates resources to projects that align with strategic direction.
5.) Balances risk across all projects.
6.) Justifies killing projects that do not support organization strategy.
7.) Improves communication & supports agreement on project goals.
PORTFOLIO MANAGEMENT SYSTEM
PORTFOLIO MANAGEMENT -- aims to ensure that projects are aligned with
strategic
goals & prioritized appropriately.
--- asks What is strategic to our organization?
--- provides information that allows people to make better business
decisions.
Content of a project portfolio system:
1.) Classification of a project.
2.) Selection of criteria depending upon classification.
3.) Sources of proposals.
4.) Evaluating proposals.
5.) Managing the portfolio of projects.
1.)CLASSIFICATION OF A PROJECT
---3 KINDS OF PROJECTS IN A PORTFOLIO--a.) COMPLIANCE PROJECTS projects needed to meet regulatory
conditions
required to operate in a region.
b.)EMERGENCY PROJECTS projects that need to be done immediately
in order to
keep the firm in operation.
c.) OPPERATIONAL PROJECTS projects needed to support current
operation.
d.)STRATEGIC PROJECTS projects that directly support the
organizations long-run
mission.
Frequently directed toward increasing reenue/market share.
*Both compliance & emergency projects must be implemented in order for
the firm not to fail orsuffer dire penalties or consequences.
*Project proposals must be classified by type so that appropriate criteria
can be used to evaluate them.
2.)SELECTION OF CRITERIA DEPENDING UPON CLASSIFICATION.
--- TYPES OF SELECTION CRITERIA---
Criteria
Weight
Project1
Project2
Project3
Project4
Project5
Project6
2.0
1
3
9
3
1
6
3.0
8
3
5
0
10
5
2.0
2
2
2
10
5
0
2.5
6
0
0
0
10
2
1.0
0
0
2
0
0
0
1.0
6
5
2
6
8
2
3.0
5
1
5
0
9
7
66
27
56
32
102
55
Project
n
10
10
83
Need
strategic fit
Selfevaluation of
project by
criteria
Return for
more
Periodic
reassessment
of priorities
Selfevaluation of
project by
criteria
Return for
more
Rejec
t
Hold for
Resources
Assign priority
Assign resources
Assign Project manager
Evaluate Progress
2.) To annually decide how they wish to balance the available orgenizational
esources among different types of projects.
Priority Team Responsibilities (aka Project Office):
1.) Publishes the priority of every project.
2.) Ensures that the process is open & free of power politics.
3.) Balances projects by type, risk, & resources demand.
BALANCING THE PORTFOLIO FOR RISKS & TYPES OF PROJECTS
--- TYPES OF RISKS --1.) Risk associated with total portfolio of projects, which should reflect the
organizations risk profile.
2.) Specific project risks that can inhibit the execution of a project.
Ex. Schedule cost & technical
Market Risk
Ability to execute
Time to market
Technology advances
PROJECT PORTFOLIO MATRIX (by: David & Jim Matheson) used for assessing
portfolio
BREAD & BUTTER
PEARL
(evolutionary
improvements to
current projects &
service)
(revolutionary
commercial advances
using proven technical
advances)
WHITE ELEPHANT
OYSTER
(one-time showed
promise but are no
longer viable)
(technological
breakthroughs with high
commercial payoffs)