Project managers, especially those who manage medium and large size projects, must understand how their project fits into the business strategy of the sponsoring executive and the organization. To do a good job of planning and managing a new project, the project manager can’t focus on just the technical issues of plans, schedules, budgets and change orders.
What is the Business Strategy?
Many organizations don’t publicize their business strategy. Don’t be confused between a business strategy and a mission statement. The mission statement is what an organization prints on every envelope and box that leaves their premises. It is public relations babble. Also don’t assume that every organization has a business strategy. They may not have anything better than target rates of profitability and sales growth for the coming year. Those are certainly good goals that state a valuable financial market position but they are not a business strategy.
An organization’s business strategy is a position that takes advantage of their unique strengths. Let’s say they provide home cleaning services and have a unique competitive advantage with a low-cost labor force. Then a business strategy of becoming the low-cost provider of home cleaning services might fit. The business strategy results from an analysis of the market in which the organization operates or wants to operate. It includes an analysis of the competition they face and any opportunities that exist. After careful data-gathering and study, the organization may decide that the best competitive position is for them to be the low-cost home cleaning service in their market. With that competitive position selected, they would align their internal goals and projects to achieve that strategic goal. In other words, they concentrate their resources and energies on achieving their desired market position. That alignment and resource allocation might mean they terminate their high-priced luxury home cleaning services. They are inconsistent with being the low-cost provider.
Business Strategy Components
A business strategy has several components. First is establishing a targeted competitive position. Second is aligning the company’s resources and efforts to reach that position. Third is planning projects with specific goals for the coming year(s) that will help them reach the target competitive position. This strategy also includes deciding what projects or initiatives not to do.
Let’s go back to our example. Why did the organization pick being the low-cost producer? It may have been the fact that no one else was focused on that competitive position. All the other competitors were focusing on trying to offer high-end services. On the other hand, it may have been as simple as a preference by the senior executive. Whatever the reason and rationale, if the strategy is for the organization to be the low-cost home cleaning service in their market area, all of their project efforts and goals should be aligned with achieving it.
This information is often closely guarded because the executives may not want to alert the competition to their plan for future success. Some competitors might eventually find out but the information is not widely publicized in the initial stages of implementing a new strategy. The organization wants their competitors to discover their new position after they have successfully positioned themselves as the low-cost provider of home cleaning services.
Why Must a Project Manager Know the Organization’s Business Strategy?
The obvious answer to that question is that understanding the organization’s business strategy and the initiatives aimed at achieving that market position prevents us, as project managers, from making stupid mistakes. Actually, they are honest mistakes that result from not knowing the competitive market position goal. To achieve success, we must ensure that our projects are aligned with the organization’s business strategy. In our example, projects to design high-end home cleaning services would obviously not be aligned with the business strategy. How do we avoid being out of alignment? We ask questions about how our project(s) support the corporate strategy. Hopefully an executive will give us some insight into what the business strategy actually is and what competitive position the organization wants to occupy in the future.
All of this assumes the organization has invested in the thought process required to identify an optimal market position and then aligned it’s projects and resources to reach that position. If this did not happen and there is no corporate business strategy for gaining a competitive market position, the project manager is stuck trying to convince stakeholders of the value of the project based on its own merits. This position is much less effective than aligning a new project with the organization’s business strategy.