•••  Enabling the Agile Enterprise

I have decided that my five keys to reducing project failure are in the wrong order. The first point has to be Focus on the right projects. In Organizational Project Management, this is accomplished through Project Portfolio Management. Today, there are limited dollars to spend on improving the business. How do we decide which project’s are the next best place to spend a dollar?

Within a business, there are many things that can be improved. In fact, most managers are interested in improving the processes within their area of responsibility. However, not every improvement, even when it will return a local benefit, is worth doing. For example, you can probably get better at the cleaning the office at your location. Maybe fancier vacuum cleaners or trash compactors at every desk would improve the quality and performance of this capability. However, in this case, we can clearly identify what is good enough and therefore don’t invest in improving this capability. Within a business we need to determine which projects to even consider – then we can do a portfolio analysis to pick the ones we are going to pursue.

 Strategic Opportunity.

Too often, projects are handed out based on some project ROI (which may only exist within the business) or based on political ability. It is important to understand how the business creates value for its customers, and where the constraints in the organization exist. If it doesn’t meet one of the following criteria, then it probably isn’t a project you need to pursue on a strategic basis.

·         Does it remove a constraint on a key value stream in the organizations ability to deliver value to the customer?

·         Does it add value to the customer that increases profit for the company in a way that is aligned with the company strategy?

·         Does it close a key performance gap in the organizations ability to achieve its standard operating objectives?

·         Does it reduce costs in the near term more than the cost of the project?

Once the project has met one of these criteria, it is important to identify exactly what capabilities in the business must be affected to complete the project. Then the project needs to be scoped distinctly to include specifically which capabilities will change, and in what way, and how they meet a strategic objective. Now, an order of magnitude estimate of cost and benefit can be determined and this project can be included in a portfolio analysis.

Business Risk Mitigation.

Some projects are necessary but don’t advance the organization’s strategy. Y2K projects and Sarbanes-Oxley are examples of these types of projects. These are typically about avoiding a risk.

·         Does it address a threat to the existence of the company?

·         Does it enable the business to respond to changes in the business environment?

·         Executive mandate.

For these projects, you again need to understand an order of magnitude impact and likelihood of occurrence of the risk being mitigated. You need to define exactly what capabilities in the business will change, and in what way. Now you can determine an order of magnitude value and cost and include this project a portfolio analysis.

Once all the projects are in the portfolio, they can be evaluated against some additional criteria such as ability to execute and business impact to identify those that should be pursued first. In future posts, I will go into more detail about how to answer each of the questions above.

The critical concepts are to select projects based on clearly articulated strategic opportunities or business risk mitigation. The strategic alignment piece is really important, because if strategic objectives change, we need to know which projects to consider stopping. The same is true for the business risk mitigation. If the likelihood of a risk increases, the business impact of the project changes. Improving something just because you can improve it is a bad investment. Have a cohesive approach to selecting projects to make sure resources are being invested in the best interest of the company.

Tags: organizational project management, porfolio management

This entry was posted on Thursday, January 22nd, 2009 at 1:23 pm and is filed under Business, Project Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.