Current Issues in SPRING 2007 Technology Management HOWE SCHOOL ALLIANCE FOR TECHNOLOGY MANAGEMENT HSATM VOLUME 11, ISSUE 2 Why Companies Need to Adopt a Strategic Approach to Project Management Joca Stefanovic and Aaron Shenhar Background According to the conventional project man- es, or to provide improvements in existing research used a combination of qualitative agement approach, projects are successful ones. Thus, companies typically initiate and quantitative methods, employing first a if they meet time, budget, and performance projects to create new value that is impossi- case study research approach, followed by goals. Yet studies show that most projects ble to achieve within the framework of an empirical statistical field study. are late, over budget, and do not deliver their expected objectives. Furthermore, even after completion, many projects do not con- We tested how the level of maturity of the project tribute to their company’s business success. on each dimension related to project success. We hypothesize that additional focus on the strategic aspects of projects will greatly ... we found that higher strategic focus is associated with contribute to the improvement of project better impact on the customer, better business results, performance. This research, which was funded by the Howe School Alliance for and better preparation for the future. Technology Management, relates to the fol- lowing questions: (a) To what extent do ongoing operations. In a paradoxical way, Research Description projects focus on their strategic and busi- however, since the establishment of modern ness aspects during project execution? project management as a formal discipline, Expanding on previous research on strategy (b) Does a higher strategic focus improve it has focused primarily on the operational in project management, we embarked on the chances of project success? aspects, namely on executing processes in questions about the recognition of strategic the most efficient way. value of projects, and the consequences of Using a combination of qualitative and project management style. We were look- quantitative research methods, we found Many surveys show that most projects do ing for evidence that projects of high-strate- that while project teams often recognize the not meet their expected goals. For example, gic value are recognized as such and are strategic value of projects, they still manage a Standish Group study showed that over managed differently from other projects. their projects according to the conventional 70% of projects were either total or partial In particular, we asked whether there are approach. We used a new three-dimension- failures, failing to deliver on time, budget, practices, behaviors, and considerations al strategic project management maturity or specifications. Moreover, out of the proj- present in project management that can be model, which assesses projects according ects that successfully met their time, budget associated with strategy implementation, to their focus on operational excellence, and requirements goals, many did not and whether strategy-related behavior in a strategic focus, and inspired leadership. deliver the expected business results to their project helps improve the project’s success. We tested how the level of maturity of the parent companies. It appears that tradition- Moreover, if the answer to the last question project on each dimension related to proj- al project management processes and tools is yes, we sought to learn what other condi- ect success. Among other things, we found are not sufficient for guaranteeing modern tions influence this relationship. that higher strategic focus is associated with project success. better impact on the customer, better busi- We defined a strategic project management In this research, we hypothesized that while ness results, and better preparation for the maturity (SPMM) model at the project level, most projects focus on efficiency, they at the future. which consists of three dimensions: opera- same time ignore the strategic aspects of tional excellence, strategic focus, and Introduction the business. Furthermore, we also hypothe- inspired leadership (see Figure 1). We sized that an increased strategic focus may Organizations initiate projects to create employed the following definitions: be associated with better business success new, unique products, services or process- as well as success in other dimensions. Our • Operational excellence: the extent to Continued on next page descriptive for all items, correlations between SPMM dimensions and project The Findings success items, confirmatory factor analysis, Phase 1—Case as well as regression calculations. Study We first calculated the SPMM scales’ On the operational means (Figure 3). As expected, operational focus dimension, about excellence had the highest score of 2.67, half of the cases ranked followed by strategic focus (2.33), and high, and half ranked inspired leadership received the lowest low (Figure 2). score (2.05). However, on the strate- The averages are industry-wide and gic focus dimension, worldwide. only 20% ranked high. We next looked at the correlation between Interestingly, the correla- these dimensions of maturity and project tion between the opera- success of various dimensions, such as proj- tional and strategic ect efficiency, customer satisfaction, team- dimensions was virtually work effectiveness, business success, zero. This supported our preparing for the future, and overall suc- initial assumption that cess. Correlation analysis showed many these two dimensions significant correlations. For example, team- are independent. Figure 1: Operational excellence, strategic work effectiveness correlated with all other focus, and inspired leadership Fourteen of the projects had high strategic project success dimensions, supporting the importance to their organizations. Out of conventional wisdom that teamwork success which project management activities these, only five exhibited a high degree of goes hand-in-hand with other aspects of (such as planning, execution, monitor- strategic focus. On the operational dimen- project success. ing, and control) focus on completing sion, about two thirds of the projects The identified significant SPMM scale the project within time, budget, and ranked low. associations of project success factors were specification goals. Among the 21 projects whose goal was not (Figure 4): • Strategic focus: the extent to which highly strategic, two-thirds ranked high on • Operational excellence is associated project management activities that the operational dimension, whereas only with efficiency relate to planning, execution, monitor- one was assessed as having high strategic ing, and control, focus on the expect- focus. • Strategic focus is associated with ed business results from the project business success When correlation coefficients were calculat- outcome. ed between project goal (coded as highly • Strategic focus is associated with • Inspired leadership: the ability of a strategic or not) and the project manage- customer satisfaction project manager to inspire the project ment style dimensions, the only significant • Strategic focus is associated with team, to induce team bonding, and to positive correlation was found between future prospects ensure team effectiveness. project goal and the strategic dimension of project management style. This result sug- • Strategic focus is associated with Finally, we defined the project’s strategic gests that a strategic approach is present overall success value as the project’s potential contribution more often in projects where strategic value to long-term organizational goals. • Inspired leadership is associated with is recognized. teamwork effectiveness The research had two phases. The first phase employed a qualitative case study approach on 35 documented cases, and its ...the only significant positive correlation was found goal was to confirm the theory and prepare for the second phase. The second phase between project goal and the strategic dimension of was quantitative, and involved statistical project management style. data on 164 projects from different coun- This result suggests that a strategic approach is tries. The goal of this phase was to test the present more often in projects where strategic value strategic project management maturity (SPMM) model on a large number of proj- is recognized. ects and assess the relationships among the three dimensions of the model and project Phase 2—Empirical Research Overall, we found that in most projects success dimensions. We expected that this goals were typically identified as either Our database included 164 project ques- examination would help us examine our operational or strategic. This demonstrated tionnaires, which were analyzed statistical- major research hypothesis. awareness of what projects mean to their ly. We calculated standard statistical Continued on next page tional goals and projects with strategic goals. Inspired leadership relates to the goals. It is much less clear, however, project manager’s activity to enable team- whether this recognition materializes work processes, team bonding and effective during the project execution process. cohesion. As we found, striving to achieve strate- It comes as no surprise that operational gic goals through projects is in most excellence predicts project efficiency. cases reduced to aligning initial project However, operational excellence predicts goals with organizational strategy and neither one of the other project success maintaining the project’s execution dimensions; e.g. operational excellence will within the triple constraint. In this man- not translate to customer satisfaction or ner, strategy-related behaviors are business success. This finding makes it nec- mostly expressed by operational behav- essary to focus attention on other project iors. management maturity dimensions as well, This approach may work for projects unlike what is assumed in current project with short-term operational goals. In management practices. these cases, it may be possible to focus Strategic focus seems to be a key element project management on operational in achieving customer satisfaction, business Figure 2: Strategic vs. operational goal success, future prospects, projects and overall success. Practically, all lasting, post- organizations, and what the expected proj- project, effects are predict- ect outcomes are. In addition, most of the ed by strategic focus. respondents clearly identified and Inspired leadership predicts described their firm’s strategy, and teamwork effectiveness. We explained how it is connected to their proj- expected it to influence ect goals. other success elements as However, most of the project teams consid- well, especially customer ered project strategy to be simply an align- satisfaction, but it seems ment of the project’s operational goals with that the effect is only indi- the firm’s strategy by ensuring that the pro- rect, through teamwork ject’s triple constraint (time, budget, and effectiveness. performance goals) is in agreement with The implications of these the organizational goals. In these cases, carrying out the company’s strategy had findings to management are been reduced to effectively executing a clear. Having project goals project within the specified triple constraint. Figure 3: Means of SPMM dimensions: Industry - and initially aligned with busi- Strategic focus is generally not recognized, world-wide ness strategy and hoping and usually there is no strategic alignment that this will guarantee in monitoring and controlling activities. achieving the project’s strategic goals is not excellence and still achieve successful proj- enough. Instead, a conscious, on-going Conclusions and Implications ect outcomes. In projects of high-strategic evaluation of project activities against its for Managers importance, explicit focus of the project’s strategic goal alignment is necessary. strategic goals is Our case study analysis indicates that most Similarly, just managing the project’s opera- necessary; neglecting it may have an projects are still managed today in an tions, without focusing on the team process- adverse effect on project success. operational manner. Furthermore, the es, is not enough either. Here too, a con- majority of projects with high strategic val- The larger scale empirical findings con- stant effort to enable team processes, team ues are also managed operationally, while firmed that project management styles could bonding, and team effectiveness is neces- almost all projects with operational goals be distinguished according to three dimen- sary. are managed operationally. This, we sions: operational excellence, strategic We thus believe that a new form of project believe, indicates that in spite of the strate- focus, and inspired leadership. Operational management standard is needed. In addi- gic importance placed on projects, the tra- excellence measures the degree to which a tion to the operationally focused ditional approach still dominates the field. project manager manages the project effi- approach, strategy- and teamwork-related ciently and keeps it within the planned time The analysis shows that most project man- focuses should be developed and included and budget constraints. Strategic focus agers and organizations recognize the within the current practices. Project man- measures the degree to which a project is strategic importance of a project and can agement needs to focus on business goals executed to fulfill the intended business distinguish between projects with opera- achievement and value creation, and not • When managing a project, project teams need to learn how to focus on the strategic and leadership aspects of the project, not just its operational efficiency. They need to develop a specific project strategy and focus the team’s activity on creating com- petitive advantage as well as future prospects from the project. • Project reviews by top managers should include examination of the strategic progress of projects, their expected success on all dimensions, and their relevance in the market given the changes and dynamics in the competitive environment. Further research is clearly needed. Because Figure 4: Maturity dimensions and their impact on project success factors operational excellence is well researched, new research directions could be on the strategic focus and inspired leadership just on achieving the triple constraint. the project. It should be assessed on sev- dimensions. For example, one may ask eral major dimensions such as efficien- whether strategic focus is more important for The major elements of this recommended cy, customer satisfaction, team effective- project success in high-uncertainty or high- approach can be summarized as follows: ness, business success and preparing for technology projects, than it is in low-tech • Projects should be seen as part of the the future. projects. Is inspired leadership more impor- strategic business processes in the organi- • Project managers should be accountable tant in certain industries than in others? And zation; their goals should be to contribute for achieving the business results and other is strategic focus more important for projects to the business success of the organiza- success dimensions, and not just the triple with external versus internal tion and not just meeting time, budget, constraint. customers? ■ and performance goals. • Projects should be selected according to • Project success should be defined their contribution to the company’s up-front to set the expectations from strategy and long term goals. About the Authors: Dr. Aaron J. Shenhar (email@example.com) a world leader in project management and technology management scholarship, is Institute Professor of Management and founder of the Project Management Program at the Howe School of Technology Management at Stevens Institute of Technology. He was named “Engineering Manager of the Year” by the Engineering Management Society of IEEE in 2000, and was the first recipient of the Project Management Institute Research Achievement Award in 2003. Prior to his academic career, he was involved in managing projects, innovation, R&D, and high technology businesses for almost 20 years, participating in all phases of engineering and management, from project manager up through the highest executive posts. Dr. Shenhar holds degrees in engineering, statistics, and management, including a Ph.D. in Electrical Engineering from Stanford University. His newly-published book, Reinventing Project Management: The Diamond Approach to Successful Growth and Innovation, is the first project management book published by Harvard Business School Press. Joca V. Stefanovic (firstname.lastname@example.org) has extensive experience in the computer business, embracing development, marketing/sales, and support. He founded and grew to the multi-million sales level a company dealing in computers and other high-tech equipment. He also founded a software development company that develops products for large international companies and distributes products for automatic personal and material identification. Mr. Stefanovic holds an M.Sc. degree in Electrical Engineering from the University of Southern California, Los Angeles, and an M.Sc. in Technology Management from Stevens Institute of Technology. He is currently working towards a Ph.D. in project management at Stevens, where he teaches the Introduction to Project Management course at the Howe School.
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