Strategic Plan Complete? Now…Align Projects to Achieving the Strategy

Once your strategic plan is completed, you must now move to selecting and prioritizing the projects that must be done in order to support that strategic plan.

One of our newest clients, an IT consulting firm, diligently completes their annual strategic planning process. However, they have not taken the next step of aligning projects to be completed to that strategic plan. Earlier this year, a new CFO in the organization, contacted Abudi Consulting Group and asked us to participate in their strategic planning process and to help them develop the framework for evaluating, selecting and prioritizing projects to ensure alignment to the strategic plan. What the new CFO noticed was that year over year the same initiatives appeared on the strategic plan with little to no progress being made in achieving the goals.

Developing the strategic plan is really only the first step in achieving the strategy of the organization. To accomplish the strategic plan, projects must be selected and prioritized that will support achieving the strategy of the organization. Ideally, projects selected should be a combination of “keep lights on” initiatives (e.g., maintenance-type projects), infrastructure or process improvement projects, and innovative initiatives.

When projects are selected and prioritized to support the strategic plan, organizations do a better job of launching, and completing, a variety of projects – from a software upgrade in order to more effectively collaborate internally through to a research-focused project to test the potential desire for a new product for the market – at the right time.  When organizations don’t consider a balance of projects to be launched in the organization, the projects that truly are needed to achieve the strategy – those process improvement or innovation-type projects – don’t get accomplished.

SWOT Analysis

A SWOT analysis conducted as part of the strategic planning process enables for understanding the types of projects that might be launched. A SWOT analysis will indicate where the company is weak. A weakness may be a barrier to achieving a strategic goal. A project might be launched that corrects or reduces that weakness, enabling for a future initiative to move toward achieving the strategic goal. Similarly, a SWOT analysis indicates areas where there are opportunities to be realized. These opportunities can be aligned to the strategic plan, and projects might be launched that help to realize those opportunities in the short-, medium-, or over the long-term.

Project Selection and Prioritization

A project selection and prioritization process should be focused on launching the right projects at the right time to meet organizational strategic goals. Any project selection process should address the following:

• A ranking of value and benefits of the project
• A review of potential risk in achieving those benefits
• An inventory of resource availability and allocation for the project
• An idea of ideal size of the project pipeline to enable for effective utilization of project resources, enable for project success, and balance use of limited budget monies

Projects cannot be prioritized based on ROI alone; though ROI is certainly a key factor in prioritizing projects. Additional factors that might be considered in prioritizing projects include:

• Alignment with strategical and tactical plans
• Balance between maintenance (“keep lights on”) projects and investment projects
• Allocation of R&D (innovation) expenditures and resources
• Allocation of marketing expenditures and resources
• Effective use of limited internal organizational resources
• Need for external (consultant) resources
• Probability of delivering the project on time, within budget and as per the defined scope
• Non-financial benefits of the project

The prioritization process should use a balanced scorecard approach, with each of the factors listed and weighted to compare projects across all factors.

Value and benefits rankings may also be modified based on risk tolerance. For example, a million dollar return on a project that may only have a 10% chance of being successful is not as desirable as a $250,000 return on a project with a 90% chance of being successful.

Projects may be selected, in addition to being aligned with the organization’s long-term strategy, if they will:

• Be consistent with the organization’s values and culture
• Contribute (directly or indirectly) to a positive cash flow for the organization
• Effectively utilize the organization’s resources – people, technology, etc.
• Assist in positioning the organization for future success

Project selection criteria is very specific to the organization. Some examples of project selection criteria include:

• Alignment to the organization’s long-term strategy, mission and values
• ROI of project; cost/benefits ratio (reward vs. risk)
• Cross-functional impact
• Enable for solving major business problems or issues
• Payback period for project
• Initial cash outlay
• Availability of resources given what else is going on in the organization
• Ability to generate future business and/or open new markets
• Ability to leverage core competencies
• Positive impact to market share; time to market
• Competitive advantage

Each criteria factor must have a weight associated with it. This enables for comparing projects across the portfolio in an objective and fair manner. The table below provides an example of a simplified scoring model.

3 = High; 2 = Medium; 1 = Low
The table below provides an example of the criterion weighting to evaluate three projects.

In the example above, based on the weighted scores, the organization would prioritize the projects as follows:

• Project C
• Project A
• Project B

Another option is to look at projects from the perspective of value to the organization and the risk potential of the project. The image below is an example of a project selection process grid based on value/risk.

A common practice is to include all projects in review on a grid showing value and risk for an overview look. Preference in selecting projects is given to those projects that appear in the high value/low risk quartile.

In summary…

Regardless of what path you take to select and prioritize projects to add to the pipeline, ensure that:

• You develop a process for selecting and prioritizing projects and train leadership in how to utilize that process.
• Stick to the process! (This way you’ll reduce chances of “pet projects” being selected.)
• The projects you select support the organizational strategy – either by achieving components of that strategy in whole or in part.
• Projects also are launched if necessary to enable for resolving business problems that may be holding back the organizational from being successful.