The definition of portfolio’s strategic alignment is fairly simple and straightforward: all of your projects must in one form or another assist the implementation of your company’s strategy. A very simple statement that at times is very difficult to explain. In order to do that, let us examine several examples of the project alignment and non-alignment.
At one point of time the executives of Société Bic (commonly referred to just as Bic), a French disposable consumer products company known for their razors, lighters, ballpoint pens and magnets made a very interesting decision. The company decided to enter … the ladies underwear market by designing, producing and selling among other things ladies pantyhose. Needless to say the company failed miserably with this project since the consumers were unable to see any link between Bic’s other products and underwear, because, of course, there was no link at all.
Although, as the urban saying goes “hindsight is 20/20” let us nevertheless try to assess this initiative from the strategic alignment perspective. Here is a list of potential questions one could direct at the Bic executives who proposed to add this project to the company portfolio:
- We manufacture disposable products made from plastic. What the heck do we know about ladies underwear?
- All of our production facilities are built based on the injection-molded plastic technology? Where will we get the equipment to manufacture underwear?
- People, especially females, perceive us as producers of cheap disposable lighters and pen? Would they be interested in purchasing our lingerie products?
- What about the distribution channels? Retail outlets that trade disposable razors, pens and lighters usually do not sell underwear. Does this mean we will have to acquire a brand new group of retail channels?
It is obvious that none of the answers to the above questions were very encouraging had they been asked at the time of project initiation. Indeed, there was little or no alignment between the proposed endeavor and the overall company strategy.
Here is another example, a bit more subtle, but still very powerful in my opinion. Several years ago I was hired by a relatively small software company to assess their project and portfolio management practices. After several days of investigation involving interviews with company employees and audits of their project management processes and documentation I jotted the following observations in my note book:
- The company consisted of approximately 100 employees roughly divided into two groups: product development (20 people) and professional services (80 people)
- The product development team was responsible for the continuous development of new versions of the company products
- The professional services guys were the ones responsible for taking the existing platform and deploying it at customer sites
- Professional services team charged the company customers between $275 and $350 per their man-hour of services usually generating between $500,000 and $2,000,000 per project in professional services fees
- Product team on the other side did not generate any revenues
- While the professional services department was fairly mature from the project management and business analysis perspective, the product development team was a complete mess with an utterly ad-hoc approach to their projects
- As a result, the product team failed time and time again with the delivery of the new product versions
- The situation got so bad that six out of the eight major customers refuse to talk to the company account managers until they fixed their product quality issues
Further discussions with the product team in attempt to establish the root causes of such poor performance led to the following discoveries:
- Since the professional services were perceived at the company as “money makers” and the product team – as “money wasters”, all of the best and most experienced resources were always dispatched to the professional services department.
- Moreover, if the company was operating at a full capacity and a new customer deployment project came along, instead of hiring additional permanent employees or contractors, the management just cannibalized the product team, again, pulling the best resources and reallocating them to the professional services projects (see Figure 1).
Needless to say, both the overall morale and the cohesiveness of the team suffered; add to that lack of any kind of requirements analysis and proper project planning and the overall performance of that team was not that surprising after all.
The subsequent conversation with the company CEO was even more interesting. I did not disclose any of my findings initially in order to obtain the executive’s uninfluenced opinion on the state of company affairs:
Me: So, let us start at the very beginning. Could you please tell me what the company’s mission is? In the perfect world, where do you see your organization in three to five years?
CEO: Well, we intend to become industry’s leading provider by being on the cutting edge of innovation and creativity, by supplying the market with the most revolutionary and visionary products.
Me: And who is your competition?
CEO: Companies A, B, C and D (names several multimillion and even multibillion global brands)
Me: So, you are planning on taking on these giants by having a product development team consisting of twenty inexperienced developers that gets cannibalized in favor of the professional services department every time a new project comes along? How exactly are you planning to accomplish this?
This story serves as one of the best examples of how the actions of the company executives do not align with the overall company strategy. The only thing that still remains unclear is whether the strategy has been conceived as a set of “sexy” and fashionable words copied from other company’ website or, indeed, the executives honestly believed in their mission statement but failed to see how their actions contradict it.
About the Author
Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East. Read Jamal’s Blog @ www.thinktankconsulting.ca
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