From Experience - Linking Projects to Strategy

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From Experience: Linking Projects to StrategyRandall L. Englund and Robert J. Graham

There is a dramatic rise in the use of project management as organizations shiftto provide customer-driven results and systems solutions. Some implementationsof project management have been successful, whereas others are spectacularfailures. A common occurrence in many organizations is too many projects beingattempted by too few people with no apparent link to strategy or organizationalgoals. Research and experience indicate that the support of upper management iscritical to project success. This article reviews actions that upper managers cantake to create an environment for more successful projects in their organizations.Specifically, the authors discuss practices for upper manager teamwork and offera complete model for selecting projects that support a strategic emphasis. Thearticle includes experiences from within Hewlett-Packard Company. 1999Elsevier Science Inc.

IntroductionGrowth in organizations typically results fromsuccessful projects that generate new prod-ucts, services, or procedures. Managers areincreasingly concerned about getting better resultsfrom the projects under way in their organizations andin getting better cross-organizational cooperation. Oneof the most vocal complaints of project managers isthat projects appear almost randomly. The projectsseem unlinked to a coherent strategy, and people areunaware of the total number and scope of projects. Asa result, people feel they are working at cross-pur-poses, on too many unneeded projects, and on toomany projects generally. Selecting projects for theirstrategic emphasis helps resolve such feelings and is acorner anchor in putting together the pieces of a puzzlethat create an environment for successful projects [6].This article covers a series of steps for linking

projects to strategy. These steps constitute a processthat can be applied to any endeavor. Included through-

Address correspondence to Randy Englund, Hewlett-Packard Com-pany, 1501 Page Mill Road MS 5MW, Palo Alto, CA 94304.J PROD INNOV MANAG 1999;16:52-64 1999 Elsevier Science Inc. All rights reserved.655 Avenue of the Americas, New York, NY 10010

out are suggestions for action as well as guidelines tonavigate many pitfalls along the path. Process toolshelp illustrate ways to prioritize projects. The lessonslearned are from consulting with many firms over along time period and from personal experiences inapplying the lessons within Hewlett-Packard Com-pany (HP), a $40 billion plus company where twothirds of its revenue derives from products introducedwithin the past 2 years.

The Importance of Upper ManagementTeamworkDeveloping cooperation across an organization re-quires that upper managers take a systems approach toprojects. That means they look at projects as a systemof interrelated activities that combine to achieve acommon goal. The common goal is to fulfill the over-all strategy of the organization. Usually all projectsdraw from one resource pool, so they interrelate asthey share the same resources. Thus, the system ofprojects is itself a project, with the smaller projects

0737-6782/99/$-see front matterPII S0737-6782(98)00046-0


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LINKING PROJECTS TO STRATEGY

BIOGRAPHICAL SKETCHESRandy Englund, co-author of Creating an Environment for Suc-cessful Projects, is a project manager at Hewlett-Packard Company(HP) in Palo Alto, California, USA. He is a member of the ProjectManagement Initiative team that provides corporate-wide leader-ship for the continuous improvement of project management acrossthe company. Randy joined HP in 1978 and has been a member ofthe Project Management Initiative since 1991. He develops andfacilitates workshops, trains intact teams, and provides consultingon project management practices to product and process developersin HP businesses. Randy was a program manager in computersystems and personal computer product development, in systemsmarketing, and in manufacturing. He led teams to bring complexdevelopment systems to market; develop a hardware system prod-uct life cycle; resolve computer system architectural issues; andidentify, document, and apply best practices. He was a sessionkeynote speaker at the World Congress on Project Management, aspeaker at PDMA International Conferences, and invited to speak atmany other professional conferences. Prior to HP, Randy spent IOyears with General Electric Company in field service engineering.Randy has a B.S. in Electrical Engineering from the University ofCalifornia at Santa Barbara and an M.B.A. in Management fromSan Francisco State University. He is a member of the ProjectManagement Institute (PMI) and formerly on the Board of Direc-tors for the Product Development and Management Association(PDMA).Bob Graham is currently an independent management consultant inthe areas of project management and organizational change and asenior associate with the Strategic Management Group. Previouslyhe was a senior staff member of The Management and BehavioralSciences Center at The Wharton School, University of Pennsylva-nia. While at Wharton he taught in the M.B.A. and Ph.D. programsand was a part of the Wharton Effective Executive program teach-ing Project Management to practicing executives. Bob has heldVisiting Professor positions at both the University of Bath, inEngland, and the University of the German Armed Forces inMunich, Germany. Bob continues asAdjunct Professor at both theUniversity of Pennsylvania and as a part of the Project ManagementUnit at HenleyManagement College inEngland. His previous bookis entitled Project Management as if People Mattered. His latestbook, co-authored with Randy Englund, is entitled Creating anEnvironment for Successful Projects: The Quest to Manage ProjectManagement. Bob has B.S. in Systems Analysis fromMiami Uni-versity, as well as an M.B.A. and Ph.D. in Operations Researchfrom the University of Cincinnati. He was also a Post-DoctoralFellow at The Wharton School. In addition, he has an M.S. inCultural Anthropology from the University of Pennsylvania. Heearned Project Management Professional (PMP) certification fromthe Project Management Institute.

being the activities that lead to the larger project(organizational) goal.Any lack of upper management teamwork reverber-

ates throughout the organization. If upper managers donot model desired behaviors, there is little hope thatthe rest of the organization can do it for them. Anylack of upper management cooperation will surely bereflected in the behavior of project teams, and there is

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little chance that project managers alone can resolvethe problems that arise.A council concept is one mechanism used at HP to

establish a strategic direction for projects spanningorganizational boundaries. A council may be perma-nent or temporary, assembled to solve strategic issues.As a result, a council typically will involve uppermanagers. Usually its role is to set directions, managemultiple projects or a set of projects, and aid in cross-organizational issue resolution. Several of these coun-cil-like activities become evident through the exam-ples in this article.

One example at HP was a cross-organizationalcouncil pulled together to resolve input/output (1/0)architectural issues for a new line of computer sys-tems. A computer architecture is the underlying struc-ture that directs hardware to implement software com-mands. The processor architecture was solid, butportions of the I/O were vague, broken, or undefined.Hundreds of technical issues were logged against thearchitecture. Individual project teams were optimizingsolutions to fit their objectives (organizational subop-timization). Meanwhile, the overall architecture was atrisk of getting out of control. Because this architectureprovided the structure for a new platform of minicom-puter products, impact on the product family would beenormous.

One project manager (a champion) took the initia-tive to convene an upper-manager council. The coun-cil accepted ownership to resolve the set of interrelatedissues. People accepted membership on the councilbecause they came to understand the strategic impor-tance of the mission. The council authorized groups ofengineers to study, propose, review, and accept solu-tions. It first established a set of priorities and con-straints to guide the study groups. The council met atleast once a month to review progress and makechanges. When several issues bogged down, it autho-rized an escalation path to two managers who wouldlisten to the arguments and make decisions. Becauseof the tremendous impact on time to market of projectsdependent on the outcome, the council kept appropri-ate pressure on making progress. At the end of theresolution phase, it enthusiastically supported a cele-bration party for the hard work contributed by hun-dreds of engineers. They listened to recommendationsfrom a retrospective analysis and took action on sug-gested improvements, applying them to subsequentprojects that were initiated to resolve additional issues.Over time the process improved dramatically and led


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to reduced anxiety about the chaotic state of the ar-chitecture.This systematic approach illustrates the vast and

important influence of upper management teamworkon project success. Increasingly evident are companieswho convene portfolio selection committees. We sug-gest that organizations begin by developing councils towork with project managers and to implement strat-egy. These councils exercise leadership by articulatinga vision, discussing it with the project managers, ask-ing them their concerns about and needs for imple-menting the strategy, listening carefully to them, andshowing them respect so they become engaged in theprocess. In this way, upper managers and project man-agers develop the joint vision that is so necessary forimplementation of strategy.

Process for Project Selection and PrioritizationOnce the upper management team is established, theycan follow a process to select sets of projects thatachieve organizational goals. They are then ideallypositioned to implement consistent priorities across alldepartments. Figure I represents a mental model of away to structure this process. Outputs from the foursteps interrelate in a true systems approach. Thismodel comes from experience in researching and ap-plying a thorough approach to all the issues encoun-tered in a complex organization. It is both simple inconcept and complex in richness. The authors use themodel both as an educational tool and to facilitatemanagement teams through the process.

1. Whatshould do

4. Do it!

3.prioritized listdesired mixo decisionin-plan

R. L. ENGLUND AND R. J. GRAHAM

What the Organization Should Do and How toKnow When You Are Doing ItFirst, identify who is leading the process and whoshould be on the management team. More time spenthere putting together a "mission impossible" teampays dividends later by getting up-front involvementof the people who will be affected by the decisions thatwill be made. Take care not to overlook any key-but-not-so-visible players who later may speak up andjeopardize the plan. This team may consist solely ofupper managers or may include project managers, ageneral manager, and possibly a customer. Includerepresentation of those who can best address the keyopportunities and risks facing the organization. Ideallythey control the resources and are empowered to makedecisions on all projects. The leader needs to getexplicit commitment from all these people to partici-pate actively in the process and to use the resultingplan when making related decisions. Be aware thatbehavioral issues become super urgent. This processhits close to home and may have a severe impact onprojects that people care personally about. Uncertaintyand doubt are created if management does not treadcarefully and pay attention to people concerns.The team begins by listing all projects proposed and

under way in the organization. Many times this step isa revelation in itself. A usual reaction is, "I didn'trealize we had so many projects going on." The intentis to survey the field of work and begin the organizingeffort, so avoid going into detailed discussion aboutspecific projects at this point.The team clarifies or develops the goals expected

from projects. Be careful not to get constrained

o peopleo goalsf ? J categories'2 1 riteria

:21rejects

[:21out-plan[ : 2 ] l ist projectso requirements[ : 2 ] capacityo critical few

Figure 1. A systematic approach to selecting projects. Adapted with permission from Robert Graham and Randall Englund,Creating An Environment for Successful Projects. Copyright 1997Jossey-Bass Inc., Publishers.


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through considering only current capabilities. Manyteams get sidetracked by statements such as "We don'tknow how to do that," effectively curtailing discussionon whether the organization ought to pursue the goaland develop or acquire the capability. Rather, thediscussions at this stage center around organizationalpurpose, vision, and mission. This is a crucial step thatdetermines if the rest of the project selection processcan be successful. In the authors' experience, thoseorganizations with clear, convincing, and compellingvisions about what they should be doing move aheadrapidly. Any lack of understanding or commitment tothe vision by any member of the team leads to frus-tration, wheel spinning, and eventual disintegration ofthe whole process. This pattern is so prevalent thatclarity of the goal or strategy is applied as a filterbefore agreeing to facilitate teams through the process.Organize the projects into categories that will latermake it easier to facilitate a decision-making process.Wheelwright and Clark [14] suggest using grids wherethe axes are the extent of product change and theextent of process change. Some organizations use mar-ket segments. The benefit to this effort is that seeingall projects and possible projects on a continuum al-lows checking for completeness, gaps, opportunities,and compliance with strategy. This might also be agood time to encourage "out-of-the-box" thinkingabout new ways to organize the work. Use creativediscussion sessions to capture ideas about core com-petences, competitive advantage, and the like to deter-mine a set of categories most effective for the organi-zation. For example, the categories might be:

J PROD INNOV MANAG1999; 16:52-64 55

Evolutionary or derivative-sustaining, incremen-tal, enhancing.

Platform-next generation, highly leveraged, and Revolutionary or breakthrough-new core product,process, or business.The actual products in Figure 2 were introduced to

the market over time in alphabetical order and posi-tioning shown. Although the figure represents a retro-spective view, it illustrates a successful strategy ofsequencing projects and products. There is a balancedmix of breakthrough products, such as A, followed byenhancements, B through E, before moving on to newplatforms, F through H, and eventually developing anew architecture and product family with L. At thetime, this strategy was improvisational [J]; it nowrepresents a learning opportunity for planning newportfolios. No one area of the grid is overpopulated,and where large projects exist there are not too manyof them.Another reason to organize projects into these "stra-

tegic buckets" is to better realize what business(es) theorganization is in. Almost every group the authorswork with get caught in the "tyranny of the OR"instead of embracing the "genius of the AND" [2]. Intrying to do too many projects and facing the need tomake tradeoffs among them, the decision becomes thisOR that. In reality, most organizations need a balancedportfolio that creates complete solutions for their cus-tomers. They need to do this AND that. The way toachieve this goal is to set limits on the size of eachcategory and then focus efforts on selecting the bestset of projects within each category. The collective set

.......... Extent of Product Change - ...~New EnhancementNew

tExtent ofProcessChange4ncremental

Next Generation

or PlatformK B . I . E enhancements,Hybrids, and

cweriV:i.

Figure 2. Bubble diagram of a product grid for one HP division. Size of bubble = size of project.


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of categories becomes the desired mix, a way of fram-ing the work of the organization. The ideal percentagethat constitutes the size of each category can be deter-mined from the collective wisdom of the team orperhaps through experimentation. The organizationcan learn the right mix over time but only if it makesa concerted effort to do so.

Within each category, determine criteria that canassess the "goodness"-quality or best fit-of choicesfor the plan. A criterion is a standard on which acomparative judgment or decision may be based. Be-cause the types of projects and the objectives withincategories may be quite different, develop unique cri-teria for each category or have a core set of criteria thatcan be modified. Many teams never get to the point ofdeveloping or clarifying criteria, and they usually wantto discuss projects before agreeing on criteria; revers-ing the order is much more effective.

Several works on research and development projectselection [8,12,13] provide a robust set of criteria forconsideration. Examples include strategic positioning,probability of success, market size, and availability ofstaff. Most important is to identify the criteria that areof greatest significance to the organization; fewer arebetter. However, teams usually need to brainstormmany criteria before focusing on few.The role of each criterion is to help compare

projects, not specify them. Select criteria that canmeasurably compare how projects support the organi-zational strategy. For example, one criterion may bedegree of impact on HP business as interpreted by ageneral manager. On a scaling model from 1 to 10,small impact scores a 2, strong a 6, critical to thesuccess of one business an 8, and critical to the successof multiple businesses a 10. Most likely all proposedprojects meet meaningful specifications and providevalue to the organization. The task is to develop toughcriteria to select the best of the best.

Some organizations use narratives to describe howeach project contributes to the vision; others use nu-merical scores on whether one project is equal, mod-erate, or strongly better than another. It is also helpfulto set thresholds or limits for projects that will beconsidered for the plan. These help to screen outprojects so that later prioritization efforts can focus onfewer projects.Writing a thorough description of each criterion

helps ensure understanding of the intent and expecta-tions of data that must be supplied to fulfill it. Oneteam of three or four people at HP spent 5 daysworking only on the criteria they were to use for


decision-making. And this was only the beginning;they next involved customers in the same discussionbefore reaching consensus and beginning to evaluatechoices. An "Aha" occurred when people found theywere wrong to assume that everyone meant the samething by terms such as packaging; some used widerdefinitions than others did, and the misunderstandingonly surfaced through group discussion. Asked if theselection process ever failed the team, its leader re-plied, "If the results didn't make sense, it was usuallybecause the criteria weren't well defined." Unfortu-nately, most teams do not exhibit the same patienceand discipline that allowed this team to be successful.

One team lost energy at this point; in recognizingthe power that the criteria would exert on projectselection, team members realized they were still notcomfortable with the goal. A time-out was taken toreassess the team's approach. Itwould have been futileto push ahead on details until the big picture was clear.The manager was frustrated that the team did notachieve consensus on criteria during this session, butthe team truly was not ready. Going through the pro-cess with an outside facilitator at an offsite meetinghelps through these rough spots.

Before moving to the next step, the team shouldestablish relative importance among criteria. Assign aweighting factor for each criterion. All criteria areimportant but some more so than others. The examplein Figure 3 is the result of one team's brainstormingsession that ultimately led to selecting four criteria.Breakout groups subsequently defined each criterionwith subcriteria. They also devised scoring methods toapply the criteria. Collectively they then determinedthe respective weighting or importance of each crite-rion (see the Process Tools section for how they didthis). Unlike threshold criteria that "gate" whether aproject is go or no-go, all projects have to satisfyselection criteria to some extent. Weighting of criteriais the technique that can optimize and determine thebest of the best. Another "Aha" that helped teams getthrough the hurdle to develop effective criteria is whenthey realized the task at this point is "weighting, notgating."It is the authors' experience that criteria, while

universally desired, are usually lacking or not formal-ized. One benefit of effective criteria is the shapingeffect it has on behavior in the organization. Whenpeople know how projects will be scored, they tend toshape proposals in positive ways to meet the criteriabetter. A pitfall is when people play games to establishcriteria that support personal agendas. Then it is up to


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LINKING PROJECTS TO STRATEGY J PROD INNOV MANAG1999; 16:52-64 57

Customer Satisfaction (28%) Employee Satisfaction (7%) Improves service levels Improves employee knowledge Results in more consistent and Increases employee efficiency oraccurate information/transactions effectiveness Helps ensure services are Improves work/life balance

delivered as promised & expected Positive impact to employee survey Helps balance workloadBusiness Value (46%) Process Effectiveness (19%) Achieves results that are critical for Enables employees to do thingsa specific window of opportunity right the first time Minimizes risk for implementation Increases the use of technology forand ongoing sustainability service delivery Improves integration and Reduces manual work andrelationships with partners non-value added activities Provides a positive ROI in < 2 yrs Increases employee self sufficiencyAligns with business goals

Figure 3. Sample criteria and weighting, plus subcriteria, developed by one HP team.

the leader to name and question these tactics. Remindpeople to support the greater good of the organization.Significant effort could be devoted to the behavioralaspects that become relevant when deciding upon cri-teria; suffice to say, be warned that this is a touchyarea to approach with sensitivity and persuasiveness.What the Organization Can DoThe next step for the team is to gather data on allprojects. Use similar factors when describing eachproject in order to ease the evaluation process. Engagepeople in extensive analysis and debate to get agree-ment on the major characteristics for each project.This is a time to ask basic questions about product andproject types and how they contribute to a diversifiedset of projects. Reexamine customer needs, futuretrends, commercial opportunities, and new markets.The person consolidating the data should challengeassertions about benefits and costs instead of acceptingassumptions that may have been put together casually.It is important for each member of the team to assessthe quality of the data, looking closely at sources andthe techniques for gathering the data. When puttingcost figures together, consider using activity-basedcosting models instead of traditional models based onparts, direct labor, and overhead. Activity-based cost-ing includes the communications, relationship build-ing, and indirect labor costs that usually are required tomake a project successful.

The team needs to constantly apply screening crite-ria to reduce the number of projects that will be

analyzed in detail. Identify existing projects that canbe canceled, downscaled, or reconceived because theirresource consumption exceeds initial expectations,costs of materials are higher than expected, or a com-petitive entry to the market changed the rules of thegame. The screening process helps eliminate projectsthat require extensive resources but are not justified bycurrent business strategies; maybe the projects wereconceived based on old paradigms about the business.The team can save discussion time by identifyingmust-do projects or ones that require simple go/no-godecisions, such as legal, personnel, or environmentalprojects. These fall right through the screens and intothe allocation process. Determine if some projects canbe postponed until others are complete or until newresources or funding become available. Can projectdeliverables be obtained from a supplier or subcon-tractor rather than internally? Involve customers indiscussions. The team constantly tests project propos-als for alignment with organizational goals.It is not necessary to constrain the process by using

the same criteria across all categories of projects. Infact, some teams found that different criteria for eachcategory of projects was more effective. Also, con-sider adjusting the weighting of criteria as projectsmove through their life cycles. Kumar et al [7] docu-mented research showing that the most significantvariable for initial screening of projects is the extent towhich "project objectives fit the organization'S globalcorporate philosophy and strategy." Other factors,such as available science and technology, become


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significant later during the commercial evaluationstage. A big "Aha" experienced by some teams whenconfronted with this data is that they usually did it theother way around. That explains why they got intotrouble- by focusing on technology or financial fac-tors before determining the link to strategic goals.Cooper (and others before him) report that top-performing companies do not use financial methodsfor portfolio planning. Rather, they use strategic port-folio management methods where strategy decidesproject selection [3]. This lesson is still a hotly debatedone, especially for those who cling to net present valueas the single most important criterion. The difficultylies in relying upon forecast numbers that are inher-ently fictitious. The authors' experience is that teamsget much better results tapping their collective wisdomabout the merits of each project based upon tangibleassessments against strategic goals. Using computedfinancial numbers more often lead to arguments aboutcomputation methods and reliability of the data, lead-ing to unproductive team dynamics.The next part of gathering data is to estimate the

time and resources required for each potential andexisting project. Get the data from past projects, sta-tistical projections, or simulations. The HP ProjectManagement Initiative particularly stresses in its or-ganizational initiatives to get accurate bottom-upproject data from work breakdown structures andschedules. Reconcile this data with top-down projectgoals. Document assumptions so that resource require-ments can be revisited if there are changes to the basis

Many choices (projects)Screen 1: fit to goalsScreen 2: market toosmall, nocompetence,partner available?Screen n: technologyfit, breakthrough,marketing effort.


for an assumption. For new or unknown projects,make a best estimate, focusing first on the investiga-tion phase with the intent to fund only enough work todetermine feasibility. The team can revisit the esti-mates when more information becomes available.Constantly improve estimation accuracy over time bytracking actuals with estimated task durations.Next, the team identifies the resource capacity both

within and outside the organization that will be avail-able to do projects. Balance project with nonprojectwork by using realistic numbers for resource availabil-ity, taking into account other projects, vacations, meet-ings, personal appointments, and other interruptions.Tip: a wise planner consumes no more than about 50%of a person's available time.

One assessment about the quality of projects in aportfolio is to look at the rejects. In a story attributedto HP founder Bill Hewlett, he once established asingle metric for how he would evaluate a portfoliomanager's performance. He asked to see only therejects. He reasoned that if the rejects looked good,then the projects that were accepted must be excellent.All the actions in this step of the process are in-

tended to screen many possible projects to find thecritical few. The team may take a path through mul-tiple screens or take multiple passes through screenswith different criteria to come up with a short list ofviable projects. Figure 4 represents one scenario whereScreen 1 is a coarse screen that checks for impact onthe strategic goal. Subsequent screens apply other cri-teria when more data is available. Any number of

Screen 1(criteria) 0.~.Screen 2 Screen n

Figure 4. Application of criteria screens during a funneling process eliminates the trivial many projects from the critical few thatthe organization can realistically complete.


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screens may be applied, up to the number n, until theteam is satisfied that the remaining projects relate tocompelling business needs. These steps actually savetime because the next section on analysis can get quiteextensive if all possible projects go through it.It usually is necessary to go through several valida-tion cycles before finishing the next step: the upper

management team proposes project objectives, projectteams provide preliminary estimates based on scope,schedule, and resources back to management, manage-ment is not happy with this response and makes ad-justments, and so on. This exercise in due diligence isa healthy negotiation process that results in more re-alistic projects getting through the funnel.

Analyze and Decide on ProjectsThe next step is to compare estimated resource re-quirements with available resources. A spreadsheet isuseful to depict allocation of resources according toproject priority.Part of the analysis is qualitative: Consider the

opportunity costs of committing to short-term, oppor-tunistic, or poorly conceived projects that take re-sources away from future prospects that may be abetter fit strategically. Also, avoid selecting "glamor-ous" new ideas over addressing the tough issues fromongoing projects. Some people lack the stamina todeal with the details of implementation and so areready to jump to a new solution at the slightest glim-mer of hope from the latest technology. This is arecipe for disaster. Also, be careful to balance theimportant projects rather than giving in to urgent, butnot so important, demands.Documenting all the findings and supportive data

using a common set of descriptive factors makes iteasier to compare similar factors across projects. Usea "project charter" form or a template where all infor-mation about each project, its sponsors, and key char-acteristics is recorded.The team can now prioritize remaining projects.

Focus on project benefits before costs; that way themerits of each project get full consideration. Later,include costs to determine the greatest value for themoney. Compute overall return from the set ofprojects, not from individual projects, because someprojects may have greater strategic than monetaryvalue. Requiring each and every project to promise ahigh financial return actually diminishes cooperationacross an organization. For example, a computer sys-

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tern division depends on an interface card from thenetworks division to produce a whole product. But ifthe networks division has other priorities, it may notcommit to developing the card. Such situations requirethe prioritization process to happen higher in the or-ganization. Also, optimize return over time and con-tinuity or uniformity of revenue from the projects.Some future projects must be funded early to ensure arevenue stream when current projects taper off.Using previously agreed-upon criteria and weight-

ing factors, the team compares each project with everyother one within a category. Repeat the process foreach criterion. See the discussion and example later inthis article about using an analytical hierarchy process(ARP) to facilitate this step. Consider using softwareto compute results-an ordered list of projects withineach category. A pitfall to avoid that engenders fearamong the team is showing one list that prioritizes allprojects from top to bottom. People get concernedwhen their project is on the line. It is not fair tocompare internal development projects with highgrossing products; keep them separated and withintheir respective categories.Finally, the team is ready to decide which projects

to pursue. Ask what you should do, not what you cando. Especially in high-tech industries, people are oftentempted to include a new technology without beingsure that customers are interested or will get valuefrom the investment. Be prepared to do fewer projectsand to commit complete resources required by projectsthat are selected. Decide on a mix of projects consis-tent with business strategy, such as 50% platformprojects, 20% derivative projects, 10% breakthroughprojects, and 10% partnerships. Note that these totalonly 90%; taking some lessons from financial portfo-lio management, diversify the set of projects by in-vesting in some speculative projects. The team maynot be sure which markets or technologies will grow,so buy an "option" and make a small investment toinvestigate the possibilities. Include experimentalprojects. It is also important to leave a small percent ofdevelopment capacity uncommitted to take advantageof unexpected opportunities and to deal with criseswhen they arise.Wheelwright and Clark [14] cite an organization

that reduced the number of its development projectsfrom 30 to 11: "The changes led to some impressivegains ...as commercial development productivity im-proved by a factor of three. Fewer products meantmore actual work got done, and more work meantmore products." Addressing an internal project man-


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agement conference, an HP Executive Vice Presidentemphasized the need to focus on doing fewer projects,especially those that are large and complex: "We haveto be very selective. You can manage cross-organiza-tional complex programs if you don't have very many.If you have a lot of them with our culture, it just won'twork. First of all, we need to pick those opportunitiesvery, very selectively. We need to then manage themaggressively across the company. That means havejoint teams work together, strong project managementand leadership, constant reviews, a framework, a vi-sion, a strong owner-all those things that make aprogram and project successfuL" Subsequently, anumber of organizations sought help from the HPProject Management Initiative to systematically re-duce 120 projects down to 30. Another organizationwent from 50 projects down to 17. It appears counter-intuitive, but by prioritizing and more carefully select-ing projects, organizations actually get more projectscompleted.Figure 5 illustrates a document that captures the

output of this process. Record projects that are fully


funded in an aggregate project plan (in-plan). In aseparate section or another document, list projects forfuture consideration (out-plan); also capture and com-municate reasons for delaying or not funding projects.The plan of record (POR) is both a process and a toolused by some organizations at HP to keep track of thetotal list of projects. It lists all projects under way orunder consideration by the entity. Ifa project is fundedand has resources assigned, it has achieved in-planstatus. Projects below the cutoff line of available re-sources or that have not yet achieved priority status areon the out-plan. The figure also categorizes theprojects and specifies the desired mix.

Project managers at HP describe one benefit of thePOR process as identifying gaps between required andactual resources. For flexible changes, the process getsall people into the communications loop. If peoplewant to add something, the management team has todecide what should be deleted. The process helps twodivisions that work together agree on one prioritizedlist instead of two. They utilize direct electronic con-nections for bottom-up entry of projects and resources

1 "; 1-; !( f _ _ . (i [ l- it t : : : : : . 1 : : : : : , :t ' . " T " . . . . . . . . . . . .: '. . . . r

Figure 5. An example plan of record showing the mix of projects in priority order and the time line for each project.

/


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by all project managers into a centralized administra-tion point.Implement the PlanNo job is complete until it is acted upon. The teamneeds to "evangelize" all others in the organization touse the aggregate project plan or POR to guide peoplewho plan work, make decisions, and execute projects.Although it may be countercultural to do so, do notstarve committed projects of the resources they need.The team or the responsible upper managers need toenforce the plan by fully staffing committed projects;that now becomes possible because fewer projects arehappening simultaneously. Also, use the plan to iden-tify opportunities for leverage across projects or forprocess reengineering. Match people skills to projectcategories to tap their strengths and areas for contri-bution.The team or a program management office needs to

maintain the plan in a central place, such as a projectoffice or online. Make it known to, and accessible by,all people in the organization doing projects, subject toconfidentiality requirements. All the work to this pointmay go for naught if the process, the steps, and theresults are not widely communicated.The same people who develop the plan are also the

ones who can best update it periodically, perhapsquarterly or as changes occur. Use tools such as anonline shared database to gather data directly fromproject managers about resources needed for eachproject. This system can be used both to gather datawhen developing the plan and to update it. View theplan as a "living document" that accurately reflectscurrent realities.The challenge for HP and many companies is to

"master both adaptive innovation and consistent ex-ecution ... again and again and again .. .in the contextof relentless change .... Staying on top means remain-ing poised on the edges of chaos and time ... Theseedges are places of adaptive behavior. They are alsounstable. This instability means that managers have towork at staying on the edge" [1]. The advice is clear:the plan is indispensable as a strategic guideline, butdon't fall in love with it! Be prepared to adapt it andto communicate the changes.Process ToolsOne tool that can assist in the decision-making processis the AHP [10]. Because of the interactions among

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many factors affecting a complex decision, it is essen-tial to identify the important factors and the degree thatthey affect each other before a clear decision can bemade. The AHP helps structure a complex situation,identify its criteria and other intangible or concretefactors, measure the interactions among them in asimple way, and synthesize all the information toobtain priorities. The priorities then can be used in abenefit-to-cost determination to decide which projectsto select. The AHP organizes feelings and intuitionalongside logic in a structured approach to decision-making- helpful in complex situations where it isdifficult to comprehend multiple variables together.An individual or team focuses on one criterion at atime and applies it step by step across alternatives. Anumber of sites across HP find value in using AHP.Figure 6 depicts the structure of the hierarchy. The

examples along the right-hand side represent choicesavailable to the HP Project Management Initiative.In another example, a team got together to choose

among a set of services they will offer to customers.More choices were available than the organization hadcapacity to support. After defining organizationalstrategy or product goals, the first task was to identifywhich criteria to enter into the decision-making pro-cess. After give-and-take discussion, they decided thatthe criteria are customer satisfaction, business value,process effectiveness, and employee satisfaction.Next, the criteria were ranked according to priorityby making pairwise comparisons between them.

Which is the more desirable criterion and by howmuch, customer satisfaction or business value? Pro-cess effectiveness or employee satisfaction? Businessvalue or process effectiveness? These questions wereasked about all possible pairs.Each potential project or service then was scored

underneath each criterion, and decisions were madeabout which projects to include in the portfolio, basedupon existing resources. This team went on to create aPOR similar to Figure 5.A detailed explanation for computing the priorityscores and the final rank ordering list can be quitecomplex, involving eigenvalues and eigenvectors, so itis much easier to get a software package (ExpertChoice [4]) that does the computations. As an alter-native, a spreadsheet could be constructed to normal-ize the numbers.This process appears complex and analytical but is

easy when the software handles the computations, andthe management team concentrates on the compari-sons. It is thorough in guiding the team to consider all


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62 J PROD INNOV MANAG1999; 16:52-64 R. L. ENGLUND AND R. J. GRAHAM

Getting to the Shou/d's0 Vivid description

of future stateassociated withportfolio success

0 Importantfactors thatassess &compareprojects'ability toachieve goal

0 Alternatives(existing &potential

Projectsrojects)

~ Improveprojectmanagementacross thecompany

~ Business impact~ Need~ Funding

~ Workshop~ Conferencee Tools~ Process

Figure 6. An analytical hierarchy process, with definitions on the left and examples on the right.

criteria, both emotional and logical, and to apply themto all projects. One team rejected the process as tooanalytical, so be aware that it does not work foreveryone.The key benefit in doing this process is the im-

proved quality of dialogue that occurs among themanagement team members. In facilitating a numberof teams at HP through this process, each one achievedfar more progress than they thought possible. Peopleadmit that they become addicted to the AHP process.They immediately buy the software. The systematicapproach is feasible whether selecting products for aproduct line, projects that comprise a portfolio, or thebest supplier or candidate for a job. In reality, thediscussions are more valuable than the analysis. Theprocess in this case provides the discipline that makesthe dialogue happen.Frame [5] offers an alternative "poor man's hierar-

chy." He puts selection criteria along the side as wellas across the top of a grid. If the criterion on the sideis preferred to the one on the top, put a 1 in the cell.Ifthe criterion on top is preferred, put a 0 in the cell.Diagonals are blanked out where criteria would becompared to themselves. Below the diagonal, putthe opposite value from corresponding cells abovethe diagonal. Then add up the numbers across therows to get total scores, which provide a rank order.One team at HP modified this process to replace the1s and Os with an actual count of how 18 peoplevoted in each pairwise comparison of alternatives.Again, they added up the rows and normalized theresults for a priority order and weighted ranking(Figure 7).This simplified hierarchy is especially helpful for

weighting criteria. It can be used for prioritizingprojects when applied to one criterion at a time. It

Business Customer Technology Employee Total %VotesBusiness *** 16 16 18 = 50 46Customer 2 *** 13 15 = 30 28Technoloqj 2 5 *** 14 = 21 19Employee 0 3 4 *** = 7 7

Figure 7. A simplified hierarchy used by one HP team to weight criteria.


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becomes bulky and less useful when applied to mul-tiple projects over multiple criteria.

Barriers to ImplementationNow for a reality check. The model depicted in thisarticle is thorough, and it integrates objective andsubjective data. When all is said and done, however,people may throw out the results and make a differentdecision. Sometimes the reason is a hunch, an instinct,or simply a desire to try something different. Some-times people have a pet project and use the process tojustify its existence, or a hidden agenda may be atplay-perhaps the need to maneuver among col-leagues, trading projects for favors. Politics at thisstage cannot be ignored, nor are they likely to disap-pear. It is imperative for leaders to become skilled inthe political process. Any attempt at leading change inhow an organization links projects to strategy is boundto meet resistance. The concept receives almost unan-imous intellectual support. Implementing it into theheart and soul of all people in the organization isanother story. It goes against the cultural norms inmany organizations and conjures up all kinds of resis-tance if the values it espouses are not the norm in thatorganization. The path is full of pitfalls, especially ifinformation is presented carelessly or perceived asfinal when it is work in process.

Some people resist because the process is too ana-lytical. Some want decision-making to be purely in-teractive, intuitive, or the purview of a few people. Acomplete process cannot be forced upon people if theorganization has more immediate concerns or unre-solved issues. Resistance occurs when there is nostrategy, the strategy is unclear, or people are uncom-fortable with the strategy. Work on the process maycome .to a standstill when people realize how muchwork is involved to fully link projects to strategy. Ifthe pain is not great enough with the status quo, peopleare not ready to change.When people sense that the leader does not authen-

tically believe in any of the elements, such as thegoals, the process, or the tools, they are hesitant tofollow with any enthusiasm. When the leader lacksintegrity and exhibits incongruity between wordsand actions, people may go through the motions butdo not exert an effort that achieves meaningfulresults.

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Enablers for Effective ImplementationIt is possible to lead people through this change pro-cess if the leader asks many questions, listens to theconcerns of all people involved, and seeks to buildsupport so that people feel they have an active role indeveloping the process [9]. A flexible process worksbetter than a rigid one. Cultivate "champions" whohave the credibility and fortitude to carry the processacross the organization. Believe that change is possi-ble.When the effort appears too massive, one approach

is to go after the low-hanging fruit. Start with one ofthe more pressing issues and use the general conceptsof this model to address it. Still have a vision for whatthe organization ultimately can achieve but understandthat patience and pacing are necessary to get there.Consider also that this process is hierarchical-it

can be applied singularly or collectively, up or downthe organization. A mental model of linking projects tostrategy is like fractals and chaos theory. As a viewermoves through layers, each is a reduced-size copy ofthe whole, exhibiting all its similar but chaotic traits-unpredictable and sensitive to small changes. Theleader invoking this process in action experiences bothorder and disorder. Behavioral patterns appear in ir-regular but similar forms. Amidst unpredictable ac-tions, however, we find patterns of similar behavior.The process or the behaviors do not vary across thelayers as much as the type of projects on which theyare utilized. It is not necessary for every level in anorganization to apply the process, but it is much moreeffective if they do. Be accountable to take actionwhere you are. Expect to work within a realm of"bounded instability" [11]. Each and every team, in-dividual, or organization benefits by using the process.For people who get frustrated when all linkages are

not present, the authors urge teams and individuals toinvoke the power of one and "just do it." Smallchanges in initial conditions have enormous conse-quences. Eventually successes or small wins are no-ticed. The practices start to permeate an organization.This can happen in the middle, move up, and then overto other organizations. Incidentally, a corporate grouplike HP's Project Management Initiative helps facili-tate this transformation. We do this by acting as aconduit for success stories and best practices.

Over the long run, we believe that organizations thatfollow a process similar to the one described increasetheir odds for greater success. This happens becauseteams of people following a systematic process and


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64 J PROD INNOV MANAG1999; J 6:52-64

using convincing data to support their arguments moreoften produce better results than individuals. Theirprojects have more visibility, and the quality of dia-logue and decision-making improve. The power ofusing criteria that are tightly linked with strategy andknown by everyone in the organization is the mitigat-ing effect it has to guide behavior in constructiveways. Having a process means it can be replicated andimproved over time until it is optimized. Italso meansother people can learn the process and coach others,thereby creating a learning organization.

In summary, the successful complete upper man-ager: Knows that projects without strategic emphasis of-

ten end in failure. Develops an upper management team to oversee

project selection. Focuses on the goals of what an organizationshould do before limiting choices by consideringonly what the organization is capable of doing.

Works to develop a system of projects and linksthem to organizational strategy.

Guides the development of consistent criteria thatare used to prioritize projects.

Selects projects based on comparative priority rank-ing of contribution to strategy.

Reduces the total number of projects to minimizepossible disruption. Knows that a system of projects utilizes a commonresource pool and that the pool may be abusedwithout cooperation across the organization.

Develops a system to manage the resource pool andreward interdepartmental cooperation.


Allows unallocated capacity in a resource pool foremergencies and for creativity.

Believes in the power generated by a learning or-ganization.

Creates a model for linking projects to strategy andsupports it with authenticity and integrity.

References1. Brown, S. L. and Eisenhardt, K. M. Competing on the Edge: Strategy

as Structured Chaos. Boston: Harvard Business School Press, 1998.2. CoIlins, J. C. and Porras, 1. I. Built to Last: Successful Habits of

Visionary Companies. New York: HarperCoIlins, 1994.3. Cooper, R. G., Edgett, S. 1. and Kleinschmidt, E. 1. Portfolio Man-

agement for New Products. Reading, MA: Addison-Wesley, 1998.4. "Expert Choice." Pittsburgh, PA: Expert Choice Inc. (see www.exp-

ertchoice.com).5. Frame, 1. D. The New Project Management: Tools for an Age of Rapid

Change, Corporate Reengineering, and Other Business Realit ies. SanFrancisco: Jessey-Bass Publishers, 1994.

6. Graham, Robert 1. and Englund, Randall L. Creating an Environmentfor Successful Projects: The Quest to Manage Project Management.San Francisco: Jessey-Bass Publishers, 1997.

7. Kumar, Vinod, Aditha N.S. Persaud, and Uma Kumar. To terminate ornot an ongoing R&D project: A managerial dilemma. IEEE Transac-t ions on Engineering Management 43(3):279 (August 1996).

8. Martino, 1. R&D Project Selection. New York: Wiley, 1995.9. O'Toole, 1. Leading Change: Overcoming the Ideology of Comfort

and the Tyranny of Custom. San Francisco: Jossey-Bass Publishers,1995.

10. Saaty, T. L.Decision Making for Leaders. Pittsburgh, PA: RWS, 1990.11. Stacey, R. D. Managing the Unknowable: Strategic Boundaries Be-

tween Order and Chaos in Organizat ions. San Francisco: Jossey-BassPublishers, 1992, p. 62.

12. Turtle, Q. C. Implementing Concurrent Project Management. Engle-wood Cliffs, Nl: Prentice Hall, 1994.13. Westney, R. E. Computerized Management of Multiple Small

Projects. New York: Dekker, 1992.14. Wheelwright, Stephen and Clark, Kim. Creating project plans to focus

product development. Harvard Business Review March-Apri l (1992)pp.70-82.

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From Experience - Linking Projects to Strategy