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Aligning & Prioritizing Projects With Corporate Strategy Using

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Presentation on theme: "Aligning & Prioritizing Projects With Corporate Strategy Using"— Presentation transcript:

1 Aligning & Prioritizing Projects With Corporate Strategy Using
Balanced ScoreCards Pankaj Bhawnani Senior Consultant, Project Management Fujitsu Consulting (Canada) Inc. PMI Dinner October, 2007

2 Outline Introduction What are we trying to solve? Why? How? Case Study
Problem Why? Solution Case Study Observation Outline Introduction What are we trying to solve? Why? How? Case Study Observations

3 Contact Information Pankaj Bhawnani Blog: 3

4 Introduction Doing the right projects vs. performing projects right
Which projects should I do so that: Achieve alignment with Corporate Strategy Balance various stakeholder opinions Optimal use of resources and budget Take into consideration interdependencies between projects Minimize Risk Profile Maximize Return on Investment Achieve Transparency in Decisions

5 Problem Projects Prioritize Corporate Strategy Stakeholders
Year 1 Year 2 Year 3 Resources and Budget Interdependencies Risk Profile

6 Why Do We Care? Survey on 507 companies on their management practices
53% of the CIOs say that their project prioritization is politically driven Only 68% agree that all the necessary business stakeholders are involved in setting project priorities Only 40% of the CIOs say that their companies use a portfolio management approach Source: CIO Insight Research Study on Project Management, 2004 Briefly mention the objective of the framework here…Just a single slide to introduce the goals of the framework. Then, SoRPES is later presented as an instantiation. Before then, EBEAM is presented as one of the tools employed in the framework

7 Why Do We Care? Alignment with strategic objectives
Inefficient use of Resources Avoidance of low value projects Consensus needed for executing a project Sarbanes Oxley Act  Transparency of Financial Decisions What to decide? Who decides? How to decide? (in the best interest of the company and their stakeholders) 7

8 Value of a Disciplined Process
Yes, there is a formal process in place. 62% 33% 5% 1% There is no formal Process, but we do Discuss this issue Frequently enough. 23% 58% 16% 3% No, it only comes up for major projects or initiatives. 8% 44% 39% 3% 6% No, it rarely if ever Is considered. 40% 50% 10% 20 40 60 80 100 Budget closely aligned with strategy. Budget somewhat aligned with strategy Budget poorly Budget does not support strategy. Budget works Against strategy. Source: Ventana Research 8

9 What did I do?

10 Solution OPTIMIZATION MODELING WHAT-IF SCENARIOS 10
START OPTIMIZATION Maximize Objective Function New Business Ideas Defined ScoreCard Objectives & Investment Criteria of an Organization Internal Process Financial Customer Growth Learning & Growth Vision & Strategy YEAR 1 YEAR 2 YEAR 3 Align Projects with Corporate Strategy Measure Each Project Priorities & weights WHAT-IF SCENARIOS Dependencies & Constraints Cost & Business Case Trade-off parameters Evaluate alternatives Bi-objective Release Planning Model F2(x) Objective Criteria Satisfactory? No F1(x) Subjective Criteria Yes Choose Plan 10 END

11 Balanced Score Card A strategic Measurement and Strategic Management System which attempts to reconcile traditional financial measures with more forward looking, non-financial measures Employees can only implement a strategy when they clearly understand it, and what’s their role in achieving company’s strategic objectives Balanced Score Card was developed to bring strategy down to employees and help the whole organization in Alignment Top-down guidance with bottom-up execution Implementing a feature or change requests requires the developers to first develop an understanding of the system Architectural design that adheres to tested design principles and practices would facilitate this understanding better than would an architectural design that does not follow such principles 11

12 Balanced Score Card – Contd.
FINANCIAL “To succeed financially, how should we appear to our shareholders?” Objectives Measures Targets Initiatives CUSTOMER “To achieve our vision, how should we appear to our customers?” Objectives Measures Targets Initiatives INTERNAL BUSINESS PROCESSES “To satisfy our shareholders and customers, what business processes must we excel at?” Objectives Measures Targets Initiatives Vision & Strategy INNOVATION AND LEARNING “To achieve our vision, how will we sustain our ability to change and improve?” Objectives Measures Targets Initiatives 12

13 Financial? What should our balance sheet look like? To succeed financially, how should we appear to our shareholders? Revenue growth rates Cost reduction Asset utilisation Project profitability Growth Maturity Harvesting Financial objectives tend to be influenced by the organization's position on the life-cycle curve. 13

14 To achieve our vision, how should we appear to our customers?
Market Share Customer Retention Profitability Satisfaction Acquisition To achieve our vision, how should we appear to our customers? Product / Service Attributes Customer Relationship Image and Reputation our customers What do value most? Organisational sub-units may have internal clients. 14

15 Internal Business Processes?
Improve quality Reduce cycle times Maximise production Maximise throughput Reduce cost per process Reduce cost per transaction To satisfy our shareholders and customers, what business processes must we excel at? core competencies CUSTOMER NEED SATISFIED SERVICE THE IDENTIFIED CREATE PRODUCT/ OFFERING BUILD THE PRODUCTS/ SERVICES DELIVER IDENTIFY MARKET Innovation Process Operations Process Customer Service 15

16 To achieve our vision, how will we sustain our ability to change and
Learning and Innovation? To achieve our vision, how will we sustain our ability to change and Employee capabilities Information system capabilities Motivation Empowerment Alignment Internal & External R&D Highlight gaps in employee skills and information systems. 16

17 Graph of Project Portfolios
Optimization Projects Graph of Project Portfolios Objective criteria + P1 P1 P2 P3 P2 * * P3 P5 P4 P4 P6 P7 * Project Dependencies + + + Subjective Criteria 17

18 The Revenue Growth Strategy The Productivity Strategy
Strategy Map The Revenue Growth Strategy The Productivity Strategy “Improve stability by broadening the sources of revenue from current customers” “Improve operating efficiency by shifting customers to more cost-effective channels of distribution” Improve Returns Financial Perspective Improve Operating Efficiency Broaden Revenue Mix Increase Customer Confidence in Our Financial Advice Increase Customer Satisfaction Customer Perspective Internal Perspective Understand Customer Segments Develop New Products Cross-Sell the Product Line Shift to Appropriate Channel Minimize Problems Provide Rapid Response Increase Employee Productivity Learning Perspective Develop Strategic Skills Access to Strategic Information Align Personal Goals 18

19 Case Study - Transportation
Strategy Map Strategic Theme: Operating Efficiency Objectives Fast ground turnaround Statement of what strategy must achieve and what’s critical to its success Measurement On Ground Time On-Time Departure How success in achieving the strategy will be measured and tracked Target 30 Minutes 90% The level of performance or rate of improvement needed Cycle time optimization Key action programs required to achieve objectives Initiative Financial Profitability Lower Costs Increase Revenue Customer Flight is on time Lowest prices Internal Fast ground turnaround Learning Ground crew alignment 19

20 Case Study–Define Score Card
Financial = 40% of the balanced approach ROI = 20% of financial Criteria 1 out of 5, ROI < % 2 out of 5, ROI 15 – % 3 out of 5, ROI 25 – % 4 out of 5, ROI 45 – % 5 out of 5, ROI > 65 % NPV = 20% of financial criteria 1 out of 5, NPV = negative 3 out of 5, NPV = $1 to $500,000 5 out of 5, NPV = > $500,000 Pay Back Period = 20% of financial criteria 1 out of 5, PBP >3 years 2 out of 5, PBP 2 – 3 years 3 out of 5, PBP 1 – 2 years 4 out of 5, PBP 6 months – 1 year 5 out of 5, PBP < 6 months 20

21 Define Score Card - Financial
Supports Incremental Revenue =20% of financial criteria 1 out of 5 , no incremental revenue 3 out of 5 , 0 – 5 % RASM over and above natural growth 5 out of 5 , > 5 % RASM over and above natural growth Supports Cost Reduction = 20% of financial criteria 1 out of 5 , no cost reduction 3 out of 5 , adjusted CASM stays the same through natural growth. 5 out of 5 , decreases CASM 21

22 Define Score Card- Customer
Customer = 20% of balanced approach Project delivers sustained improvement to the customer experience weighted at 40% of Customer Criteria 1 out of 5 = negative impact to guest experience 3 out of 5 = maintains guest experience or not applicable 5 out of 5 = improves guest experience Project provides improvement to consistency of customer experience and consistency of service weighted at 30% of customer Criteria 1 out of 5 = project splits service (creates channel inconsistency, inconsistent guest experience across touch points) 3 out of 5 = project maintains status quo or not applicable 5 out of 5 = project aligns & improves service offering (channel consistency, aligns experience across touch points) Project implementation gives access to new markets and/or new customers 1 out of 5 = No 5 out of 5 = Yes 22

23 Define Score Card – Internal Process
Internal Business Process = 20% of balanced approach Project improves service/product delivery processes, ie. Customer experience, safety, sales, route scheduling, OTP etc. Weighted at 60% of the Internal Process criteria 1 out of 5 = negative impact to processes 3 out of 5 = no impact or not applicable 5 out of 5 = improves processes Project improves corporate support processes i.e. hiring, accounting, etc. Weighted at 40% of the Internal Processes criteria 23

24 Define Score Card Learning & Innovation = 20% of balanced approach
Project supports recruitment and retention of people Weighted at 30% of Learning & Growth Criteria 1 out of 5 = negative impact to recruitment and retention 3 out of 5 = maintains current or not applicable 5 out of 5 = positive impact to recruitment and retention Project improves alignment of corporate success with personal success (rewards and recognition ) Weighted at 30% of Learning & Growth Criteria 1 out of 5 = negative impact to alignment of success 5 out of 5 = positive impact to alignment of success Project provides our people with tools required to do the job Weighted at 40% of Learning & Growth Criteria 1 out of 5 = negative impact, manual or inefficient processes 5 out of 5 = positive impact in providing tools required 24

25 Case Study -Optimization
Demo 25

26 What-if Analysis What amount of resource would be needed to allow
execution of top projects? 26

27 What-if Analysis Which projects seem to be most attractive? 27

28 What-if Analysis Which projects are most attractive for stakeholders?
28

29 What-if Analysis Stakeholder Similarity Analysis 29

30 Observations By connecting balanced score card directly with project management, we’re directly linking strategy with tactical execution Helps communicate the value of operational activities Make strategy a continuous process Bringing stakeholders together for consensus Effective leadership Strategic planning is at best about posing questions more than attempting to answer them Balanced Score Card should be implemented as a project and buy-in is critical If you can’t measure it, you can’t manage it 30

31 Key References Alleman, Glen B., “Using Balanced Scorecard to Build a Project Focused IT Organization” (CH2M HILL), 2003 Benson, Robert J., Bugnitz, Thomas L., Walton, William B., From Business Strategy to IT Action: Right Decisions for a Better Bottom Line, John Wiley & Sons, 2004 Bower, Joseph L., Gilbert, Clark G., From Resource Allocation to Strategy, Oxford University Press, 2006 Cokins, Gary, Performance Management: Finding the Missing Pieces (to Close the Intelligence Gap) (SAS Institute Inc.) John Wiley & Sons, 2004 Kaplan, Robert S. and Norton, David P.,”The Balanced Scorecard: Measures that Drive Performance,” Harvard Business Review, 1992 Kaplan, Robert S. and Norton, David P., “Putting the Balanced Scorecard to Work", Harvard Business Review, 1993 Kaplan, Robert S. and Norton, David P.,”Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review, 1996 Niven, Paul R., Balanced Scorecard Step-by-Step John Wiley & Sons, 2002 Porter, Michael E., Competitive Strategy, Simon & Schuster, 1998 31

32 Questions? A Final Thought - Paul Nitze
“One of the most dangerous forms of human error is forgetting what one is trying to achieve.” - Paul Nitze


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