Project Shareholder Value: Alignment with Corporate ... · Project Shareholder Value: Alignment...

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Project Shareholder Value: Alignment with Corporate Strategy PMI Knowledge Sharing Presented by Frank LaRose [email protected] [email protected] LinkedIn July 26, 2017 1-1

Transcript of Project Shareholder Value: Alignment with Corporate ... · Project Shareholder Value: Alignment...

Project Shareholder Value:Alignment with Corporate Strategy

PMI Knowledge SharingPresented by

Frank [email protected]

[email protected]

July 26, 2017

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Discussion Topics

✓ Strategy✓ Definition and Overview ✓ Vision, Mission, Values, Objectives

✓ Project Alignment to Business Strategy✓ Obtain and Apply Knowledge✓ Organizational Structures

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Shareholders vs. Stakeholders

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Any individual or organization that is affected by activities of a business

Company Lifecycle

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Your Company?

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Defining Strategy

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Merriam-Webster

Defining Strategy

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• Big Picture of how the Company is going to Win!!!

• Derived Greek Word: The Art of War...Sun Tzu

• Most Management teams struggle with it!!

• Use the word a lot in Conversations!!!

“The art and science of formulating,

implementing, and evaluating cross-

functional decisions that enable an

organization to achieve its

objectives.”-Strategic Management – 16th Ed.

Fred R. David and Forest R. David

Defining Strategic Management

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Defining Strategic Management

“Strategic management is the management of an organization's resources to achieve its goals and objectives. Strategic management involves setting objectives, analyzing the competitive environment, analyzing the internal organization, evaluating strategies and ensuring that management rolls out the strategies across the organization. …involves identifying how the organization stacks up compared to its competitors and recognizing opportunities and threats facing an organization from within or from competitors.”

- INVESTOPEDIA

- http://www.investopedia.com/terms/s/strategic-management.asp

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✓A strategic plan is a company’s game

plan.

✓A strategic plan signals commitment

to specific markets, policies,

procedures, and operations.

Defining Strategic Management

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✓ The annual business plan specifies actions needed to implement the strategy

✓ Strategy is the broad approach to the achievement of objectives

✓ It starts with the identification and evaluation of strategic objectives

✓ And then summarizes how to fulfill the objectives

✓ Strategic options can be analyzed by using Ansoff’s matrix and Porter’s generic strategies

Strategy

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Strategy formulation

Strategy implementation

Strategy evaluation

Stages of Strategic Management

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Strong Leadership at Top!!!!

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Strategy Formulation

✓ Develop a Vision and Mission

✓ S.W.O.T. Analysis

✓ Establish long-term objectives

✓ Generating alternative strategies

✓ Choosing particular strategies to pursue

Stages of Strategic Management

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Who are we?

Where do we want to go?

How are we going to get there?

Where are we now?

The Strategic-Management Model

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Strategy Formulation Decisions

✓What new businesses to enter

✓ What businesses to abandon

✓ Whether to expand operations or diversify

✓ Whether to enter international markets

✓ Whether to merge or form a joint venture

✓ How to avoid a hostile takeover

Stages of Strategic Management

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Ansoff Matrix

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Strategy Implementation

✓ Establish Annual Objectives

✓ Devise Policies

✓ Motivate employees

✓ Allocate Resources

Stages of Strategic Management

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Strategic Competitive Advantage

Competitive Advantage – Definition

✓Advantage over competitors gained by offering customers greater value by:

✓lower prices or

✓providing greater benefits and service that justifies higher prices.

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Competitive Strategies

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Strategy - Differentiation

✓Selecting one or more criteria used by buyers in a market ✓Positioning the business uniquely to meet those

criteria. ✓Usually associated with charging a premium price✓Higher production costs ✓Extra value-added features for the consumer ✓Covers the additional production costs✓Customers get clear reasons to prefer over less

differentiated products.

✓Examples of Differentiation Strategy: Mercedes cars; Bang & Olufsen; Lexus; Rolex

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Strategy – Cost Leadership

✓ Objective: to become the lowest-cost producer in the industry ✓ Emphasis placed minimizing costs ✓ If selling price can equal (or near) the average for the market,

then the lowest-cost producer will (in theory) enjoy the best profits.

✓ Large-scale businesses offering "standard" products with relatively little differentiation - acceptable to the majority of customers.

✓ Occasionally, a low-cost leader will also discount its product to maximize sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share.

✓Examples of Cost Leadership: Nissan; Tesco; WalMart; IKEA

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Strategy – Focus (Niche)

✓ Business aims to differentiate within just one or a small number of target market segments.

✓ Special customer needs of the segment✓ Opportunities to provide different products from competitors

targeting a broader group of customers✓ Customers really do have different needs and wants –

✓ Valid basis for differentiation - and that existing competitor products are not meeting those needs and wants.

✓Examples of Niche Focus: any successful niche retailers; (e.g. The Perfume Shop); or specialist holiday operator (e.g. Carrier)

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Strategy – Cost Focus

✓Business seeks a lower-cost advantage in small number of market segments. The

✓Product will be basic –✓Perhaps a similar product to the higher-priced

and featured market leader, but acceptable to sufficient consumers. Such products are often called "me-too's".

✓Examples of Cost Focus: Many smaller retailers featuring own-label or discounted label products.

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Global Strategy

✓ Strategies designed to enable an organization to achieve its objective of international expansion

✓ International Strategy: Primarily the home market.✓Competitive advantage and strategy – home market

✓Multinational strategy: number of markets beyond home market.✓Competition is developed separately in each country.

✓ Global strategy: treats the world as one large market and one source of supply.✓Competition is developed on a global basis

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Strategy Evaluation

✓ Determining which strategies are not working

well

✓ Three fundamental activities:

➢ Reviewing external and internal factors

that are the bases for current strategies

➢ Measuring performance

➢ Taking corrective actions

Stages of Strategic Management

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Value Chain

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✓Availability of capital can no longer be

taken for granted.

✓Consumers expect green operations and

products.

✓Marketing is moving rapidly to the Internet.

✓Commodity food prices are increasing.

✓An oversupply of oil is driving oil and gas

prices down.

Some Opportunities and Threats

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Profitability

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✓Proactive in shaping firm’s future

✓Allows firm to initiate and influence (rather

than just respond to) activities

Benefits of Strategic Management

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Benefits to a Firm That Does

Strategic Planning

✓ Financial

✓ Nonfinancial

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✓Enhanced awareness of external threats

✓Improved understanding of competitors’

strategies

✓Increased employee productivity

✓Reduced resistance to change

✓Clearer understanding of performance–

reward relationships

Nonfinancial Benefits

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✓ No formal training in strategic management

✓ No understanding of or appreciation for the benefits of planning

✓ No monetary rewards for doing planning

✓ No punishment for not planning

✓ Too busy “firefighting” (resolving internal crises) to plan ahead

✓ View planning as a waste of time, since no product/service is made

Why Some Firms Do No Strategic

Planning

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✓Laziness; effective planning takes time and effort; time is money

✓Content with current success; failure to realize that success today is no guarantee for success tomorrow; even Apple Inc. is an example

✓Overconfident

✓Prior bad experience with strategic planning done sometime/somewhere

Why Some Firms Do No Strategic

Planning

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✓ Using strategic planning to gain control over decisions and resources

✓ Doing strategic planning only to satisfy accreditation or regulatory requirements

✓ Too hastily moving from mission development to strategy formulation

✓ Failing to communicate the plan to employees, who continue working in the dark

✓ Top managers making many intuitive decisions that conflict with the formal plan

✓ Top managers not actively supporting the strategic-planning process

✓ Failing to use plans as a standard for measuring performance

Pitfalls in Strategic Planning

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✓Delegating planning to a “planner” rather than involving all managers

✓Failing to involve key employees in all phases of planning

✓Failing to create a collaborative climate supportive of change

✓Viewing planning as unnecessary or unimportant

✓Becoming so engrossed in current problems that insufficient or no planning is done

✓Being so formal in planning that flexibility and creativity are stifled

Pitfalls in Strategic Planning

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Vision, Mission, Values, Objectives

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Mission

What is a 'Mission Statement’

✓ A mission statement is a short sentence or paragraph used by a company to explain, in simple and concise terms, its purposes for being. These statements serve a dual purpose by helping employees to remain focused on the tasks at hand, as well as encouraging them to find innovative ways of moving towards an increasingly productive achievement of company goals. It is not uncommon for the largest companies to spend many years and millions of dollars developing and refining their mission statement, with many of these mission statements eventually becoming household phrases.

INVESTOPEDIAhttp://www.investopedia.com/terms/m/missionstatement.asp

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Mission

What does a mission statement include?

✓ A good mission statement answers several key questions about your business:

➢What are the opportunities or needs that the company addresses?

➢What is the business of the organization? How are these needs being addressed?

➢What level of service is provided?➢What principles or beliefs guide the organization?

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Example Mission Statements:

✓ Nike: "To bring inspiration and innovation to every athlete in the world.”

✓ Starbucks: "To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”

✓ Chevron: "To be the global energy company most admired for its people, partnership and performance.”

✓ Amazon: "To be the most customer-centric company in the world, where people can find and discover anything they want to buy online.”

✓ Intel: "Delight our customers, employees and shareholders by relentlessly delivering the platform and technology advancements that become essential to the way we work and live.”

✓ eBay: "Provide a global trading platform where practically anyone can trade practically anything."

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Mission vs. Vision

Mission Statement

✓ A mission statement has a more 'present day' focus and really describes how a company plans on achieving its objectives. This is really a statement to employees, shareholders, and others with an interest in the organization that clearly articulates what an organization is doing, how it's going to do it, and ultimately why it's doing it.

Vision Statement✓ A vision statement has more to do with the future and really describes what an

organization plans or hopes to be in the future. This is more of an inspirational or motivational statement that is meant to drive employees and also clearly demonstrate an organizations goals to stakeholders (customers, investors, etc.).

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Values

✓The operating philosophies or principles that guide an organization’s internal conduct and relationship with its customers, partners and shareholders.

✓Core Values are usually summarized in the mission statement or company’s core values.

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Objectives

✓Overall direction and plan of the company…

✓Marketing Plan follows

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✓ Tactics are designed for the short term

✓ Tactics are the details within the overall the strategy

✓ The details include what, where and how activities will take place to accomplish a goal

Examples:

✓Promotional mix

✓Pricing policy

✓Production plan

✓ These details will be contained in programs and budgets and will eventually be translated into action plans

Tactics

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“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before the defeat” (Sun Tzu, The Art of War)

✓ Strategy: the broad approach to achievement of objectives over the long term

✓ Tactics: detailed filling-in of measures designed to contribute to the strategy. Designed to achieve short term goals

Strategy vs. Tactics

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✓ Implementation of the plan

✓Remember: Greatest strategy is useless without proper implementation

✓ This stage involves:

✓Action plans

✓Detailed budgets

✓Project Management✓ Initiating, Planning, Executing, Monitoring & Controlling, Closing

✓Putting the strategy and tactics into action

Action

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✓What is to be done?

✓How is it to be done?

✓ By whom is it to be done?

✓Who is responsible for making sure it is done?

✓ By when is it to be done?

Special Thought: “Planning without action is futile, while, Action without planning is fatal.”

Action Plans

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✓ Budgets play a key role in planning

✓ Usually presented in spreadsheet:✓ Expected sales or cash inflow

✓ Expected and planned expenditures

✓ Discretionary spending…such as promotions

✓ Caps on spending

✓ Facilitation and monitoring of spending (monitor and Control)

Budgets

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✓Control Mechanisms

✓Gantt Charts

✓Budgets

✓Management Information System (MIS)

Monitor and Control

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Objectives

✓Overall direction and plan of the company…

✓Marketing Plan follows...

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Management by Exception

✓ Review of Data and Reports✓Compare Actuals against Plans✓Deviations…require investigation and actions

✓ Manage by Exception: leave matters to subordinates...intervene when evidence of plan deviations

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Advice to Managers

✓Monitor for success - not control for its own sake

✓ Only intervene where deviation is substantial

✓ Feed back results to allow subordinates to correct minor deviations

✓ Keep a focus on strategic goals

✓ If you micro-manage you will not be able to see the forest from the trees

✓Monitor selectively

✓ Focus on variables that of great significant and those that provide early warning of major problems

✓ And always avoid paralysis by analysis1-52

Evaluation and Modification

✓Monitor for success - not control for its own sake

✓ Only intervene where deviation is substantial

✓ Feed back results to allow subordinates to correct minor deviations

✓ Keep a focus on strategic goals

✓ If you micro-manage you will not be able to see the wood for the trees

✓Monitor selectively

✓ Focus on variables that of great significant and those that provide early warning of major problems

✓ And always avoid paralysis by analysis1-53

Project, Program and Portfolio Management

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PM Power – Corporate Strategy• DO NOT determine Strategy• Need to understand it!

Know your Organizational Structure:• Traditional (Strategic Goals, Corp Initiatives,

Org Functions, Tactile Ops)• Project Driven (Strategic Goals, Programs,

Projects, Activities)

PMs

Obtain and Apply Knowledge

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Align your project(s) to the Business Strategy

10K, 8Q…Annual Reports

Company Meetings – Executive State of the Union

Mission, Vision, Value Statements

Know the Industry

Sit at the table with your Business Leaders and Executives

Understand Market Trends…changes in Requirements...Realignment...Be Agile

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✓Competitive Advantage

➢ S.W.O.T

➢ Differentiation

✓Competitive Advantage

✓ Strategists

✓ Vision and Mission Statements

✓ External Opportunities and Threats

✓ Internal Strengths and Internal Weaknesses

Key Terms in Strategic

Management

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Long-Term Objectives

Strategies

Annual objectives

Policies

NPV

Shareholder Value

Stakeholder

Income Statement

Balance Sheet

Cash Flow

EPS

ROI

IRR

Net Value

Net Present Value

Strategy

Company Maturity Level

Strong Leadership team

Competition

Mission Statement

Vision

Key Terms in Strategic

Management

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Mission StatementValue StatementProduct or ServiceIndustryProduct maturity10kMarketing StrategyOperations StrategyFinancial StrategyHR StrategyPMO Portfolio Mgt.Earned Value Mgt.Triple Constraint (Time, Scope, Budget)Project CharterTarget MarketSegmentationGeographicDemographicsPsychographics

Strategy Occurs at Multiple Levels

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• Business Strategy• Industry• Positioning

• A Diversified Company may have multiple Strategies (different Businesses)

• Corporate Strategy• Bringing together some of the Business Strategies

under a portfolio