The failure of strategic planning

Projects struggling for management support are one of the key indicators of a sub-standard value creation system that is failing to make full use of the deliverables created by projects and programs. But the problem is likely to be much deeper; surveys consistently show that between 15% and 80% of projects undertaken by organisations cannot be linked to the performing organisations strategy . These ‘feral projects’ are either symptoms of inadequate governance, or symptoms of inadequate strategic planning!.

In many organisations, and particularly in business areas focused on system support such as IT the typical path taken by an innovative idea through to some confused delivery of value is a straight line from the innovation, to a business case, to a project that has to seek management support and the surviving projects eventually deliver their outputs to a bunch on unprepared and unwilling end users. The generation of value is far from certain!

Over the last few years, Portfolio Management has started to emerge. Portfolio management should have a strategic focus and make selections based on strategic priorities but in most current implementations tends to be a process oriented, stand alone function. Certainly by applying capacity constraints the number of projects that fail due to lack of organisational resources will be reduced but the focus on value creation is minimal. Management support and organisational change are not central to the process. There is literally a ‘fence’ between the executive ‘strategic planning’ processes and innovation within the organisation.

Most authorities describe project and programs as the ‘change agent’ responsible for creating the ability to implement strategic initiatives to grow and improve the organisation. For this to occur, the strategic planning system needs to be far more engaged with the organisation and central to the process of innovation, guided and supported by the organisations executive!

Within a value driven framework, the strategic planning process should be central to innovation, initiating work to develop prospective ideas, and receiving all of the innovative ideas to enhance the organisation from every source. Innovative organisations such as Google actively encourage innovation and experimentation within parameters but have careful selection processes before burning money on significant projects. They are also prepared use the innovative ideas to inform strategy, and to take significant strategic risks if an innovation warrants the speculation on a ‘whole new future’ for the organisation.

Within this framework, the evolution of the strategic plan is a cyclical process, possibilities and ‘blue sky’ ideas are communicated to the governing body, who formulate, review and update the overall strategic guidelines as new ideas and possibilities emerge.
However, my feeling is there is a tactical level missing from strategic thinking that will be needed for this process to work effectively. The overarching ‘strategic guidance’ needs to be fairly stable and take a long view and only be updated as needed (possibly twice a year). Based on this strategic guidance, a detailed strategic plan is developed at a ‘tactical level’, to frame the current implementation of the strategy. This process needs more rigour and more flexibility (the two are not mutually exclusive) compared to the high level plan, should only take a medium term view and be updated continuously. Based on this plan, feasible ideas that support the strategy are authorised for the development of a value oriented business case.

The creation of this flexible but rigorous tactical-level strategic process would place the ‘plan’ at the forefront of processes such as Portfolio Management and virtually eliminate feral projects.

Portfolio management also has a central role to play. The current strategy informs the portfolio selection process, and information on current projects and programs, the viability of assessed business cases and other consolidated information is absorbed back into the strategic planning process. Based on these factors, the key job of the portfolio managers is to select the most strategically important business cases, within the capacity limitations of the organisation, for initiation as a project.

The role of management is firstly to implement the executive guidance by supporting the Portfolio Management processes and the selected projects. More importantly, management is also responsible for managing the organisation so that the necessary change initiatives are implemented to make effective use of the project deliverables to generate valuable returns over the life of the initiative, frequently a period of many years!

Developing a value driven system similar to the one described in this post is primarily a governance issue. The organisations directors and executives need to lead the process and be closely involved in the strategic management of the organisation.

Strategic planning also needs to evolve from a fluffy ‘high level’ process to a far more useful function that actually sets the strategy for the organisation’s management to implement. Within this framework, the organisations governance systems and leadership need to ensure their management support the process and are focused on creating value.

The Value Chain

However, the value creation chain is only as strong as its weakest link, which includes effective strategic planning supported by effective governance that ensures management support for the overall process. A clear indication the strategic governance processes are not working is when projects and programs have to fight to receive executive support to ‘exist’ and the organisation’s measure of success is limited to the ‘iron triangle’ of time, cost and scope focused at the end of the project.

Successful organisations focus on the more difficult, but more important measures of benefits realised and the value created for the organisation as a result of the project deliverables being used by the organisation to support its strategic initiatives and generate lasting improvements.

Most of the work needed to make this process work is in management areas outside of the traditional Portfolio, Program and Project management (PPP) arena. But no organisation will achieve the optimum results from its PPP initiatives without the front and back ends of the overall value chain being of equal ‘strength’.

This is not rocket science, many successful organisations, particularly in mining and engineering achieve this type of integration in their core business. For more on the governance aspects see: Mosaic WP1073 – Project Governance.  

For more on the overall project delivery capability see: Mosaic WP1079 – Project Delivery Capability.

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9 Responses to The failure of strategic planning

  1. drpdg says:

    Lynda,
    Are you familiar with the AACE’s “Total Cost Management Framework” (TCMF)? http://www.aacei.org/resources/tcm/

    Although poorly named, the TCMF was developed back in the 1950’s by either Diamond Shamrock or Esso Oil and is still in use today my all the major oil companies.

    This model is, to my knowledge, the ONLY model that fully integrates Asset Management, Operations (Program) Management and Project Management into the model you are describing.

    BR,
    Dr. PDG, Jakarta, Indonesia
    http://www.build-project-management-competency.com

    • stakeholdermanagement says:

      The problem I am seeing is not based around solutions – they exist or can be developed, rather the lack of appreciation of the need to invest in appropriate processes at the governance and executive levels of most organisations, both government and private. Most ‘boards’ simply don’t get involved in requiring effective systems.

      Where there are $millions, if not $billions at risk the approach to project initiation is far more disciplined for the most part; this includes mining, oil and gas (with exceptions such as BP’s Deepwater Horizon). The question is how do you get other organisational leaders to sign onto the disciplines needed to stop wasting money????

  2. Max Wideman says:

    The really important thing here is to create cheeky little graphics to convey the message . . .

  3. Yadav Lal bhattarai says:

    It is quite good for us to learn, since giving good idea to be member in an Organization. Thank you very much

  4. […] The failure of strategic planning (stakeholdermanagement.wordpress.com) […]

  5. […] In the area of strategic change, doing the ‘right project right’ is woefully inadequate. An effectively governed and managed organisation starts with a well defined strategy, and manages each selected project or program through the organisational changes needed to make full use of the outputs to the maximisation of the benefits realised; recognising that in a changing world, the potential benefits will be changing throughout the whole life of the initiative and adapting to optimise the overall outcomes (for more on this see: The failure of strategic planning). […]

  6. Great post! and thanks for bringing us the “feral project.” Great new term to add to our glossary…I’m serious this puts an important concept in stark terms. Keep it up…looking foward to reading your archive and new posts.

  7. Pentti Ruutu says:

    Strategic planning sometimes could be not perfect but that is not a problem for some businessman because we all know that if you have a good management you the strategic plan has a second plan that make sure of it,in Finland most of the business are manage very well not only for a project but also for product.

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