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BEST PRACTICES

Close the Gap between Projects and Strategy

by Lauren Keller Johnson
IF YOUR COMPANY is like most, it's tackling increasingly more projects that consume expanding levels of precious resources but fail to generate commensurate business results. In Connecting

ognize the relationships among distinct projects and align them with corporate strategy. Some companies are already finding success in doing so.

The Need for Alignment

Companies' proliferation of projects has been driven and complicated by two trends: (1) an increasing reliance on intangible assets such as technology, information flows, and relationships; and (2) a decreasing reliance on land, minerals, and other tangible resources. Today's projects include not only new product and channel initiatives but also efforts to improve processes (Six Sigma, for example) and drive major cultural change. In addition, more companies now take a project-based, team-oriented approach to getting work done. In most organizations, the complexity and diversity of projects make a clear project strategy all the more compelling while magnifying the challenge of executing on that strategy. The hurdles to effective project-portfolio management take several forms, all of which relate to how well a company's projects align collectively with the corporate strategy, reinforce one another, enable adaptability, and inspire executives and employees.

the Dots: Aligning Projects with Objectives in Unpredictable Times (Harvard

Business School Press, 2003), Cathleen Benko and F. Warren McFarlan maintain that every year U.S. companies spend roughly $2.3 trillion on projects, which are defined as efforts that have a discrete beginning, end, and deliverable. And yet the vast majority of companies don't have a strategy for managing their projects to capture their full value and effectively map them to organizational needs. The consequence? Over the past five years, it has generated nearly $1 trillion

Management Associates in San Carlos, CaJjf., notes, many firms also see managers' and employees' enthusiasm for projects fizzle as inefficiencies, lack of closure, and other frustrations "bleed off" energy. "People conclude that the next project in the pipeline won't work, just like the previous one didn't;' he says. Why is project-portfolio alignment so hard? Part of the problem, Benko says, is that "while a company's strategic intent comes from the top, projects start in the middle. They're budgeted by function or department, so the managers working on those projects see only small pixels of the bigger picture. And people can respond only to what they see." Fewer than 15%of employees, Benko continues, can state their company's strategic goals. "If you can't articulate the strategy:' she says, "you can't make smart decisions about which projects to take on. Lack of clarity also leaves lots of room for interpretation of the company's strategic intent:' Benko also believes that executives approve new projects on a too-absolute basis because they use too-few criteria in determining whether an effort is a good idea or a bad one. For example, when

The hurdles to effective project-portfolio management always relate to how well a company's projects align with corporate strategy.
in underperforming investments in the United States alone, the authors note. What explains this phenomenon? Companies are launching an increasingly wider range of project types as well as a far higher number of projects than in previous decades, according to Benko. And so now the pressure is on. Companies must rein in and give focus to their ever-more-disparate array of pro]ects, Benko and McFarlan maintain, by managing them in portfolios that recSome companies find that the cumulative impact of their efforts and initiatives doesn't move them any closer to strategic goals. For other companies, projects work at cross-purposes or are duplicated by managers unaware of one another's efforts. For still others, project selection can backfire and doesn't improve a company's ability to adapt to external business changes quickly and smoothly. And as Howard Goldman, a partner at choosing projects, executives might consider only return on investment. Or they might feel compelled to take a democratic approach (e.g., "We'U fund the three most-promising human resource initiatives and the three best-sounding finance projects"). Result? None of the executives see the big picture. So how can companies surmount these obstacles to ensure that their projects collectively support the corporate strategy, achieve efficiencies, and posi-

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tion the company to adapt to the future? Consider these approaches:

1. View Your Projects through a "Strategy Lens"

Benko contends that "if you want to find out where your company is going to be three to five years from now, don't look at your stated strategy. Instead, look at your project portfolio. That's where you're making your investments, and

Gibson clustered the 400 initiatives into eight strategic categories and then rated each project in terms of how closely it supported corporate objectives, such as enhancing service delivery, boosting top-line revenues, and reducing costs. Based on the ratings, he targeted projects for revitaLization or rejection, and identified needed new initiatives. He then assigned a process team to manage each project category.

technologies, project-portfolio steering committees and program managers, and disciplined cross-function communication all belp.

Project-Portfolio Modeling Software

The Fairfax, Va.-based defense contractor Anteon Corporation uses Metier's project-portfolio management software to model performance data from past

While companies can't build a project-portfolio "brain" that

watches for duplicated efforts. ineHiciencies. or projects at cross-purposes. they can cobble together
an approximation.
it's those investments that determine your firm's direction." Benko advises executives to "look at all the projects currently under way at your company. Then decide what direction they collectively seem to suggest. Ask yourself, 'Is that where we want to go?' If not, decide how you must change your portfolio to put the firm back on track." Whatever system you establish to conduct this kind of assessment, keep it Simple. As Kristin Arnold, president of Quality Process Consultants in Fairfax, Va., notes, "If it's too cumbersome, no one will implement it!' Bill Gibson, former COO of San Jose, Calif.-based business intelligence services firm Crystal Decisions (now Business Objects), found a way to examine his company's projects through a strategy lens. Charged by his CEO with improving the company's operating processes, Gibson inventoried all process-improvement plans under way-and came up with a jaw-dropping 400. "Nothing was getting done:' he says. "There was a lot of inertia, no sense of employee or executive ownership over projects, and little project-planning expertise in our firm!' Over the next six months, the teams prioritized projects with the help of senior management. "The teams discovered that all processes affect multiple functions in a company, like threads woven throughout a tapestry," Gibson says. "To prioritize projects, they had to figure out which initiatives best supported the processes most closely linked to our strategic priorities. Yes, the whole effort is tedious and harrowing, but I don't think there's any way to avoid it-nor should you avoid it!' The effort paid off."The teams:' Gibson says, "built an infrastructure for long-term project coordination that still serves us well today." And when it acquired Crystal Decisions in December 2003, Business Objects adopted the methodology and applied it on a larger scale. and current projects in order to forecast project performance. According to Mike Cassidy, group senior vice president of Anteon's system engineering group, project-portfolio management software enables program managers to anticipate nonlinear effects of change in complex programs. This ability to "look over the horizon" helps managers predict which tasks might slip during a project's implementation and how much time particular tasks will require. The more data the system accumulates, the stronger its predictive abilities. Portfolio-management technologies work best in combination with project steering boards whose members review and approve enterprise projects. At Atlanta-based staffing firm EmployBridge, ClO Teresa Chao serves on such a committee with the firm's corporatelevel CFO, two business-center CFOs, and the IT director. In addition, the group includes members of the executive committee and managers from various strategic business units who participate in meetings on an ad hoc basis. "During meetings we discuss and prioritize projects based on EmployBridge's business needs:' Chao says.

2. Build a Project-Portfolio "Brain"

While companies can't literally build one project-portfolio "brain"that watches for duplicated efforts, spots inefficiencies, or identifies projects that are working at cross-purposes, they can at least cobble together a rough approximation. New

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BEST PRACTICES
bers hailed from Canada, the United States, and Germany. Frye assigned a subprogram manager for each project. He also established a steering committee of executivesthat met weeklyto discuss high-levelissuesand the program's overall progress. In addition, virtual project-managementteams met weekly in cyberspace to track project performance and address problems. One of Frye's biggest challenges came in the form of cultural differences between his company and SAP."We had one small company working with

Group members also identify common tasks across seemingly different projects and lump like projects togethera technique that Benko and McFarlan call identifying coml11onthreads. Constant communication, on multiple levels, is key."We have monthly phone calls about strategy with area vice presidents and weekly calls with the CFOs'direct reports to get projectstatus updates:' Chao says. "Steering committee members also participate in executivemanagement meetingsso that everyonehas the big picture."

How the World's Largest Bakery Puts Execution Before Strategy

by Mauro F. Guillen and Esteban Garcia-Canal
IN TODAV'S WORLD, all companies need to be able to function in chaotic, unpredictable business environments. Emergingmultinationals already know how to do that; it's what they're used to. Take Bimbo Bakeries, the world's largest bread baker. Founded in 1945by a Spanish immigrant to Mexico,the company has focused on execution and operational excellenceto adapt to rapidly changing circumstances and customer preferences. Initially seeking low-cost and relativelyunsophisticatedwaysto grow,the firm expanded its operations throughout Latin America in subsequent decades. ln 1996 it made its first U.S.acquisition, thanks largely to optimizing oven utilization and delivery routes. By 2012 it had swallowedup more than a dozen U.S.firms, including the bakery divisionsof WestonFoodsand Sara Lee Corporation. Bimbo's executives understand that in a low-marginbusiness like theirs, execution iscrucial.Profitsdepend heavily on getting the right amount of highly perishableproductsto storesat the right moment and at a reasonable cost. In many markets,"stores"are mainly momand-pop outlets scattered many miles from one another over poor roads. To make such customers profitable,Bimbo searches relentlessly for ways to eliminate waste and increasethe efficiencyof its operations. The same approach served Bimbo well when it acquired the bakery division of Sara Lee,the huge U.S.food,beverage, and personal-care company. For

The ability to look over the horizon helps managers predict

which tasks might slip and how much time particular tasks will require.
Project-Portfolio Managers
Management Associates'Goldman recommends using a program manager for complex,cross-functionalgroups of projects. ln matrixed environments, he says,many project team members have multiple commitments, and team composition shifts regularly.And since one strategic goal may hinge on dozens of different projects,the program manager should alsocoordinate all the initiatives related to a strategic goal.The manager holds the position for the year or so required by the effort. The job includes looking beyond results to examine the process-and to retool midstream, if necessary. For instance,Matthias Frye managed a program of projects related to Crystal Decisions'partnership with Walldorf, Germany-based SAP AG to produce a joint product in 2001 and 2002. The effort included projects that crossed marketing, sales,R&D,and other functions, and enlisted virtual teams whose merna huge one, and each did business at different speeds."To smooth over this cultural gap, Fryeencouraged his executives and project managers to travel to Germany to meet face-to-face with their counterparts at SAP.To address communication challenges, Frye insisted on thorough documentation and circulation of each decision. He also boiled down the project plan to a one-page memo for monthly meetings. The joint venture's success-which led to improved brand image and accelerated growth for BusinessObjectsstemmed largely from Frye'sability to see the whole of the project and manage the relationshipwith SAP.With this purview, Frye could establish execution strategies that crossed subproject boundaries.
Originally published in Harvard Management Update, June 2004 Lauren Keller Johnson is a Massachusetts-based writer.

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years, sales for Sara Lee's bread business had been declining because of a lack of focus on maintaining high standards in execution. Success would have entailed continual improvements in production and distribution efficiency, but the company did not choose to pursue that approach. In 2010 Sara Lee sold the bread business to Bimbo, which applied its execution focus to the business. Bimbo's leaders are continually on the road, looking for ways to improve

erational excellence and cheap labor. Bimbo's choice to focus more intently on execution than on detailed planning suggests that the company's leaders understand the danger of becoming encumbered by rigid internal rules about which markets to target and how-rules that have prevented developed-world multinationals from moving more quickly into the booming markets of the developing world. Instead of getting bogged down in planning, Bimbo takes

At Bimbo Bakeries, the vision is to keep a grip on the daily realities of operations.

the productivity of its 100 plants on three continents, its huge truck fleet, and other operational elements. For instance, it uses tricycle delivery bikes in urban areas of China where streets are too narrow for trucks, a practice it first implemented in Latin America. At the same time, all its trucks are equipped with sophisticated computer systems to optimize delivery routes. As Bimbo has expanded, it has adapted to consumer trends and local preferences, creating niches all over the world. Even in China, a country in which bread is little more than a culinary footnote, Bimbo has found a responsive customer base among young, urban consumers, successfully offering individually wrapped snacks such as beef rolled in bread. If there is a vision at Bimbo, it's the insistence of its chief executive, Daniel Servitje, on keeping "a firm grip on the day-to-day realities" of operations. Many emerging multinationals maintain a similar focus on execution. Often, the only way for those companies to compete with their better-capitalized rivals in the developed world is to keep costs very low through a combination of op-

chances, experiments, gets market feedback quickly, and does what's needed to improve its value proposition with customers. Bimbo is just one example of an emerging-market multinational that is demonstrating a surprising ability to surmount business challenges that developed-world companies have avoided or given up on. Hemmed in by complicated or calcified rules about which markets to focus on and how to grow, these firms are achieving success by executing first and analyzing later, pursuing headlong expansion, and embracing turbulent markets. 0
This blog post was excerpted from their article "Execution as Strategy" in HBR, October 2012 Mauro F. Guillen is the Dr. Felix Zandman Professor of International Management at the University of Pennsylvania's Wharton School. Esteban Garcia-Canal is a professor of management and international business at the University of Oviedo in Spain. They are the coauthors of Emerging Markets Rule: Growth

Strategies of the New Global Giants (McGraw-Hill,2012).