CHAPTER 5

Case Study: How an International Transportation Company Moves Strategy into Projects

The company's operations comprise a number of strategic business units at various sites in the UK and the United States (US). This report covers operations in the UK.

An Objectives, Goals, Strategy, and Measure (OGSM) framework is used to cascade strategy down the organization and through it to set the strategic context for the whole company. A diagram, shown in Figure 5.1, was developed during the case study to indicate the preeminent position of the OGSM framework within the company and its relationship to business units and projects.

Corporate, Business Unit and Project Environments

Figure 5.1 shows that the strategic business units, capital investment plans (CIPs), business governance, project governance, and major and minor projects are all set within the environment of the corporate OGSMs and that each level determines—in descending order—that of the next.

Figure 5.2 demonstrates the cascade of OGSMs—through a number of business levels and projects and programs down to the individual level—via the asset management (AM) process (see below for a description of AM) and shows that the OGSMs are incorporated in the business plans at the various levels.

Figure 5.1 indicates that the OGSMs for business units flow directly from corporate OGSMs and long-term CIPs. The OGSMs also set the environment for business governance bodies to apply to the project governance bodies and projects. The business governance bodies are responsible for ensuring that the strategies and activities of their business unit, including projects, are aligned with their CIPs and the corporate OGSMs.

A project is governed by project governance bodies, which are the authority for the project and are responsible for ensuring that the project fits into the strategy for the business. The project board is responsible for ensuring that the project aligns with business strategy by means of the Project Management Major Projects Process. If the project is not considered to be major, it is classified as a minor project and is managed using a subset of the major projects process.

Business Model

The company's business model, shown in Figure 5.3, has three major generic processes: strategy, solutions, and operations. These processes are supported, in turn, by AM process and the Enterprise Support (ES) process.

The AM process is a key element of the project environment (see Figure 5.1). The AM SBU is responsible for the delivery of all the company's programs and projects, as shown in Figure 5.2. Its OGSMs are not only driven by the corporate OGSMs, these are also driven by the OGSMs of all other SBUs (see Figure 5.2).

The AM process, shown in detail in Figure 5.4, comprises five major stages:

• Development: Finding the right solution;
• Design and engineering: Setting the appropriate quality;
• Supply chain: Extracting maximum value from the supply chain;
• Project delivery: Delivering best value solutions;
• Maintenance: Maintaining assets at optimum cost.

The ES process (see Figure 5.3) includes the finance, human resources (HR), and supply processes and the Plan and Develop process. The processes at both levels are fully integrated, both vertically and horizontally and documented electronically and available online. They are mandatory across all the company's business units, but can be applied flexibly according to the size and complexity of the program or project.

Moving Strategy Through Portfolios, Programs, and Projects

Portfolios

The company does not use the term portfolio within the context of managing a group of programs or projects. But it does use a process and set of assessment tools for measuring the strategic contribution, uncertainty/complexity, and value for money of its capital investments at the business unit and SBU levels. Such a process and set of assessment tools are also used for evaluating, selecting, and prioritizing the company's programs and projects.

Strategic contribution assessment is based on the individual elements defined in the OGSM that relate to corporate objectives and strategy and to the overall prioritization of projects required at the business unit, SBU, and corporate levels. An assessment of the complexity and uncertainty of developing and delivering a project is also undertaken. The results of this assessment are combined with the strategic contribution assessment to develop an overall value vs. risk picture for the capital investment portfolio at business unit, SBU, and corporate levels.

Accountabilities and responsibilities

The company identifies those accountable for undertaking and approving the strategic contribution, complexity/uncertainty, and Value For Money (VFM) assessments as well as the points in the process when these are to be done. These are summarized in Tables 5.1 and 5.2. (See also the Project section below for an explanation of CPCs, shown in Tables 5.1 and 5.2.)

Portfolio management process

Figure 5.5 outlines the process for evaluating, prioritizing, and approving projects, and the incorporation of these into capital investment plans at the business unit, SBU, and corporate levels.

Step 1: The individual business units carry out a strategic fit evaluation based on their OGSMs and provide a score for individual capital investment project proposals. Each business unit ranks its proposals according to the strategic fit and submits a capital investment plan to the SBU.

Step 2: The SBU carries out an evaluation and prioritization of all business unit submissions and forms a consolidated SBU capital investment plan. The business capital investment submissions of all the business units are prioritized against each other to give an SBU prioritization against the SBU target defined by its OGSMs.

Step 3: The executives of all the SBUs review, amend, and approve the submission of their capital investment plans to corporate.

Step 4: Corporate evaluates and prioritizes the capital investment plans from each of the SBUs and uses them to develop the corporate CIP. Corporate finalizes the CIP on the basis of prioritization against the targets set by the CEO and defined in the corporate OGSMs. The CIP is then submitted to the CEO for approval. The main board reviews the CIP; once it is approved, it is signed off.

Step 5: Upon endorsement of the corporate CIP, the SBU and individual business plans become live, and each capital investment project progresses as per the business unit prioritization and is executed following the project management process.

Programs

The company describes program management as the management of a group of projects with a similar—or the same—aim. For example, one major infrastructure program that was implemented at all the company's major sites comprised 146 projects. These programs are managed using the major projects project management process, described in the next section.

Projects

The project environment in Figure 5.1 includes the following functions and processes:

• Business governance
• AM process comprising:
  • Project governance
  • Project board
  • Major projects
  • Minor projects.

Governance and project boards

The roles and responsibilities of the business governance and project governance bodies have already been outlined. The project board is responsible to project governance for the day-to-day running of the project, which it executes through a project leader and project team. The project board uses processes embedded in the AM process (and the major projects process), as outlined in Figure 5.6.

All the work justifying the business need for a project is undertaken during the “Define need” stage. The development manager develops a statement of need for the project and sets the objectives for the project. The strategic and business risks are identified, which contextualize the strategy for the project. The development team determines the options to meet the stated need and the implications associated with the various options it then recommends a preferred solution, based on the optimum business case developed during this process. Project governance decides at the end of this stage, CPC-A (Capital Projects Committee Review Point A), whether the project can proceed to the “Define solution” stage.

Figure 5.6 also shows CPC points B through D, along the process (see also Table 5.1 above). These formal review-and-approval events—typically, project management stage-gate reviews for projects—are used, among other things, to ensure that the strategy for the project is aligned to business OGSMs throughout the life of the project. The strategic contribution assessments are also undertaken by the CPCs (see Table 5.2 above).

If the CPC approves the project to move to the next stage, the project objectives defined in the previous stage are refined and the project performance success criteria agreed. A development brief defines the direction in which the possible solutions for the project are to be developed. This is a key document for preserving continuity in business and project strategy. Possible solutions are developed and evaluated, and a preferred solution is selected. These activities and the outputs of the process are reviewed at CPC-B (see Figure 5.6), along with a funding request for the next stage.

Subsequent to the approval of CPC-B, the definition process is carried out. This primarily entails developing the technical solution for the project and producing an integrated production plan for the design, manufacture, and assembly stages of the project. It also involves checking that the design of the solution complies with that specified in the development brief as well as managing stakeholders. The preferred technical solution and integrated production plan are reviewed at the end of the process at CPC-C. Upon approval of the technical solution, the design process is undertaken and the detailed design of the technical solution is developed. During this process, project performance is also managed against project targets and business strategy so that the alignment of business and project strategies is maintained; at this point, the final performance targets for the project and the business strategy are incorporated in a business case for the project. The technical solution (including the detailed design) and business case for project (including objectives and strategy) are reviewed at CPC-D.

CPC-D approval authorizes the project board to execute the manufacture and assembly phases of the project. The project board continues to manage project performance against project targets and business strategy during these phases and ensures that project and business strategies are continuously aligned.

Project board roles and responsibilities

Some of the roles and responsibilities associated with project strategy for the following members of the project board and project team are summarized below:

• Project board chairman
• Development manager
• Project leader

The project board chairman acts as primary sponsor and client for the project. This individual is responsible for ensuring that the project meets the needs of the business and maximizes shareholder value. This individual also ensures that the strategic contribution, VFM, and uncertainty assessments are appropriately undertaken. This individual is also accountable for ensuring successful project delivery and the identification and reporting of risks and safety issues that may affect the project, including ones that may affect project strategy.

The development manager is responsible for reviewing the business need for the project with the business owner. This individual is also responsible for preparing:

• The statement of need for the project;
• A list of potential options the project can undertake to meet the business need;
• A business case together with a financial analysis to support the solution to the business need.

This individual also directs and implements the strategy approved by the project board and documents the strategic contribution, VFM, and complexity/uncertainty assessments.

The project leader (until recently called the project manager) provides leadership to the project team and is accountable to the project board for the implementation of the project and for meeting the approved project objectives and targets, as defined in the project execution plan. This individual is responsible for red-flagging—to the project board—issues that could potentially affect project strategy and the delivery of the project.

Major and minor projects

In addition to the project board activities, programs and projects are managed using the company's project management major projects process. This process is very comprehensive and fully integrated with the definition, design, manufacture, and assembly stages of the AM process (see Figure 5.4). It comprises a number of levels that are fully documented and available online. Projects that are deemed minor by project governance bodies tailor the major projects process accordingly.

An example of one of the major projects process—Level 1 elements, the definition stage—is shown in Figure 5.7. This process is undertaken by the project team between the review gates CPC-B and CPC-C. It indicates that strategy alignment is achieved between CPC-B and CPC-C through the project definition process and is reviewed accordingly against the business OGSMs. (One of the inputs to the receive project information process is the project's development brief; see the preceding section on governance and project boards.)

Table 5.3 below tabulates the flowchart shown in Figure 5.7; it is also another example of the visibility of the process and highlights the review process. It outlines the purpose, assurance, and activities of the major projects process for the development stage of the AM process (not shown in detail), the definition stage, and the design, manufacture, and assembly stages of the project delivery process. The assurance activities for each of the stages are identified as the capital projects committee events and associated reviews.

The activities relating to project strategy in the definition stage include the following:

• System strategies: Developing the functional requirements of the facility to meet the operational and maintenance strategies.
• Project definition: Developing a set of jointly owned documents that clearly define the facility in terms of functional requirements and customer value.
• Production plan: A clear strategy that defines the process for production-identifying targets, benchmarks, and metrics.

The project definition sub-process incorporates many of the inputs and core tasks of the project definition process identified in Figure 1.9 (see Chapter 1).

The activities relating to project strategy in the design stage are as follows:

• Systems integration: Planning the development of the system design and interfaces to ensure integration across the whole project.
• Assembly plan: Developing a plan that determines the assembly requirements by showing how sub-assemblies are integrated and accepted into the customer's facilities.
• Manufacturing plan: Developing a plan that optimizes the manufacturing sub-assembly and logistics to best meet the assembly plan.

A number of key management plans are developed during the definition and design stages, which in the PMBOK® Guide's (Project Management Institute 2000) schema constitute elements of the overall project strategy. However, this practice is not recognized in the process. In fact, no reference is made to project strategy per se in the major projects process.

The project boards and project teams perform most of the project management practices and the elements that relate to strategy, as shown in Figure 1.9 (Chapter 1). These boards and teams carry out the major project process Level 1 activities (Table 5.3) as well as those at the lower levels. The company's best practice resources, tools, and techniques supporting the major project process appear to be those typically used by companies managing major projects, such as budget and cost control, risk management models, and earned value management.

Roles, Responsibilities, and Competencies for Moving Strategy

The company uses a competency framework, which includes competencies to manage strategy. Project board chairmen, development managers, and project leaders all have defined accountabilities, roles, and responsibilities, some of which have been mentioned above (in relation to the project board process and business and project strategy). Moreover, the company uses matrices to specifically and comprehensively define the accountable (A), responsible (R), consult (C), and inform (I) roles for those involved in each stage of the major project process.

An example of a matrix for the “Receive project information” sub-process (see Figure 5.7) is shown in Table 5.3. This example, adapted by the authors of this book, shows only four of a possible sixteen positions (jobs) involved in the major projects process. When examining activity 3 in Table 5.4, “Define [project] success criteria,” it can be seen that the project board, development manager, and operational stakeholder all have a consult role; the project leader is both accountable and responsible for defining the project success criteria.

This matrix is a quick and very effective technique for identifying who should do what and when at any point in the major projects process; it almost defines the how—or strategy—of a project.

Conclusions

The OGSM framework and the capital investment process ensure strategy is moved from the corporate levels through SBUs and business units into projects in a highly visible and structured way. Programs and projects are selected and prioritized using a portfolio management process that ensures alignment of project and business strategy throughout the company. The gated review process ensures that projects are aligned to business strategy (and corporate strategy) as they are set up, authorized, and executed. The Project Management Major Project Process is used to develop the project definition and many key project management plans, a summary of which is generally considered to encapsulate project strategy. However, project strategy as a term and practice is not used in the company, and the performance of the project team is not measured against the objectives of the project, as expressed in terms of project strategy, but is measured in terms of business strategy.