Balancing

The statements above can be categorised in groups (see Table 2.3).

Table 2.3 Grouping business plan statements

What will commercial success look like?

How will clients judge success?

The company will:

The company will:

• retain its most important clients

• deliver a wider range of products

• bring in new clients

• reduce its implementation timescales

• secure recurring revenues rather than one-

• reduce its implementation costs

off fees

• deliver minimum maintenance products

• further its alliance partnerships

• engage in fixed-price or shared-risk

• deliver increased revenue

initiatives

• deliver increased margins

• become number one in its marketplace

• undertake short-term, high-yield projects

Which processes must be excellent?

How will we show we have learned and

grown?

The company will:

The company will:

• prioritise and justify every initiative

• use new and/or innovative technologies

• have market-leading product quality and

• provide opportunities to help retain

testing processes

experienced staff

• use cutting-edge product implementation

• apply lessons learned from experience

processes

• attract and develop junior staff

• manage its projects using repeatable,

• increase the gap between itself and its

proven principles and techniques

competitors

This is a simple and early example of a business plan expressed as a balanced score card of measures, a technique developed by Robert Kaplan and David Norton to describe what strategic success could look like. An organisation's targets and measures are described in four balanced quadrants: commercial, customer, process and learning. When combined, they provide a consistent and sound means of describing how to reach and measure success. This helps to identify programmes and portfolios of projects the organisation must undertake if it is to be successful.

The thinking behind the balanced score card is that commercial success can come from selling customers what they want, but the processes needed to deliver the products and services they buy must be sleek and effective, and they get that way by using people and intellectual capital in which there is continuous investment. The investment comes from prior commercial success, so the approach looks circular.

Because the quadrants are linked by this logic, the list of statements must be checked for consistency. Engaging in fixed-price or shared-risk initiatives may not permit increased margins; developing junior staff may be a challenge while using new and innovative technologies that may create redundancies. Some objectives may be beyond the organisation's control; the most important clients may not buy the wider range of products. An organisation must ask itself: "Which would matter most: client engagement or product leadership?" If the statements are inconsistent, so may be the business plan from which they were derived and the portfolio of projects that stem from it.

Table 2.3 is not complete, however. There are no measures. If these statements are to be used to confirm the portfolio's contribution to the business plan, each must be quantified. Table 2.4 overleaf contains examples from each quadrant.

Despite this further analysis, it is still not possible to identify projects that will help to achieve these targets. Not every target will rely solely on a project or series of projects. Some will depend on increased or improved productivity such as reducing implementation timescales. Others may require increased vigilance but not a change of behaviour, for example securing recurring revenues rather than one-off fees. Some targets may be achieved by a combination of projects and business as usual; some projects already under way or under consideration might make a limited contribution to the achievement of one or more targets. However, there may be targets that can be achieved specifically as a result of a project or programme of projects. For instance, if a company wishes to implement its own project management method based on an industry-recognised standard, this may need to be commissioned as a single project.

Table 2.4 Reused business plan statements

What will commercial success look like?

• secure recurring revenues rather than one-off fees

Revised:

• During the coming year, the company will secure $500,000 worth of recurring revenues from clients that have always prewously made one-off payments

Which processes must be excellent?

• manage its projects using repeatable, proven principles and techniques

Revised:

• During the coming year, the company will implement its own project management method based on an industry-recognised standard

• During the coming year, the company will deliver two projects using the new method

How will clients judge success?

• reduce its implementation timescales

Revised:

• During the forthcoming year, the company will deliver three implementations of its standard product in seven weeks rather than nine

How will we show we have learned and grown?

• provide opportunities to help retain experienced staff

Revised:

• The company will reduce the turnover of staff with more than ten years' experience by 20%

So it is possible to derive some projects from the business plan. But an organisation moving towards a project-focused approach must be sure that other projects already under way or proposed without reference to the business plan are likely to contribute to its strategy. The organisation must assure itself that it has a portfolio of proposed and actual projects that is aligned to its vision.

This is done by challenging, not least because work on the existing portfolio has commenced. While it may seem sensible to abandon one project in favour of another, money has already been invested and it is a commercial decision to write off an investment, not an intellectual one.

However, this argument is helpful in understanding why time was taken to create a balanced set of strategic measures. The main motivation of many organisations will be to achieve the measures in the commercial quadrant, but projects and business-as-usual activity will be needed to deliver across the balanced score card if ultimate commercial success is to be achieved.

A technique that can help achieve this involves three ingredients:

e the business plan expressed as success criteria;

E the existing project portfolio;

E any newly proposed projects.

By comparing the existing portfolio and proposed projects with the list of targets, it is possible to determine the fit. If the relevant information is available, it is a relatively simple exercise. Ask whether each existing or proposed project's contribution to achieving each measure in turn is direct, indirect, partial or absent (see Table 2.5).

Table 2.5 Project contribution to strategy

Strategic imperative

Project 1

Project 2

Project 3

Will this project contribute to the company securing $500,000 worth of recurring revenues in the coming year from clients that have always previously made one-off payments?

Direct

Indirect

Absent

Will this project contribute to the company delivering three implementations during the coming year of its standard product in seven weeks rather than nine?

Absent

Absent

Absent

Will this project contribute to the company implementing its own project management method based on an industry-recognised standard during the coming year?

Indirect

Absent

Absent

Will this project contribute to the company delivering two projects in the coming year using the new project management method?

Absent

Absent

Absent

Will this project contribute to company reducing its turnover of staff of more than 10 years' experience by 20% during the coming year?

Absent

Direct

Absent

Several significant conclusions can be drawn from this simple example:

e No projects are contributing to the company delivering speedier implementations. Customers will not be pleased. e Even if the company develops a new project management approach (of which there is little evidence), no projects will use it.

e Project 3 is making no contribution to the company's strategic aims. Why is it being funded?

The power of this technique extrapolated across every strategic imperative and all existing and proposed projects is enormous. Here are some questions that can help in deciding which projects should be pursued:

e Are there projects contributing directly to achieving specific strategic imperatives, making them more likely to be met?

e Which strategic imperatives are unsupported by projects and so run the risk of being missed?

e Which projects are not contributing to any strategic imperative?

e Do the projects identified above give cause to reconsider whether all strategic imperatives have been identified?

e Is there a balanced portfolio of projects contributing across the four quadrants?

e Is the organisation focusing on one of the four quadrants at the expense of the others?

e Is the organisation more concerned about measurements than objectives?

e Is the organisation conducting projects because it wants to, not because it needs to?

Managers should ask themselves such questions. If direct, indirect, partial and absent are each given a value, it is possible to develop some information to aid the debate about which projects should be undertaken, which should not and where the business plan appears to be unsupported.

Figures 2.4-2.7 show examples of such data expressed in a way to encourage focused debate. In Figure 2.4, the height of each bar is less important than their relative heights in indicating a balanced portfolio. Figure 2.5 shows the portfolio's contribution to achieving a single strategic objective. Figure 2.6 (see page 38) shows the strategic value of an individual project. It is often valuable to add depth and substance when making a business case. Figure 2.7 (see page 38) shows how much each project will contribute to a specific quadrant.

However, this is not the only way of considering the relative contribution of a proposed or actual project. So far the analysis has not compared each project's potential risk and reward so the proposed portfolio has not been balanced.

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