In the 1990s, companies’ major IT investment was in ERP systems, with the focus mainly on improving and automating the run-the-business activities (both core operations and supporting activities). At the beginning of the twenty-first century this focus shifted to the Internet and e-commerce. Lately, however, organizations have shown increased interest in specialized project and portfolio management software, confirming a slow movement toward project management as a tool to run their businesses and to execute their strategy. Soon there will likely be a new wave of companywide software implementations to improve and automate organizations’ change-the-business activities (project management and portfolio management activities).
The full benefits of this move will likely require five to ten years to be realized. Until recently most companies lacked integrated software to manage their hundreds of projects. The most advanced companies were using Microsoft Project, but often just to describe the project plan and its main milestones. Individual projects were not connected; a consolidated view of the portfolio of projects required information from multiple systems; and up-to-date project information was impossible to obtain.
Consider this real situation: A bank with 540 current projects costing approximately €256 million and involving 4,780 out of 20,000 employees has no tool with which to monitor the projects’ status, costs or contributions to strategy execution. Given that the bank has no way of knowing how its portfolio of projects is doing, how can it make good project-related or investment decisions?
As recent as around 2008, project and portfolio management was on the back burner for most companies. Even worse, most companies were unable to monitor their strategy execution because they lacked the tools to follow up on their projects and their change-the-business activities. Only with the rise of programme management offices did some transparency enter this process, soon to be followed by a new wave of project portfolio management software.
Using a companywide project portfolio management system is indispensable to managing the change-the-business dimension. Managing hundreds of projects, thousands of resources and millions of euro without such tools as Excel, MS Project and PowerPoint is unimaginable; but this is what most companies are still doing. Until recently, companies had no control of their change-the-business dimension and had little idea of either the total costs invested or the expected benefits. I call this a ‘black box’ situation.
Over the past five years this situation has changed, accelerated by the financial crisis of 2009. Many companies have now turned to PPM processes and tools to:
Gain control of all projects and project-related activities;
Move from the ‘black box’ to a transparent environment, creating visibility and producing accurate data;
Reduce costs by cutting spending on projects and reducing project-related overhead through such measures as eliminating PMOs and investing in fewer initiatives;
Accelerate change in the organization to adapt to the current volatility of the environment and to survive the economic crisis;
Improve project execution and increase the overall efficiency of the change-the-business dimension.
Trying to capture all the change-the-business elements in one tool creates the risk that instead of being fully dedicated to managing projects and the overall portfolio of projects, the tool is used mainly for time tracking and resource management or, even worse, for project accounting because the financial aspects become most important.
Despite this increase in PPM implementations, many of them have taken much longer than anticipated; have been more costly than initially planned; and have not fully delivered the vendor-promised benefits. This is very similar to what happened two decades ago with the implementation of ERPs. The main reasons why PPM tools are so difficult to implement are: outlined below.
The IT department, which drives the implementation, creates a lack of buy-in and the tool is used by less than half of the organization. The business itself, preferably via a cross-departmental team, has to sponsor and lead the roll-out of a PPM tool.
The very expensive PPM application is turned into a time-tracking tool. Today, most PPM implementations begin by asking all employees working in the change-the-business dimension to register their hours on timesheets. This approach, which is the worst I can imagine, creates enemies and resistance to using the PPM application and causes many organizations to use it to track staff hours. A PPM tool should be implemented using a top-down approach, focusing first on the organization’s strategy and priorities and on the projects that are currently running. By creating clarity on the top, the value of the tool is visible more quickly, increasing the buy-in for the implementation.
Mature processes are lacking and the segments of the organization are misaligned. Often, companies decide to implement a PPM tool without having first defined and rolled out the project, programme and portfolio management processes. In addition, organizational changes and alignment have not yet taken place, so the PPM tool is implemented without having a strong foundation and therefore does not stay in place for long.
If the company begins by defining and implementing the change-the-business processes and performing the organizational changes needed to support those new processes, implementing the PPM application will be much easier. Users will welcome the tool, as it will make their work easier.
The PPM tool is not connected with the run-the-business dimension. PPM tools do not connect easily with the run dimension’s key processes and data. Although they claim to be all-in-one tools that can be used for both defining and executing strategy, this is not the case. As a result, company management does not recognize their added value or support their implementation. The marketing of PPM tools should therefore focus on their ability to automate project and portfolio management and should not try to oversell their functionality. If the automation of the change-the-business dimension is done well, this is already a very big step in performance.
Notwithstanding all these issues, sooner or later every organization will need to implement a PPM tool to manage all its change-the-business and project activities. There is no other way to get the transparency needed to manage this large and critical part of the business.
Organizations today are composed of an amalgam of applications. Each dimension has specific applications that are needed to efficiently perform its role in the business. If we consider that strategy execution is the combination and integration of the run and the change, then we can conclude that companies today lack the software to plan and execute their strategies.
This is one of the reasons why strategy execution is so difficult and although many vendors claim to have produced a strategy execution tool, this is not the case. In fact, there is no single tool that can cover both sides of the business and consolidate the information to allow management to follow up the execution of their strategies. For me, the strategy execution tool has not yet been invented. On the other hand, being regularly confronted with the lack of such a tool has led me to find a temporary solution that I believe should form the basis for its future development.
This temporary solution involves building a strategy execution system based on a dynamic enriched data warehouse with simulation functionalities. The data warehouse connects to all the relevant systems used in the run- and the change-the-business dimension and extracts only the relevant data needed for management to build and follow up on the strategy. The tool also establishes controls on the quality of the data, monitoring the accuracy of the information but ensuring that the data is corrected at the source.
The sources of this data are critical since only a selection of relevant information is extracted to be worked on and enriched in the data warehouse. A large multinational can easily have thousands of pieces of business, operational and project data, with definitions that can differ depending on the owner and the user. However, for purposes of creating a strategy execution system, we will look at just a selection.
It is important that the selected data be defined in a companywide data model which uses standard agreed-upon definitions and is kept in a centralized entity (strategy execution office). As the data is extracted from the applications, the ownership and quality of the data is kept locally.
The benefits of building a strategy execution system on top of company applications are that the system is much easier to implement; is less expensive than any other software package; and can be customized to the company’s specific needs. It is neither a run-the-business application trying to cover the particularities of the change-the-business dimension as well, nor vice versa. I know that this approach to building a strategy is a somewhat revolutionary approach but I have seen it work – and the results are amazing.
Antonio Nieto-Rodriguez is an expert in strategy execution and project management. He currently works for BNP Paribas Fortis as Head of Transversal Portfolio Management, which deals with the prioritization, the selection and the execution of all the large strategic projects. He is former Head of Post Merger Integration at Fortis Bank, where he was involved in the merger with ABN AMBRO. Previously, he worked for PricewaterhouseCoopers for more than ten years, where he was the global lead practitioner for the Project and Portfolio Management practice. He is a visiting professor in Solvay and Nyenrode Business Schools where he teaches strategy execution and program management to MBA students. Antonio is a founder member of the PMI European Corporate Council and an active speaker and presenter on strategy execution and project portfolio management.
– Microsoft Project Server