request for proposal summary

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PProjectroject
netnetworksworks

66

ManagingManaging
riskrisk
77

MonitoringMonitoring
progrprogressess

1313

TTeamseams
1111

OutsourcingOutsourcing
1212

LeadershipLeadership
1010

StrategyStrategy
22

IntroductionIntroduction
11

OrgOrganizationanization
33

ScheduleSchedule
resourresources/costsces/costs

88

Inte
rna

tion
al

Inte
rna

tion
al

pro
ject

s
pro

ject
s

1515

1818

OverOvers
ightsight

Agile
Agile PMPM

CarCareer eer pathspaths

1717

1616
PProjectroject
closureclosure

1414

EstimatEstimatee
55

ReducingReducing
project project durationduration

99

DefineDefine
projectproject

44

C H A P T E R C H A P T E R T W OT W O

2424

Organization Organization Strategy Strategy and and Project Project SelectionSelection
The The Strategic Strategic Management Management Process: Process: An An OverviewOverview

The The Need Need for for a a Project Project Portfolio Portfolio Management Management SystemSystem

A A Portfolio Portfolio Management Management SystemSystem

Selection Selection CriteriaCriteria

Applying Applying a a Selection Selection ModelModel

Managing Managing the the Portfolio Portfolio SystemSystem

SummarySummary

Appendix Appendix 2.1: 2.1: Request Request for for Proposal Proposal (RFP)(RFP)

Organization Organization Strategy Strategy
and and Project Project SelectionSelection

1185880 – McGraw Hill Education ©

StrStrategy ategy is is implemented implemented thrthrough ough projectsprojects. . Every Every prproject oject should should have have a a
cclear lear link link to to the the orgorganizationanization’s ’s strstraategytegy..

StraStrategy tegy is is fundamentally fundamentally deciding deciding hohow w the the organizaorganization tion will will competecompete. . OrganizaOrganizations tions
use use prprojects ojects to to conconvert vert strastrategy tegy into into new new prproductsoducts, , servicesservices, , and and processes processes needed needed ffor or
successsuccess. . FFor or exampleexample, , Intel’Intel’s s major major strategy strategy is is one one ofof differ differentiation. entiation. Its Its prprojects ojects
tartarget get innovinnovation ation and and time time to to marmarket. ket. CurrCurrentlyently, , Intel Intel is is directing directing its its strastrategy tegy totoward ward
specialty specialty chips chips ffor or prproducts oducts other other than than computerscomputers, , such such as as autosautos, , securitysecurity, , cell cell phonesphones,,
air air contrcontrolsols. . Another Another goal goal is is to to reduce reduce prproject oject cycle cycle timestimes. . Intel, Intel, NEC, NEC, General General
Electric, Electric, and and AAT&T T&T hahave ve reduced reduced their their cycycle cle times times by by 20–50 20–50 percent. percent. PrProjects ojects and and
prproject oject management management plaplay y the the key key rrole ole in in supporting supporting strastrategic tegic goalsgoals. . It It is is vital vital for for
prproject oject managers managers to to think think and and act act strastrategicallytegically..
Aligning Aligning prprojects ojects with with the the strategic strategic goals goals ofof the the organizaorganization tion is is crucial crucial for for prproj-oj-
ect ect successsuccess. . TTodaoday’y’s s economic economic climate climate is is unprecedented unprecedented bby y rapid rapid changes changes in in tech-tech-
nologynology, , global global competition, competition, and and financial financial uncertaintyuncertainty. . These These conditions conditions make make
strastrategy/project tegy/project alignment alignment eeven ven more more essential essential ffor or successsuccess. . Ensuring Ensuring a a strong strong link link
between between the the strastrategic tegic plan plan and and projects projects is is a a difdifficult ficult task task thathat t demands demands constant constant
aattention ttention from from top top and and midmiddle dle management.management.
The The larger larger and and mormore e diverse diverse an an ororganization, ganization, the the mormore e difficult difficult it it is is to to crcreate eate

and and maintain maintain this this strstrong ong link. link. Companies Companies todatoday y are are under under enorenormous mous pressure pressure to to
manage manage a a prprocess ocess that that clearlclearly y aligns aligns prprojects ojects to to organizaorganization tion strastrategytegy. . Ample Ample evi-evi-
dence dence still still suggests suggests thathat t many many ororganizations ganizations hahave ve not not devdeveloped eloped a a process process thathat t
clearlclearly y aligns aligns project project selection selection to to the the strastrategic tegic plan. plan. The The result result is is poor poor utilization utilization
ofof the the organizaorganization’tion’s s resources—peopleresources—people, , moneymoney, , equipment, equipment, and and core core competen-competen-
ciescies. . ConConverselyversely, , organizaorganizations tions that that hahave ve a a cohercoherent ent link link ofof pr projects ojects to to strategystrategy
hahave ve more more cooperacooperation tion acracross oss the the organizaorganization, tion, perfperfororm m better better on on projectsprojects, , and and
hahave ve fewer fewer prprojectsojects..
HoHow w can can an an organizaorganization tion ensure ensure this this link link and and alignment? alignment? The The ansanswer wer requirrequires es

integraintegration tion ofof pr projects ojects with with the the strastrategic tegic plan. plan. Integration Integration assumes assumes the the eexistence xistence
ofof a a strategic strategic plan plan and and a a prprocess ocess for for pprioritizing rioritizing prprojects ojects by by their their contribution contribution to to
the the plan. plan. A A crucial crucial factor factor to to ensure ensure the the success success ofof integra integrating ting the the plan plan with with proj-proj-
ects ects lies lies in in the the creacreation tion ofof a a prprocess ocess that that is is open open and and trtransparent ansparent ffor or all all partici-partici-
pants pants to to rereviewview. . This This chapter chapter prpresents esents an an ovoverview erview ofof the the importance importance ofof stra strategic tegic
planning planning and and the the prprocess ocess ffor or developing developing a a strastrategic tegic plan. plan. TTypical ypical prproblems oblems en-en-
countered countered wwhen hen strategy strategy and and prprojects ojects are are not not linklinked ed are are noted. noted. A A generic generic method-method-
ology ology thathat t ensures ensures integraintegration tion by by creacreating ting very very strstrong ong linkages linkages ofof pr project oject selection selection
and and priority priority to to the the strastrategic tegic plan plan is is then then discussed. discussed. The The intended intended outcomes outcomes are are
clear clear ororganization ganization ffocusocus, , best best use use ofof scarce scarce ororganization ganization rresources esources (people(people, , equip-equip-
ment, ment, capital), capital), and and imprimprovoved ed communicacommunication tion across across prprojects ojects and and departmentsdepartments..

2525

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26 26 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

WhWhy y Project Project ManagManagers ers Need Need to to UnderUnderstand stand StrateStrategygy
PrProject oject management management historicallhistorically y has has been been preoccupied preoccupied solely solely with with the the planning planning
and and exexecution ecution ofof pr projectsojects. . StraStrategy tegy was was considered considered to to be be under under the the purviepurview w ofof se- se-
nior nior management. management. This This is is old-school old-school thinking. thinking. NeNew-school w-school thinking thinking recognizes recognizes
thathat t project project manamanagement gement is is at at the the aapex pex ofof strategy strategy and and operoperationsations. . Aaron Aaron Shenhar Shenhar
speaks speaks to to this this issue issue when when he he stastatestes, , “. “. . . . . it it is is time time to to expand expand the the traditional traditional rrole ole ofof
the the prproject oject manager manager frfrom om an an operaoperational tional to to a a more more strastrategic tegic perspectiveperspective. . In In the the
modern modern evevolving olving organizaorganization, tion, project project manamanagers gers will will be be ffocused ocused on on business business
aspectsaspects, , and and their their role role will will eexpand xpand from from getting getting the the job job done done to to achieachieving ving the the
business business rresults esults and and winning winning in in the the markmarket et placeplace.”.” 11

There There arare e two two main main rreasons easons whwhy y project project manamanagers gers need need to to understand understand their their
ororganizationganization’’s s mission mission and and strategystrategy. . The The first first rreason eason is is so so they they can can make make aappropri-ppropri-
aate te decisions decisions and and adjustmentsadjustments. . FFor or exampleexample, , hohow w a a project project manamanager ger would would rre-e-
spond spond to to a a suggestion suggestion to to modify modify the the design design ooff a a product product to to enhance enhance perfperforormance mance
will will vary vary depending depending upon upon wwhether hether his his compancompany y strives strives to to be be a a prproduct oduct leader leader
thrthrough ough innovinnovation ation or or to to achieachieve ve operaoperational tional exexcellence cellence through through lolow w cost cost solu-solu-
tionstions. . SimilarlySimilarly, , how how a a prproject oject manager manager wwould ould respond respond to to deladelays ys mamay y vary vary depend-depend-
ing ing upon upon strastrategic tegic concernsconcerns. . A A project project manamanager ger will will authorize authorize ovovertime ertime ifif her her firfirm m
places places a a premium premium on on getting getting to to the the marmarket ket first. first. Another Another prproject oject manager manager willwill
accept accept the the deladelay y ifif speed speed is is not not essential.essential.
The The second second reason reason prproject oject managers managers need need to to understand understand their their ororganizationganization’’s s

strastrategy tegy is is so so they they can can be be effectieffective ve prproject oject advadvocatesocates. . Project Project manamanagers gers hahave ve to to be be
aable ble to to demonstrademonstrate te to to senior senior management management hohow w their their project project contribcontributes utes to to their their
firm’firm’s s mission. mission. Protection Protection and and contincontinued ued support support come come from from being being aligned aligned with with
corporacorporate te objectivesobjectives. . Project Project manamanagers gers also also need need to to be be aable ble to to explain explain to to teamteam
members members and and other other stakstakeholders eholders whwhy y certain certain prproject oject objectives objectives and and priorities priorities are are
critical. critical. This This is is essential essential ffor or getting getting buy-in buy-in on on contentious contentious trade-oftrade-offf decisions decisions..
FFor or these these reasons reasons prproject oject managers managers will will find find it it vvaluaaluable ble to to hahave ve a a kkeen een under-under-

standing standing ofof strategic strategic manamanagement gement and and project project selection selection prprocessesocesses, , which which areare
discussed discussed next.next.

The The Strategic Strategic Management Management Process: Process: An An OverviewOverview
StraStrategic tegic management management is is the the prprocess ocess ofof assessing assessing “w“what hat we we arare”e” and and deciding deciding and and imple-imple-
menting menting “wha“what t we we intend intend to to be be and and hohow w we we are are going going to to get get therethere.”.” Stra Strategy tegy describes describes
how how an an ororganizaganization tion intends intends to to compete compete with with the the resources resources aavailavailable ble in in the the existing existing and and
perceivperceived ed future future enenvironment.vironment.

TTwwo o major major dimensions dimensions ofof stra strategic tegic management management are are rresponding esponding to to changes changes in in the the
external external enenvironment vironment and and allocaallocating ting scarce scarce rresources esources ofof the the firm firm to to improimprove ve its its
competitivcompetitive e position. position. Constant Constant scanning scanning ofof the the external external enenvironment vironment ffor or changes changes
is is a a major major requirrequirement ement for for survisurvival val in in a a ddynamic ynamic competitive competitive enenvironment. vironment. TheThe
second second dimension dimension is is the the internal internal responses responses to to nenew w action action proprograms grams aimed aimed aat t en-en-
hancing hancing the the competitivcompetitive e position position ofof the the firfirm. m. The The nanature ture ofof the the responresponses ses depends depends
on on the the type type ofof business business, , envirenvironment onment volavolatilitytility, , competition, competition, and and the the organiza-organiza-
tional tional cultureculture..
StraStrategic tegic management management prprovides ovides the the theme theme and and ffocus ocus ofof the the future future dirdirection ection

ofof the the organizaorganization. tion. It It supports supports consistency consistency ofof action action aat t every every levlevel el ofof the the

1 1 ShenharShenhar, , A., A., and and Dov Dov Dvie, Dvie, , , Harvard Harvard School, School, 2007, 2007, p. p. 5.5.Reinventing Reinventing Project Project ManagementManagement

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 2727

IBM’IBM’s s investment investment in in artificial artificial intelligence intelligence paid paid
off. off. In In February February 2010, 2010, millions millions of of people people were were
glued glued to to their their television television sets sets to to watch watch IBM’IBM’s s
WWatson atson outclass outclass two two former former champion champion con-con-

testants testants on on the the Jeopardy Jeopardy quiz quiz showshow. . Watson Watson performed performed at at hu-hu-
man man expert expert levels levels in in terms terms of of precision, precision, confidence, confidence, and and speed speed
during during the the Jeopardy Jeopardy quiz quiz showshow..
Does Does WWatson atson represent represent a a new new strategic strategic direction direction for for IBM? IBM?
Not Not reallyreally. . The The Watson Watson project project is is simply simply a a manifestation manifestation of of the the
move move from from computer computer hardware hardware to to a a service service strategy strategy over over a a
decade decade ago.ago.

WAWATSON TSON PROJECT PROJECT DESCRIPTIONDESCRIPTION
Artificial Artificial intelligence intelligence has has advanced advanced significantly significantly in in recent recent
years. years. WWatson atson goes goes beyond beyond IBM’IBM’s s chess-playing chess-playing supercom-supercom-
puter puter of of the the late late 1990s. 1990s. Chess Chess is is finite, finite, logical, logical, and and reduced reduced
easily easily to to mathematics. mathematics. WWatson’atson’s s space space is is ill-defined ill-defined and and in-in-
volves volves dealing dealing with with abstraction abstraction and and the the circumstantial circumstantial nature nature
of of language. language. Since Since WWatson’atson’s s system system can can understand understand natural natural
language, language, it it can can extend extend the the way way people people interact interact with with
computers.computers.
The The IBM IBM Watson Watson project project took took three three intense intense years years of of re-re-

search search and and development development by by a a core core team team of of about about 20. 20. Eight Eight uni-uni-
versity versity teams teams working working on on specific specific challenge challenge areas areas augmented augmented
these these researchers.researchers.
WWatson atson depends depends on on over over 200 200 million million pages pages of of structured structured

and and unstructured unstructured data data and and a a program program capable capable of of running running tril-tril-
lions lions of of operations operations per per second. second. With With this this information information backup, backup, it it
attacks attacks a a JeopardyJeopardy question question by by parsing parsing the the question question into into small small
pieces. pieces. With With the the question question parsed, parsed, the the program program then then searches searches
for for relevant relevant data. data. Using Using hundreds hundreds of of decision decision rules, rules, the the
program program generates generates possible possible answers. answers. These These answers answers are are
assigned assigned a a confidence confidence score score to to decide decide if if Watson Watson should should risk risk
offering offering an an answer answer and and how how much much to to bet.bet.

WHAWHAT’S T’S NEXT?NEXT?
Now Now that that the the hype hype is is overover, , IBM IBM is is pursuing pursuing their their service service strat-strat-
egy egy and and the the knowledge knowledge gained gained from from the the WWatson atson project project to to real real
business business applications. applications. WWatson’atson’s s artificial artificial intelligence intelligence design design is is
flexible flexible and and suggests suggests a a wide wide variety variety of of opportunities opportunities in in indus-indus-
tries tries such such as as finance, finance, medicine, medicine, law law enforcement, enforcement, defense. defense.
Further Further extensions extensions to to handheld handheld mobile mobile applications applications that that tap tap

S N A P S H O T S N A P S H O T F R O M F R O M P R A C T I C EP R A C T I C E
Does Does IBM’IBM’s s Watson’Watson’s s Jeopardy Jeopardy Project Project
Represent Represent a a Change Change in in Strategy?*Strategy?*

into into WWatson’atson’s s servers servers also also hold hold great great potential. potential. IBM IBM identified identified
the the obvious obvious lowest lowest hanging hanging apples apples on on the the tree tree as as providing providing
healthcare healthcare solutions solutions and and has has begun begun design design of of such such a a program.program.
TTo o create create a a “doctor’“doctor’s s consultant” consultant” program program would would likely likely

follow follow a a design design platform platform similar similar to to Watson’Watson’s. s. For For example, example, it it
would would be be able able to:to:

• • Data Data mine mine current current medical medical documents documents to to build build a a knowl-knowl-
edge edge basebase

• • Integrate Integrate individual individual patient patient informationinformation
• • Use Use system’system’s s complex complex analytics analytics to to select select relevant relevant datadata
• • Use Use decision decision rules rules to to provide provide physicians physicians with with diagnostic diagnostic

optionsoptions
• • Rank Rank options options with with confidence confidence levels levels for for each each option.option.

Creating Creating a a doctor’doctor’s s consultant consultant solution solution will will not not replace replace doc-doc-
tors. tors. Although Although the the system system holds holds tremendous tremendous potential, potential, it it is is
manmade manmade and and depends depends on on the the database, database, data data analytics, analytics, and and
decision decision rules rules to to select select options. options. Given Given the the doctor’doctor’s s consultant consultant
input, input, a a trained trained doctor doctor makes makes the the final final patient patient diagnosis diagnosis to to
supplement supplement physical physical examination examination and and experience.experience.
The The Watson Watson project project provides provides IBM IBM with with a a flexible flexible compo-compo-

nent nent to to continue continue their their decade-old decade-old strategystrategy, , moving moving IBM IBM from from
computer computer hardware hardware to to service service products.products.

*Ferrucci, *Ferrucci, et et al. al. “Building “Building Watson,” Watson,” AI AI Magazine. Magazine. vol. vol. 31, 31, no. no. 3. 3. Fall Fall 2010.2010.

ororganization. ganization. It It encouraencourages ges integraintegration tion because because effeffort ort and and resources resources areare
committed committed to to comcommon mon goals goals and and strastrategiestegies. . See See Snapshot Snapshot frfrom om Practice: Practice: Does Does
IBM’IBM’s s WWaatson’tson’s s JJeopardeopardy y Project Project RRepresent epresent a a Change Change in in StraStrategy? tegy? It It is is a a con-con-
tintinuousuous, , iteraiterative tive prprocess ocess aimed aimed aat t developing developing an an integraintegrated ted and and coordinacoordinated ted
long-term long-term plan plan ofof action. action. StraStrategic tegic management management positions positions the the ororganization ganization toto
meet meet the the needs needs and and requirrequirements ements ofof its its customers customers ffor or the the long long terterm. m. With With thethe

© © Sean Sean Gallup/Getty Gallup/Getty ImagesImages

1185880 – McGraw Hill Education ©

28 28 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

long-term long-term position position identified, identified, objectives objectives are are set, set, and and strstrategies ategies are are dedeveloped veloped to to
achievachieve e objectives objectives and and then then translatranslated ted into into actions actions by by implementing implementing prprojectsojects. .
StraStrategy tegy can can decide decide the the survival survival ofof an an ororganization. ganization. Most Most ororganizations ganizations arare e
successful successful in in stra strategies tegies ffor or whawhat t course(s) course(s) they they should should pursuepursue. . How-How-formulatingformulating
eveverer, , the the probproblem lem in in many many ororganizations ganizations is is stra strategies—that tegies—that isis, , implementingimplementing
making making them them happen. happen. IntegrIntegration ation ofof strategy strategy fforormulamulation tion and and implementation implementation
often often does does not not exist.exist.
The The components components ofof strategic strategic manamanagement gement are are closelclosely y linked, linked, and and all all arare e di-di-

rected rected totowarward d the the future future success success ofof the the ororganization. ganization. StraStrategic tegic management management re-re-
quires quires strstrong ong links links among among mission, mission, goalsgoals, , objectivesobjectives, , strategystrategy, , and and implementation. implementation.
The The mission mission givgives es the the general general purpose purpose ofof the the ororganization. ganization. Goals Goals givgive e global global tar-tar-
gets gets within within the the mission. mission. ObjectivObjectives es give give specific specific tartargets gets to to goalsgoals. . Objectives Objectives gigive ve
rise rise to to fforormulamulation tion ofof stra strategies tegies to to reach reach objectivesobjectives. . FinallyFinally, , strastrategies tegies require require ac-ac-
tions tions and and tasks tasks to to be be implemented. implemented. In In most most cases cases the the actions actions to to be be taktaken en represent represent
prprojectsojects. . Figure Figure 2.1 2.1 shows shows a a schemaschematic tic ofof the the strategic strategic management management prprocessocess and and
major major activities activities rrequired.equired.

PProjectsrojects

11

22

33

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InternalInternal
envirenvironment—onment—
strengths strengths andand
weaknessesweaknesses

ReReview/review/revisevise
missionmission

ReReview/review/revisevise
missionmission

ExternalExternal
envirenvironment—onment—
opporopportutunitiesnities

and and threatsthreats

Set Set strategystrategy
and and objectivesobjectives

PPorortfoliotfolio
of of strategic strategic choiceschoices

StrategyStrategy
implementationimplementation

PProjectroject
selectionselection

FIGURE FIGURE 2.12.1
Strategic Strategic
Management Management
PrProcessocess

1185880 – McGraw Hill Education ©

Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 2929

Four Four Activities Activities of of the the Strategic Strategic Management Management ProcessProcess
The The typical typical sequence sequence ofof activities activities ofof the the strastrategic tegic management management prprocess ocess is is outlined outlined
here; here; a a description description ofof each each activity activity then then ffolloollows:ws:

1. 1. RReview eview and and define define the the ororganizaganizational tional mission.mission.
2. 2. Analyze Analyze and and fforormulamulate te strastrategiestegies..
3. 3. Set Set objectives objectives to to achieachieve ve strastrategytegy..
4. 4. Implement Implement strategies strategies thrthrough ough projectsprojects..

RReview eview and and Define Define the the OrgOrganizational anizational MissionMission
The The mission mission identifies identifies “wha“what t we we want want to to becomebecome,,”” or or the the raison raison d’êtred’être. . Mission Mission
stastatements tements identify identify the the scope scope ofof the the organizaorganization tion in in terterms ms ofof its its prproduct oduct or or ser-ser-
vicevice. . A A written written mission mission statement statement prprovides ovides ffocus ocus for for decision decision making making wwhen hen shared shared
by by ororganizaganizational tional managers managers and and emploemployeesyees. . EveryEveryone one in in the the ororganization ganization should should
be be kkeenly eenly aawarware e ofof the the organizaorganization’tion’s s mission. mission. FFor or exampleexample, , at at one one larlarge ge consult-consult-
ing ing firm, firm, partners partners who who fail fail to to recite recite the the mission mission stastatement tement on on demand demand are are requirrequired ed
to to buy buy lunch. lunch. The The mission mission stastatement tement communicacommunicates tes and and identifies identifies the the purpose purpose ofof
the the ororganization ganization to to all all stakstakeholderseholders. . Mission Mission statements statements can can be be used used ffor or evaluaevaluating ting
ororganization ganization perfperforormancemance..
TTraditional raditional components components ffound ound in in mission mission statements statements arare e major major products products and and

servicesservices, , target target customers customers and and markmarketsets, , and and geogrageographical phical domain. domain. In In addition, addition,
stastatements tements frequently frequently include include ororganizaganizational tional philosophphilosophyy, , key key technolotechnologiesgies, , public public
imageimage, , and and contribution contribution to to societysociety. . Including Including such such factors factors in in mission mission statements statements
relarelates tes directldirectly y to to business business successsuccess..
Mission Mission stastatements tements change change infrequentlyinfrequently. . HoHowevweverer, , when when the the nanature ture ofof the the busi-busi-
ness ness changes changes or or shiftsshifts, , revised revised mission mission and and strastrategy tegy stastatements tements may may be be rrequired. equired.
See See Snapshot Snapshot frfroom m Practice: Practice: HP’HP’s s Strategy Strategy RRevision evision as as an an eexample xample ofof a a mission mission
and and strastrategy tegy revision.revision.
More More specific specific mission …