Problems, causes and solutions: Closing the strategy-execution gap
It’s an emerging mantra that strategy is executed via projects and programs – for example, according to the Project Management Institute (PMI) (2014) – 'all strategic change happens through projects and programs. While some projects improve an organisation’s ability to 'run the business' and don’t rise to the level of a 'strategic initiative,' all of an organisation’s strategic initiatives are projects or programs, which inevitably 'change the business.' One might argue whether this is an over-statement, but the reality is that projects and programs are increasingly promoted as the means by which organisations should pursue achievement of their strategic objectives. This reflects the:
- scale of the challenges faced i.e. the gap between the current ‘as is’ state and the desired ‘to be’ state
- need to implement change that crosses functional and often organisational boundaries (for example in relation to strategic alliances and integrated supply chains)
- Complexity of the challenges faced – projects and programs (whether managed traditionally or by more ‘agile’ approaches) provide a degree of discipline combined with the flexibility to adapt to an emerging environment.
This in turn leads Kerzner (2013) to argue:
Project management is no longer regarded as a part-time occupation or even a traditional career path position. It is now viewed as a strategic competency needed for survival of the firm.
But if this is the case, then there is a serious problem - the success rate of projects and programs is disappointingly poor. Research consistently reports that many projects and programs are not only delivered late, cost more than was anticipated (often a lot more) but also fail to deliver against their stated objectives. In NSW for example, an audit report found that 88 public infrastructure projects overspent by $900 million, and a report commissioned by Infrastructure Australia found that 48 per cent of projects failed to meet their baseline time, cost and quality objectives. In Victoria a report from the Auditor General on IT found:
- delivery was late in 50 per cent of cases
- thirty-five per cent were overspent
- Most could not demonstrate value for money.
A similar picture applies in the private sector - the PMI (2014) reported that only 56 per cent of strategic initiatives meet their original goals and business intent. Although executives know what they should be doing (88 per cent say that strategy implementation is important to their organisations), 61 per cent acknowledge that their firms often struggle to bridge the gap between strategy formulation and its day-to-day implementation. Project failure is therefore both an implementation and a strategic issue.
The causes of project failure to deliver against strategic intent are numerous including factors such as: unclear goals, overly optimistic forecasting, managers investing in ‘pet’ projects, poor and inconsistent investment appraisal practices (so resources are not prioritised on those projects with greatest strategic impact), and failing to adapt projects to changes in strategy. But there is another important factor that is often overlooked – what Sull (2007) termed the ‘strategy-execution gap’ where strategy formulation, planning and implementation (via projects and programs) are perceived as a series of distinct and sequential steps. Under this view, strategy is formulated by senior managers, and is then implemented by the rest of the organisation.
This linear view has a number of implications:
- Strategy and implementation are treated as separate activities or functions (which rarely communicate with each other).
Strategy is set when we know least – this is especially problematic in dynamic environments.
It encourages a ‘command and control’ approach to project implementation, where the focus is on ensuring strategy is implemented as envisaged even where conditions have changed. Indeed, as Sull (2007) says,'a linear view of strategy pushes leaders to escalate commitment to a failing course of action, even as evidence mounts that the original strategy was based on flawed assumptions.'
Where strategy is implemented successfully, it is the strategic planners that get the credit. In contrast, failure is typically attributed to flawed implementation and is thus a failure of project managers or project management.
Sull (2007) said:
Linear view of strategy pushes leaders to escalate commitment to a failing course of action, even as evidence mounts that the original strategy was based on flawed assumptions.
Consequently rather than being driven by the need to deliver a specific contribution to strategic objectives, too often we see projects and programs using some nebulous reference to ‘strategic alignment’ as a justification for their continued existence. As Sanwal (2007) says, strategy is too often, 'the justification of last resort or when an investment owner does not want to think about why to do an investment. In essence, strategy is the reason often cited when the benefits of a particular idea cannot be articulated in a more lucid manner'.
So what’s to be done? Well I’d focus on three key steps. Firstly, we need to adopt an integrated view of strategy and execution. Rumelt (2012) argues strongly in ‘Good Strategy Bad Strategy’, that strategy is, 'a cohesive response to an important challenge…a strategy is a coherent set of analyses, concepts, policies, arguments, and activities that respond to a high-stakes challenge.' Furthermore, Rumelt identifies three elements to the ‘kernel’ of ‘good’ strategy:
- Diagnosis – of the challenge faced via insight, re-framing the critical factors in a situation and designing a coherent response to address them (including risk mitigation). It is less about decisions than design.
- A guiding policy – the approach to be used to address the challenge i.e. the high-level ‘how’.
- Coherent, coordinated and focused actions including resource commitments.
This approach also recognises the need for strategy to adapt in response to learnings from implementation. In short - less ‘command and control’ and more ‘adapt and learn’.
Secondly, and following on from Rumelt’s point 3 above, rather than projects being started and then aligning themselves with strategy, we need to start with the strategy and commission the projects and programs required to deliver that strategy.
Nieto-Rodriguez (2014) argues that:
Fewer, more effectively selected and managed projects are the key to strategic and long-term success… those organisations that focus on just a few key initiatives can perform significantly better than unfocused organisations.
This also reflects the conclusions of Kendall and Rollins (2003) who argued that if you want to get better at project delivery, do fewer projects –'the executive cut the number of projects in half. By having fewer active projects, they were able to complete more projects per year.'
So fewer more strategically focused projects – but how do we determine which projects? This is where our third step comes in – developing a portfolio-wide benefits framework to provide a sound and consistent approach to determining the forecast strategic contribution from all projects and programs proposed for inclusion in the organisation’s portfolio. So we start with the organisation’s strategic objectives and ask, ‘what measurable improvements (i.e. benefits) would demonstrate achievement of, or progress towards, those objectives?’ As the PMI (2016) have said, 'Project benefits can be considered synonymous with positive strategic impacts' – so we need to have a consistent approach to measuring these strategic impacts as a basis for sound investment appraisal and portfolio prioritisation. Commonly identified benefits categories include the following:
- Customer or user benefits - for example, in terms of time saved, money saved, and improved customer experience. One example of the latter is where the UK Government’s Service Transformation Initiative focused on reducing avoidable contact (i.e. reducing the number of calls, letters etc. citizens were required to make to communicate with government departments)
- Increased or improved output (service or product quantity and quality)
- Financial benefits (cost reduction and increased revenue) – fundamentally, such benefits need to be seen in some positive change in cash inflow or outflow and
- Risk reduction (reduced exposure to the organisation’s strategic risks). For example, one organisation I worked with were particularly concerned with risks to their IT systems and data. Consequently they had appointed strategic risk owners whose job included assessing the impact of projects and programs on each relevant risk.
Ultimately, what we are talking about here is a more disciplined approach to both strategy formulation and execution via projects and programs. An approach in which projects are commissioned and managed to deliver a specific strategic contribution as measured by a consistent set of organisationally specific benefits, and in which lessons learned from implementation are fed back into strategy formulation.
About the writer
Steve Jenner teaches on the Executive Masters Program at Queensland University of Technology (QUT). This article draws upon materials developed for courses at QUT, and a chapter Steve authored for the recent ‘Handbook of Project Portfolio Management’ (Routledge, 2019).
Strategy; Agile; Data
Kendall G. & Rollins S.C (2003) 'Advanced Project Portfolio Management and the PMO', J Ross.
Kerzner H (2013) 'A Systems Approach to Planning, Scheduling and Controlling', 11th edition, John Wiley & Sons.
Martin R.L (2010) 'The Execution Trap', Harvard Business Review, July-August.
Nieto-Rodriguez A (2014) 'The Focused Organization', Gower.
PMI (2014) 'The High Cost of Low Performance'.
PMI (2016) 'Strategic Impact of Projects – Identify Benefits to Drive Business Results'
Rumelt R (2012) 'Good Strategy Bad Strategy', Profile Books
Sanwal A (2007) 'Optimizing Corporate Portfolio Management', John Wiley, Hoboken, NJ.
Sull D. N (2007) 'Closing the Gap between Strategy and Execution', MIT Sloan Management Review, volume 48, No 4.