IPS Blog

Managing Strategic Initiatives in the New Economy

Jul 1, 2009 10:24:00 AM

Managing strategic initiatives effectively and efficiently at any time can be challenging. When the economy turns itself on its head it is even more critically important. This whitepaper will discuss the business context we are currently in, what makes initiatives challenging and challenged and the application of key concepts to manage strategic initiatives now and beyond the crisis.

It's a New World Out There

Let's put the current situation into some form of context - a way of understanding what environment we face externally and internally. Historically recessions are cyclical in nature (this too shall pass). They tend to occur roughly every 6 years and over time the length of a recession has dropped to an average of 11 months in the past 50 years. There is a difference this time out. The situation is far more complex - the impact is global in nature, occurring at lightning speed and systemic. The tipping point was the financial credit crisis however SPM believes it coincides with an exponential increase in world change - technologically, geopolitically demographically, economically and how we view and run business. And in fact the reality is the recession is forcing all of us - professionally and personally to transform ourselves to survive.

The unprecedented period of growth we have experienced over the past 6 years has created a number of issues which will require addressing: redundancies and inefficiencies, complexities, and lack of innovation (just do it because we are making lots money and our clients are demanding speed). In the new economy these won't be tolerated. In the longer term organizations will need to deal with these issues.

In a 2008 CEO study conducted by IBM CEOs identified 5 core traits on top of their agenda: change, innovation, globally integrated, disruptive by nature and genuine not just generous. The key trait focused on the need for change. CEOs saw significant change ahead and yet 39% felt unprepared to manage the pace of change. The study indicated that market factors, people skills, and technological factors as the areas where the most change will occur over the next 3 years. While change drivers are typically the economy, competition, new ideas, profits and losses and regulation today they are all colliding at the same time. The potential for change at unprecedented speed with maximum uncertainty will create a higher receptivity for change than in the past. Change management capability and understanding how to effectively introduce change will be essential.

Human capital is an area where continued challenges exist and will be exacerbated by the recession. Demographics are forcing companies to look at where they will find or develop leaders. In Canada immigration is not solving the issue as it is taking longer to get new workers up the curve and capable to take on leadership roles in the numbers required. The issue for many companies as they deal with the impact of the recession on their business and sector will be how to retain and retool for the new economy. To retain staff organizations will look for ways to have them do work they weren't skilled for in the past. Work may be redistributed or off boarded if there is not a strong business case to continue with a particular line of business or key initiative.

The new economy will certainly create real opportunities for some. The need to come to terms with the reality of the global recession and its impact will be critical in how to move forward. Understanding your financial and competitive strength may well guide the overall corporate strategic position, immediate efforts and how leaders should be leading. While it provides a unique opportunity to overcome organizational inertia and barriers to strategic transformations, the new environment will favour the fast and agile.

Challenged and Challenging Initiatives

Strategic Initiatives are a vital way organizations respond to opportunities and to threats. In today's globally competitive, fast changing business climate, effective initiative implementation is a must. Unfortunately, most organizations are optimized to handle Business As Usual - not the change that new initiatives bring. This is why so many initiatives come up short.

SPM's approach to initiative management recognizes and reduces the tension between Strategic Initiatives and Business As Usual with each implementation cycle. This gives organizations a faster, leaner, more agile and more effective organization. We view strategic initiatives as a continuous transformation of the organization.

In the new economy managing this tension and delivering effectively on initiatives will be a critical success factor.

Over the past five years the number and complexity of strategic initiatives being undertaken has increased significantly. These initiatives are more dispersed crossing business units, geography, and executive boundaries. While driven by business needs there has generally been a technology component further increasing the complexity and dynamics within the organization. Initiatives (and the resulting programs and projects) are how we deliver on corporate strategy. Therefore, they become drivers of change and a means to remaining competitive and growing. It is not only essential to select the right ones but do them right (effective and efficient) in order to realize expected outcomes and benefits. Historically however, organizations are over optimistic in execution - how long it will take to complete, what sales will be achieved, how much costs we can reduce and how much it will cost to execute the initiative, and how much we can deliver once in production.

Consistently independent studies have identified 44-47% of initiatives as troubled or challenged. If we look at that in terms of dollars then for an organization with initiatives on the books costing $60 million it puts approximately $27 million at risk of failing let alone the missed realized benefits and intended strategic results. This can be a significant cost to an organization at any time today it is even more intolerable.

How do initiatives become challenged? What makes an initiative challenging? Is there a difference? We define an initiative as challenging under conditions such as: never been done before, using new technology, creating or driven by innovation. The biggest issue challenging initiatives face is lack of strong and effective change management. We believe with the changes in the economic condition we will see a higher appreciation, willingness and adoption of change management best practices.

Challenged or in trouble initiatives usually are defined by their overruns on cost, missed or behind deliverables, risks in delivering anticipated benefits and behind schedule (either planned or forecasted). In the Center for Business Practices' research report on Troubled Projects they identified primary root causes were related to poor communications and poor project management processes. Other key causes included: expectations were too high, unrealistic, not managed or poorly communicated; requirements were unclear, contradictory, ambiguous, or imprecise; lack of resources, resource conflicts, turnover of key resources, or poor resource planning; planning was based on insufficient data, details or poor estimates; and risks were unidentified or assumed and not managed. The good news is that where organizations either have a standard process for recovering troubled projects or initiatives or where a deliberate intervention was undertaken there was a very high success rate in successful completion (in 80% of the organizations). Either initiatives were recovered and completed successfully (in 43% of organizations) or by setting new expectations and meeting those new requirements they were successful (in 37% of organizations).

The unfortunate news is generally crisis occurs late in an initiative as shown in the diagram below. This means today executives and key initiative stakeholders will need to recognize the symptoms of challenged initiatives earlier and then take immediate action. Deliberate interventions can result in successful recovery or immediate cancellation saving the organization money, time, competitive advantage and more. Interestingly the IBM study on Making Change Work identified that Change Masters (those who deliver effective change management on initiatives) have a better record of initiative success (80% compared to the 41% typically reported).

What makes these initiatives successful? Change masters have recognized that behavioural and cultural change are crucial. These factors are considerably tougher to address as they are 'soft'. They include: top management sponsorship, employee involvement, honest and timely communication, corporate culture that motivates and promotes change, and change agents (pioneers of change).

Many organizations are finding that the crisis and shifting environment is creating a closing of ranks and silo mentality, a focus on cost cutting, and executives appear exhausted and therefore resistant to innovating or seeking the opportunities that are being created. This will continue to challenge the ability to deliver on initiatives without deliberate action.

Moving Forward

In times of uncertainty there is no wishful thinking. You have to confront reality. That means it is essential to look for strategic and tactical actions that will provide resiliency as well as them to adapt and change. Given the type and magnitude of the uncertainty with this downturn and shift to a new economy a need to be agile and change in mid-stream to take advantage of fast paced dynamics externally and create faster learning is necessary. Tight portfolio management, scenario planning and development of diverse options and initiatives, total risk management, and change management will become necessary components for survival.

 

Given the lower success track record on many initiatives managing initiative investments judiciously is vital. Tools that are known to work even at the best of times can be implemented quickly and easily. There must be a willingness to put rigor, discipline and action to work. Organizations then have ways to learn faster, shift before it is too late and adapt to an ever changing external environment. Three key areas to tackle are:

1. Tighten initiative portfolio management and governance

* Review your existing portfolio to ensure all of your existing initiatives fit with today's strategy and continue to have a strong business case; include in flight initiatives as well as those waiting to initiate;

* Develop scenarios to 'see' different futures and determine initiatives for each scenario; if a scenario starts to take shape be ready to initiate quickly; make small tests or experiment with minimal investment or impact; these scenarios will require metrics and measures to determine trigger points;

* Monitor the external environment to adjust your scenarios and optional initiatives;

* Identify and eliminate redundancy - there are often similar initiatives executing at the same time;

* Review risk and returns criteria as part of your initiative selection process to adapt for the new environment;

* Increase and improve governance - build strong steering committee and ensure active, committed executive sponsorship; allow 'telling truth to power' so information is accurate and real on in flight initiatives and their progress.

2. Utilize audits or health checks

* Allow for early intervention to catch initiatives at risk of becoming trouble or challenged;

* Quickly assess initiatives and clear roadblocks;

* Don't wait until the end of an initiative or when a crisis occurs, conduct a health check or audit after planning and at key stages of the initiative;

* Know when to pull plug - if an initiative is failing or if it no longer makes sense because the need/market has changed then stop. This will free up resources (people and finances) to move to other key initiatives that will deliver.

3. Tackle complexity before it tackles you

* Chop and chunk initiatives into small timeframes with intermediate deliverables; they must be able to create value or deliver benefit, this allows for immediate short term value while minimizing risk;

* Working on less allows the delivery of quality;

* Go back to basics: program and project management processes work - use them;

* Deploy skilled practitioners to successfully execute your key strategic initiatives - availability is not a skill;

* Implement change management as a core competency; develop sponsor roadmaps to help drive change, create change masters to manage the soft factors that impact results.

Keeping your business in focus on the operational side is important. Even more important is driving out the right initiatives to deliver the strategy that fits where your organization needs to go not only through the crisis but beyond. Inertia is not an option and there is no time to waste. As Darwin stated it's not the strongest of species who survives but those most responsive to change.

Resources

IBM's Making Change Work Study, 2008

Managing Strategic Initiatives in Turbulent Times, Roundtable Notes, SPM Group Ltd., February 2009

Leadership in Uncertain Times, RHR International, November 2008

Strategy Execution: Managing Strategic Initiatives, SPM Group Ltd., 2004

Troubled Projects: Project Failure or Project Recovery, Center for Business Practices Research Report, 2006

Why Some Companies Are Making the Wrong Moves, Booz & Company, 2009

 

(by Catherine Daw, PMP, MBA CEO & President SPM Group Ltd.)