Tips on Executing Effective Business Strategies

Can you honestly say that your business strategy is (or will) drive improvements in your company’s results and ultimately it’s’ value?

Many companies spend significant energy and resources in developing a business strategy. Developing a good business strategy requires a lot of hard work and the company’s leadership should expect this hard work to pay off. However, in many cases, company executives are not satisfied with the results of this exercise.

Just having a logical business strategy is not enough. The business strategy must be effective.
In our experience, many business plans are not effective. This can result in the company’s leadership either: (1) concluding that the plan is unworkable and abandoning the effort or (2) continuing to invest additional significant time & money to redo the strategy until it is effective.

There is a practical third option. Execute a Business Strategy Diagnostic Review of your present plan. In this review, a knowledgeable consulting professional can assess your present plan and recommend the appropriate changes to transform it into an effective strategy in a more efficient manner.

No one can guarantee the success of any business strategy. However, companies can improve their chances of creating an effective strategy by simply avoiding a few classic mistakes.
In our experience, five of the most common steps that can be taken to improve the effectiveness of many business strategies are:

1.      Your Business Strategy Must Fit Within Your Capabilities and Be Specific Enough For Effective Execution. An effective business strategy leverages the strengths of a company. It should also fit well with the company's internal capabilities and culture or it will be difficult to implement. In our experience, many strategies do not address these requirements causing difficulty in execution. 

2.      Create More Inspiring and Specific Company Goals. First, it is a misconception that a business strategy will not contribute to the company’s results until years in the future. The plan should not be viewed as being only a long-term exercise. An effective business strategy properly implemented can begin to have an impact on business results almost immediately. In fact, a good strategy should be formulated with both defined short & longer term targeted business goals to drive better performance. Second, another way to drive more effective plans is to create business specific goals that can be measured against the market and competition in addition to past company performance. For example, do you have a goal to grow at least or greater than the growth of the market?  When you use market driven targeted results, it helps to ensure that once your business strategy is completed it will not be dull but inspirational. It will be targeted to achieve the desired results in the marketplace.

3.      Develop a Strategic Market Position That Truly Differentiates You from Competition. This is perhaps one of the most common omissions that we see in business strategies today. Many companies produce a very flexible, broad and generic strategy statement that makes everyone feel comfortable and does not limit any future potential business opportunities. However, the result is usually predictable. It makes the company look very similar to every other company in the market. A strategy statement should include a competitive differentiation that can be sustained over the long term.

4.      Develop a Greater Understanding of the Market and the Market Segments. We find many companies need a better understanding of the market in which they do business. Most companies are aware of the approximate market share of the major competitors in a market. A number of companies can also identify current market trends and project the impact these trends will have on the market and their company. However, in our experience, few companies truly understand important market issues such as: (1) the buying factors of customers in the market: (2) the differences in buying factors among the various market segments, and (3) the importance of these buying factors to the customers. We believe that overall strategic intelligence should track a broad array of indicators with emphasis on identifying changes that may affect the short and long term strategy of the company.

5.      Know Much More About Your Competition. Many companies do know their major competitors and some key information about each including their products, their prices, and promotions. However few companies evaluate the cost structure or marketing & sales approach of their competitors and compare it to their own. A much better working knowledge of competitors is critical when trying to understand your competitor’s business strategies and how you can develop strategies that are competitive within the buying factors within specific market segments.

These are just a few examples of issues that our professional consultants uncover when completing our Business Strategy Diagnostic Reviews. We work closely with our clients to identify both the additional information needed and the additional analysis necessary to transform their present plan into a more effective implementable business strategy that drives results.

While there is no guarantee that the business strategy will be successful, addressing a number of these areas for improvement may significantly improve your chances of success.

Prevent a Costly Runaway Project: Recognize the Warning Signs

Our firm recently completed a study which concluded how many companies can significantly reduce their cost by identifying and correcting runaway projects much earlier. One key is that management must be more aware of their early warning signs and what necessary steps they can take to regain project control.

The study of 105 companies in the technology, financial services, health care, distribution, and manufacturing industries found that 76% of these companies had one or more major runaway projects in the last three year.  These runaway projects resulted in a significant impact on their business. 

Those that experienced these runaway projects defined the negative results of these projects on their business to include one or more of the following:

·         Significant cost overruns which impacted profitability & cash flow;

·         Delays in product/service launch which resulted in loss of expected new revenues;

·         Delays in new systems changes/process improvement or business integration implementations resulting in delaying operational improvements and cost reduction opportunities;

·         Requiring project cancellations resulting in financial write-offs and lost or delayed business opportunities.

An article in Computer Weekly also supported our study’s conclusions. It pointed out that every one of the top U.S.  200 companies had at least one runaway project they had to face in their history. It also reported that a third of all the major computer projects carried out in the UK at the time went over budget, overshot their completion dates, or ended up being junked by users as worthless.

One key recommendation in our study is for our clients to schedule a regular independent review of every major project in their organization on a periodic basis. Generally, an organization, and specifically the project team may support their project and their specific approach as the preferred way of proceeding. Some of them may do this at any cost. 

A way to minimize the risk of any project overconfidence is for the company to conduct a regular review from an independent third party reporting directly to executive management. The review can be at the end of each major milestone.  

This post is to provide a company's  management with the information necessary to help them identify some of early warning signs of a runaway project within their company and to understand the most effective way to proceed. We will discuss:

·         The Definition of a Runaway Project;

·         Early Warning Signs of a Runaway Project;

·         Examples of  Causes of a Runaway Project;

·         Identifying & Correcting a Runaway Project; and

·   

Definition of a Runaway Project

Our study defined a runaway project as a major project that is characterized by repeated delays and overspending and where critical success factors are not satisfied. However, in our study, a number of these projects were ultimately completed after the right corrective action was taken so runaway projects should not necessarily be considered failed projects.

Without corrective action, runaway projects can squander an organization’s resources. They also have a high probability of failure. If this happens, the company will not only miss meeting its corporate business objectives but it can lead to an expensive write-off.

Early Warning Signs of a Runaway Project

Our study confirmed that you do not need to be an experienced project manager to identify the early warning signs of a runaway project. A knowledgeable executive who knows where to look can identify potential trouble projects by looking in a number of key areas. The signs were consistent in many of the projects that were reviewed. In many cases, the signs could have helped identify these projects earlier if they were noticed.

They included:                                                                                        

·         Schedule delays; Budget overruns

·         Multiple budget adjustments; Ongoing need for more budget

·         Multiple management changes;

·         Inconsistent project leadership:  

·         No clear business owner;

·         “Big Bang” delivery strategy: Delivers value only at the end;

·          Deadlines were being missed. 

·         Limited availability of key resources:

·         Project staff were confused about their tasked or they were continually being reassigned;

·         A lack of or irregular status reporting; and

·         Project plans have not been maintained/ Poor Project plan.

Examples of Causes of a Runaway Project

There were numerous examples of causes for runaway projects identified in our study. As you would expect, most runaway projects looked innocent enough early in life of the project. However, things happened that started the ball rolling and these projects continued to gain momentum and move in the wrong direction.

Some key examples of the causes that contributed to a number of the runaway projects included:

·         The project scope was not well defined or agreed nor integrated throughout the project.  We found that the project’s business objectives were generally unclear which gave significant room for scope creep. In many cases there was not effective control over request for changes which led to significant and continuous changes to scope (especially without understanding the project impact). In efficient projects there was clear business objectives stated that resulted in less scope creep and less project changes.  Effective control of changes is essential to avoid runaway projects. Our study concluded that the more the changes to a project accelerate, the further the project was delayed and the higher the project costs.  The project then gets delayed further, which results in more changes. At some point in the project, the change rate exceeds the capacity of the project team requiring more staff. The additional resources delay the project even further due to more coordination needs and additional training. The cost of the project then increases requiring more executive attention, and cause the project to slip even further and cost even more.

·         The underlying technologies were not mature enough. There were a number of examples of runaway projects that could have been identified earlier thereby saving the company significant money if the company did not want to take the chance of using operationally unproven technology.  One example was the implementation of a state- of- the-art Enterprise Resource Planning System software solution. Company executives selected the software after an extensive search with the recommendation from a preferred systems integrator.  The integrator stated that the integrator was adopting the software as the standard for their implementation practice.  However, the first warning should have been that at the time the solution was far from proven.  The next warning sign came at the end of the detailed scoping phase when it was obvious that the level of fit was much less than even the most pessimistic estimates. However, both parties still agreed to continue with the effort. The third warning came when the build phase took almost three times longer than expected, even allowing for reductions in functions and features. After three years, an objective project audit concluded that project should have been ended in its first year saving millions of dollars.

·         Effective project management practices were not followed. One example was a runaway project that went wrong after assigning an inexperienced project manager to a major product development effort.  While the manager did have project management experience, this effort proved to be well beyond his previous experience where he implemented much smaller projects. It was  ultimately determined that the project was being managed using more casual project management techniques than required which led to a number of problems including late delivery of key subprojects that resulted in major delays for the entire project. The result was a project that cost millions more than expected and was 20 months overdue with less functionality than anticipated.

·         Contracting out a major project does not alleviate the need for effective management.  Today, there are numerous options open to a company to contract out for completion of a major project. This offers a turnkey solution and can isolate the costs and results from other company activities. In many companies, this can provide an ideal solution without hiring a massive number of new personnel. However, our review found that this does not guarantee protection against runaway projects.  Effective management is still required. Our review identified runaway projects can still happen. Examples of causes included changes in the scope of the project; negotiations of new changes in contract terms; and unanticipated need for new funding including hardware & software purchases that the customer did not anticipate.

Identifying & Correcting Runaway Projects

There is no simple solution to fix the runaway project problem once it occurs without expending a significant amount of time and cost.

 The goal is to identify a potential runaway project as early as possible so that you can address the issues as quickly as possible. This permits you to take control of the situation before the problem gets to too far along. However, recognizing that our clients may have projects in various degrees of difficulty, BTP has developed the following nine step approach to help our clients to identify & correct runaway projects in these various degrees of difficulty:

1.    Conduct an independent review of every major project in your organization on a scheduled basis. The best way to insure against a runaway project is to catch potential problems early. Generally, an organization, and especially the project team, may support their project their specific approach to the project. Some may support their approach to the project at any cost. A way to minimize the risk of any project overconfidence is for the company to conduct a regular review from an independent third party reporting directly to executive management. The review can be at the end of each major milestone and provide another perspective on the approach.

2.    Know the early warning signs. We have identified some examples of the early warning signs of a runaway project in this paper. Senior executives should stay informed of the status of major projects within their company and be on the lookout for these and other early warning signs of potential runaway projects.

3.    Acknowledge you have a runaway project. Follow up on these early warning signs. Get additional information to confirm your suspicions and then admit that you have a runaway project. Too many organizations in our survey did not react quickly enough in taking corrective action. They thought giving the project team more time and money would solve their problem. Step one is to confess you have a runaway project. This may be difficult when your project people are telling you that all they need is “more time” or “more money”.

4.    Suspend the work on the project if necessary. Our research suggests that the right course of action for some runaway projects is to suspend the work until you have conducted a project audit. If you continue, you may be burning more hours and cost against the project and you may not be working toward accomplishing your objective. Pausing gives you an opportunity to regroup and develop a new plan. However, in many situations, this can be a difficult decision.  Some people on the project may leave and not be available when the project resumes. If a vendor is involved, it may pull its team. However, if the project is not going in the right direction, it can be the right decision to make.

5.     Perform a project audit. The objective of this project audit is to determine the root causes for problems in the project so that corrective action can be taken. The causes can vary including an inexperienced project manager, insufficient staff; lack of support systems.  In some cases in our study, we found the team does not have a good project charter. Without a project charter, the project is not truly defined.

6.    Recalculate the effort needed to complete the project. In this step, you would independently reassess the effort that is needed to complete the project. Define a realistic estimate of dollars and hours of what it is going to take to finish the project. In our study, we found that many of these runaway projects were initially estimated using intuitive estimating rather than from experience. Intuitive estimating may work with small projects however large projects in which you are dealing with more than one business organization require much more experienced based estimators. To realistically assess the effort to complete the project, an experienced large project reviewer should review the project and see how long it really takes to complete tasks. Don't assume you are going to do things so much better or that tasks will take less time. Where appropriate, bring in someone who has done the particular task to get a realistic estimate.

7.     Confirm the business priority and return on investment (ROI). In this step, the company should reconfirm the project’s business priority and calculate a new ROI. In our survey, a comprehensive formal ROI was not completed on a number of the runaway projects that were reviewed.  It is our recommendation that prior to refunding any runaway project after an independent audit someone should reassess the project’s business priority and complete another justification for the project. Do business priority and the ROI still make sense? Do the business benefits make the project worth continuing? Has the project's importance decreased over time? Are there now alternative solutions?

8.     Restart the project. Once you have answered all the appropriate questions, have a new project plan and new estimates, and you have made the appropriate changes to correct the deficiencies noted in the audit you can re-launch the project.

9.     Learn from your mistakes. Institutionalize the lessons from this effort into your learning process to avoid repeating these mistakes in your company.  A lasting learning experience can come from dealing with a successful immediate occurrence in your own environment. A practical approach to institutionalizing these lessons into your quality program is by project completion assessments.  The role of an auditing effort is to provide an independent verification of facts, the purpose of project assessments is organizational learning and not the conduct of audits. A constructive post-implementation review will concentrate on immediate corrective actions and not focus on past circumstances or future eventualities.

The “bottom line” is that our survey concluded that most companies have a significant opportunity to improve their financial results by doing a better job of early identification of their runaway projects and being more aggressive in taking corrective action.

Our research suggests that some ways that will help them do this include scheduling independent reviews of these projects; keeping your eyes open for the early warning signs; and learn from your mistakes as well as the mistakes made by others.

To do this, an executive should not be timid about asking for an independent opinion when they have doubts about the direction of their major projects.  In many cases that second opinion may be a good investment.