How to powerfully, usefully and effectively measure each projects' strategic contribution
Some time ago I was in discussion with the then editor of the CIO Magazine who was talking about the need for IT to ‘align’ with the business. I said that I totally disagreed! “IT needs to be part of the business rather than some separate ‘aligned’ entity.” Alignment is not enough, to fully contribute you need to be integrated.
Similarly with strategic relevance. Where organizations assess a project’s strategic relevance they normally assess its ‘strategic alignment’ – “Which strategies does this project align to?” The proposer of the project is then usually given a list of around six or so ‘strategies’ to tick which their project aligns to.
This is pretty useless as a measure as, in most organizations, you would struggle to find a project that does not ‘align’ to at least one strategy. And ‘alignment’ is hardly a strong measure.
Now we used to fall into this language trap as we at TOP had a “Strategic Alignment Framework”. But it did far more than just measure alignment. As a result I was scolded very vigorously by a senior Gartner Vice President who said, “Your Framework doesn’t measure alignment, you actually measure Strategic Contribution, so you should not call it a ‘Strategic Alignment Framework’.” Good point. It is now called The TOP “Strategic Contribution Assessment Tool” (SAT) as it measures, at a detailed level, exactly how and how much each project contributes to the organization's strategy, stratagems and strategic imperatives.
It is simple to build and use.
Step 1 – identify the stratagems and their strategic imperatives
You need to start by translating your organization’s strategy into between 4 and 6 ‘stratagems’ and then identify the anywhere between 20 and 40 strategic imperatives required to deliver these stratagems.
Measuring contribution at the strategic imperative level of detail is essential to clearly measure exactly how and where each project contributes to each strategy. Measuring at the strategic statement level is far too high to be useful.
A stratagem of, say, “Improve financial management” may include strategic imperatives of “Reduce operating costs,” “Increase margins,” “Increase sales revenue,” “Improve financial reporting,” etc. This is the level for effective contribution measurement.
Step 2 – weight (5-1) the strategic imperatives in terms of their current priority
Not all strategic imperatives are created equal – they need to be weighted to show which are the most important and which are less important.
For example, in one organization during the boom times revenue growth was the highest-priority financial strategic imperative. Come the global financial crisis and suddenly it was supplanted by cost reduction as the most important financial management imperative.
So each strategic imperative needs to be weighted on a scale from 5 down to 1 so that the most important imperatives are clear.
You can see why just ticking an ‘alignment box’ is not detailed enough.
Step 3 – define the contribution levels for each strategic imperative and their scores (1-3)
But just contributing is not enough either. You also need to know how much you contribute.
A project that increases revenue by, say, $10 million per annum contributes more than a project that increases revenue by only $1 million. You need to be able to clearly differentiate between different levels of contribution – on a normalized basis.
So for each strategic imperative you need to specify three levels of contribution and specify what a $10 million revenue increase is – high, medium or low (3, 2 or 1). In some organizations this revenue increase will be massive, in others it may be marginal – so these contribution level definitions are specific to each organization. But what they do ensure is that every project that increases revenue is scoring its contribution on the same, clear, specific bases.
These scores and their accompanying definitions clearly differentiate between high, medium and low contributions and allow for comparison across different projects and project types.
Step 4 - score each project’s strategic contribution
Now you have the basis for accurately measuring each project’s relative strategic contribution. Each project can now generate an overall ‘strategic contribution score’ by identifying and justifying…
- Which weighted strategic imperatives it contributes to, and
- How much it contributes to each imperative – its contribution levels.
The strategic imperative weighting x the contribution level score gives you a total score for each imperative. Add these scores up and you have the project’s total strategic contribution score.
As every project uses the same normalized bases for scoring you now know each project’s relative strategic relevance (its total score). Usually you set a minimum score for a project to proceed – below which it is deemed ‘strategically irrelevant’ and therefore not worthy of investment.
Step 5 – monitor, measure and manage your strategy’s execution
By scoring each project’s contribution to each strategic imperative (which are organized by stratagem) you now also know at the portfolio level:
- Which strategic imperatives and stratagems are (or are not) being delivered by the project portfolio.
- Which projects are contributing to each stratagem and imperative and how much they are contributing.
- When each strategic imperative contribution (project) will be delivered.
- And, as they are delivered, when and how each strategy and imperative is being delivered.
As a result you can now not only objectively measure each project’s strategic relevance at a detailed level but you can also track how and how well your strategy is being delivered by your project portfolio.
You are now in control of your portfolio’s strategic contribution and your strategy’s execution. Which is much more powerful, useful and valuable than just ticking ‘alignment’.
The creation and use of a Strategic Contribution Assessment Tool is part of the TOP Strategy Management Module. To find out more on how you can generate a SAT for your organization or have one generated for you contact us at TOP.