Friday, September 21, 2018

What is strategy? And what isn't.

What is strategy? And what isn't.
An essential part of strategy execution is linking your project portfolio to your strategy. This translation from strategy to actual projects implementing it is one of the most important goals of project portfolio management. This concept is easy to grasp, but where I see many organizations struggle is to actually define a strategy that is clear, easy to communicate and defined in such a way that the rest of the organization can actually execute on it.

So let's start with what strategy is not.

Mission and Vision: these are elements of strategy, but they aren't enough. They offer no guide to productive action and no explicit roadmap to the desired future. They don't include choices about what businesses to be in and not to be in. There is no focus on sustainable competitive advantage or the building blocks of value creation.

A plan: tactics and plans are also elements of strategy, but they aren't enough either. A detailed plan that specifies what the organization will do (and when) does not imply that the things it will do add up to sustainable competitive advantage. When you have read my previous article on project success you will remember that the same is true for projects.

Emergent: The world is changing so quickly, some leaders argue, that it's impossible to think about strategy in advance and that, instead, an organization should respond to new threads and opportunities when they arise. Emergent strategy has become a new buzzword at many technology companies and start-ups, which indeed face a rapidly changing marketplace. Unfortunately, such an approach places company in a reactive mode, making it easy prey for more strategic rivals. Long and midterm strategy is possible in a fast changing world and it can be a real competitive advantage.

Optimization of the status quo: Many leaders try to optimize what they are already doing in their current business. This can create efficiency and drive some value. But it isn't strategy. The optimization of current practices does not address the very real possibility that the firm could be exhausting its assets and resources by optimizing the wrong activities. Optimizing has its place in business, but it is not strategy.

“There is nothing quite so useless, as doing with great efficiency, something that should not be done at all.”  ― Peter Drucker
Following best practices: every industry has tools and practices that become widespread and generic. Some organizations define strategy as benchmarking against competition and then doing the same set of activities but more effectively. Sameness isn't startegy. It is a recipe for medocrity.

So what is strategy?

Mike Porter states in his influential book "Competitive Strategy" that an organization creates a sustainable competitive advantage over its rivals by "deliberately choosing a different set of activities to deliver unique value". So strategy requires making explicit choices.

Lafley and Martin define strategy in their book "Playing to win: how strategy really works." as an integrated set of choices that uniquely positions the organization (which can be a company, a department, or a business unit) in its industry so as to create sustainable advantage and superior value relative to the competition.

It is natural to want to keep options open as long as possible, rather than closing off possibilities by making explicit choices. But it is only through making and acting on choices that you can win. Yes, clear, tough choices force your hand and confine you to a path. But they also free you to focus on what matters.

I really like the approach of the authors and I have used it with success in strategy definition and refining workshops. The rest of this article summarizes their approach and when this resonates with you I would recommend reading the book.

Lafley and Martin's main point is that strategy is the answer to the following five interrelated questions:

1) What is your winning aspiration? The purpose of your enterprise, its motivating aspiration. Simon Sinek calls it the "why?". Aspirations are statements about the ideal future. At a later stage, you can formulate these as OKRs that measure progress toward them. An organization must seek to win in a particular place and in a particular way. If it does not seek to win, it is wasting the time of its people and the investments of its capital providers. Think about this, and you will probably agree that this is valid for non-profit organizations as well. When I donate money I want that organization to win (in this case do as much good as possible). And the volunteers working for that organization want to win as well.

2) Where will you play? A playing field where you can achieve that aspiration. It represents the set of choices that narrow the competitive field. The questions to be asked focus on where the organization will compete - in which markets, with which customers and consumers, in which channels, in which product categories, and at which vertical stage or stages of the industry in questions. This set of questions is vital; no organization can be all things to all people and still win, so it is important to understand which where-to-play choices will best enable the comapny to win.

3) How will you win? The way you will win on the chosen playing field. To determine how to win, an organization must decide what will enable it to create unique value and sustainability, and deliver that value to customers in a way that is distinct from the organization's competition. Remember this is always tied to where you play.

4) What capabilities must be in place? The set and configuration of capabilities required to win in the chosen way. Capabilities are the map of activities and competencies that critically underpin specific where-to-play and how-to-win choices. For example for a SaaS company: software development, superb customer onboarding/support, scaling, analytics, and brand building.  The capabilities should support and reinforce one other. In isolations, even when the capability is strong, they will not generate a competitive advantage. But all together they are the pillars of growing the business.

5) What management systems are required? The systems and measures that enable the capabilities and support the choices. To be truly effective they must be purposefully designed to support the choices and capabilities. But in general you can say that the systems need to ensure that choices are communicated to the whole organization, employees are trained to deliver on choices and leverage capabilities, plans are made to invest and sustain capabilities over time, and the efficacy of the choices and progress towards aspirations are measured.

These choices and the relationship between them can be understood as a reinforcing cascade, with the choices at the top of the cascade setting the context for the choices below, and choices at the bottom influencing and refining the choices above.

Read more…

Tuesday, September 18, 2018

Using OKRs to define Project Success

Using OKRs to define Project Success
One of the main reasons why projects fail is not defining project success. A project can only be successful if the success criteria are defined. And this ideally upfront. Unfortunately, I have seen many projects that skipped this part completely.

When starting a project, it's essential to work actively with the organization that owns the project to define success across three levels:

1) Project delivery
2) Product or service
3) Business

Project delivery success

Project delivery success is about defining the criteria by which the process of delivering the project is successful. Essentially this addresses the classic triangle "scope, time, budget". It is limited to the duration of the project and success can be measured as soon as the project is officially completed (with intermediary measures being taken of course as part of project control processes). 


Product or service success

Product or service success is about defining the criteria by which the product or service delivered is deemed successful (e.g. system is used by all users in scope, uptime is 99.99%, customer satisfaction has increased by 25%, operational costs have decreased by 15%, etc.). These criteria need to be measured once the product/service is implemented and over a defined period of time. This means it cannot be measured immediately at the end of the project itself.


Business success

Business success is about defining the criteria by which the product or service delivered brings value to the overall organization, and how it contributes financially and/or strategically to the business. For examples: financial value contribution (increased turnover, profit, etc.), competitive advantage (market share won, technology advantage), etc.


Overall project success

These levels combined will determine your overall project success. You can be successful on one level but not others. This sounds all good in theory, but in practice, it is not so easy to define the criteria for levels 2 and 3. This is one of the main reasons why so many organizations only look at level 1: scope, time and budget. They are easy to define and measure.

Personally, I think level 1 matters very little if levels 2 and 3 are not met. So in spite of the “project management triangle”, the fact is that delivering a project on time, in scope and in budget is not enough. The project must be delivered successfully – meaning that the objective(s) that motivated the project in the first place have to be reached.

This is where so-called OKRs come into the game.

What are OKRs?

OKR is an abbreviation for Objective and Key Result. The concept was invented at the Intel Corporation and is widely used amongst the biggest technology companies in the world including Google and Zynga.

OKRs are originally meant to set strategy and goals over a specified amount of time for an organization and teams. At the end of a work period, your OKRs provide a reference to evaluate how well you did in executing your objectives.

You can use the same concept for defining project success. Spending a concerted effort in identifying your project strategy and goals, and laying it out in a digestible way with OKRs can truly help your project team and stakeholders see how they are contributing to the big picture and align with other teams.

Objectives

Any project has one or more objectives. The goal of setting an objective is to write out what you hope to accomplish such that at a later time you can easily tell if you have reached, or have a clear path to reaching, that objective. Choosing the right objectives is one of the hardest things to do and requires a great deal of thinking and courage to do well.

Key Results

Assuming your Objectives are well thought through, Key Results are the secret sauce to using OKRs. Key Results are numerically-based expressions of success or progress towards an Objective. All Key Results have to be quantitative and measurable. As Marissa Mayer, a former Google’s Vice President, said:

“If it does not have a number, it is not a Key Result.”                                   


The important element here is measuring success. It’s not good enough to make broad statements about improvement (that are subjectively evaluated). We need to know how well we are succeeding. Qualitative goals tend to under-represent our capabilities because the solution tends to be the lowest common denominator.

For example, if I create a goal to “launch new training for the sales team” I might do that for one sales member. If I alternatively make a Key Result of “train 50 sales team members” and only train 10, I’ve still 10x-ed my original goal.

Don’t turn OKRs into a project task list

Do you measure effort or results? Are your OKRs focused on your objective or on the means to get there? As we mentioned before, when used correctly, OKRs define success criteria for a project. OKRs should determine whether a project achieved success. But to do that, OKRs cannot be based on activities for three main reasons:

1) We want a results-focused culture, and not one focused on tasks.

2) If you did all your tasks and nothing improved, that is not a success. Success is improving something: customers are more satisfied, sales are higher, costs have been reduced.

3) Your project is just a series of hypotheses. An idea is just a non-validated hypothesis. In the same way, we don’t know if our project will improve our results or add value to the organization. The project is just a hypothesis so you cannot attach your OKRs to a non-validated bet. See No validation? No Project! for more on this topic.

Nobody works on projects as a hobby. Behind every project is a desire to improve one or more metrics. So, instead of tracking the delivery of a project, we should measure the indicators that motivated it in the first place.

Use Value-based Key Results

There are two basic types of Key Results:

1) Activity-based Key Results: These measures the completion of tasks and activities or the delivery of project milestones or deliverables. Some examples of Activity-based Key Results are:

- Release a beta version of the product.
- Launch a new feature
- Create a new training program.
- Develop a new lead generation campaign.
- Write a solution design document

Activity-based Key Results usually start with verbs such as launch, create, develop, deliver, build, make, implement, define, release, test, prepare and plan.

2) Value-based Key Results: These measures the delivery of value to the organization or its customers. Value-based Key Results measure the outcomes of successful activities. Some examples of value-based Key Results:

- Increase Net Promoter Score from X to Y.
- Increase Repurchase Rate from X to Y.
- Maintain Customer Acquisition cost under Y.
- Reduce revenue churn (cancellation) from X% to Y%.
- Improve average weekly visits per active user from X to Y.
- Increase non-paid (organic) traffic from X to Y.
- Improve engagement (users that complete a full profile) from X to Y.

The typical structure of a Value-based Key Result is:

Increase/Reduce Metric M from X to Y                                                     

Where X is the baseline (where we begin) and Y is the target (what we want to achieve).

Using the “from X to Y” model is better than writing a change in percentages because it conveys more information. Compare the two options below:

1) Increase the number of new users by 20%.
2) Increase the number of new users from 4000 to 4800.

Option 1 can be confusing since it’s hard to tell how ambitious the target is. Are we talking about increasing the number of new users from 500 to 600 or 4000 to 4800?

Examples

When project teams start with Value-based OKRs, it is common for them to get stuck listing activities as Key Results. To convert those activities into value, think about what would be the consequences of being successful with this task. What would be the desired outcomes?

If we are successful with , we will

- Key Result #1
- Key Result #2
- Key Result #3

Example 1

If we are successful with the new campaign, we will

- Increase Net Promoter Score from 29 to 31%
- Reduce churn from 3.2 to 2.7%

Example 2

If we successfully migrate the platform, we will

- Reduce infrastructure costs from X to Y.
- Maintain availability during migration in 99,99%.
- Maintain revenue of $ X.

OKRs as a communication tool

As you might have guessed by now, effective OKRs are widely shared and meant to be understood by project teams, related teams, and stakeholders. In that regard, they can serve as a communication tool for directing teams to solve complex challenges with constraints.

As a communication tool, OKRs bring two key things to an organization:

1) Easily digestible direction such that every project member/stakeholder in the organization understands how they contribute to the mission; aka focus.

2) Expectations amongst teams and their individual members; aka accountability.

Defining measurable results becomes easier as you learn what you should be measuring and what ultimately matters for your project and business. In my work with large project teams, I find that the quality of OKRs has a good correlation with the understanding of the project. Just going through the exercise of either defining OKRs, or reworking current project plans into OKRs is a highly effective evaluation tool.

Read more…