How does your project contribute?

I recently attended a training session called Business Acumen. A good amount of the course's material was dedicated to understanding financial statements (the company providing the training was affiliated with the National Association of State Boards of Accountancy.) The rest of the course's material was based on the book, What the CEO wants you to know: Using business acumen to understand how your company really works, written by Ram Charan.
The main point of the book was that all businesses, regardless of their industry have the same underlying principles.

• Cash - Money and near-money equivalents used to fund a company's operations.
  
• Margin - The amount of money left over after paying off expenses (for a product.)
  
• Growth - The rate at which a company's business expands.
  
• Velocity - The rate at which a company's assets can be used to make money. For example, inventory turnover is a measure of velocity in some industries.
  
• Customer - Consumers or potential consumers of your products and services.
  

The interesting part of the training session was trying to understand how your activities (or project) contributed to the well-being of your company. Basically, a project should be contributing to one of more of these elements. For example, a company setting up an e-commerce website would be trying to:

1. Increase the market for its products (especially if it did not have a web presence.)
   
2. Increase the growth rate for the business by increasing the potential sales opportunities.
   

If you or your project is not contributing to one or more of these principles, then you should reevaluate what you are doing.

1, 2, 3 align your projects!

What are the steps involved in aligning projects to a strategy?

1. There are many different projects that a company can undertake. The first step is to create a list and make sure that everyone understands what each project is about.
   
2. Determine the criteria you will use. Your criteria should match your strategy and be representative of the direction you want your company to follow. For example, if you want to be a low cost provider, one of your potential criteria could be, "that a project should reduce the costs of service or increase the efficiency of providing service using your call centre."
   
3. Some things are more important than others. Weight your criteria.
4. Let the project sponsors individually score the importance of the projects using your criteria. Tabulate the results to reduce bias that the sponsors may have towards a one project or another. Projects that score high align more closely with your company's strategy and direction.
   
5. Establish high-med-low groups of projects.
   
6. The groupings and individual rankings form a basis for prioritizing.

By the end of this process you will have determined objectively which projects align better with your overall strategy and goals. Note that there are factors other than strategic fit that determine which projects will ultimately be undertaken (e.g., compliance, ROI.)

Strategy and direction

Business strategy is one of the most important things for a company. Some companies have a vision statement, a mission statement, followed by strategies to achieve the mission and implemental tactics to meet the strategy.

The basic premise is that people understand what they are working towards and why. Focus and clarity are the keys.

Guy Kawasaki suggests the use of simple mantras to provide direction rather than 60+ word MBA written, jargon-filled mission statements.

A mission statement that doesn't provide focus or clear direction does what exactly?

Here are some mission or vision statements from some companies. Tell me if you know what they're doing. Do they provide direction?

3M is a diversified technology company with a worldwide presence in the following markets: consumer and office; display and graphics; electro and communications; health care; industrial and transportation; and safety, security and protection services. What makes us so diverse is our ability to apply our technologies often in combination to an endless array of customer needs.

At IBM, we strive to lead in the invention, development and manufacture of the industry's most advanced information technologies, including computer systems, software, storage systems and microelectronics.

Alliance Data partners with its clients to develop unique insight into consumer behavior. We use that insight to create and manage customized solutions that change consumer behavior and enable our clients to build stronger, mutually-beneficial relationships with their customers.

Great companies will call Alliance Data first to create more loyal and profitable customer relationships.

Always earning the right to be our clients' first choice.

Ultimately, simply having a defined mission, vision or mantra is not enough. You need direction and a clear objective so you can tell if you are getting closer or further from your goal.