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Program Management: Linking Business Strategy to Product and ...

  1. 1. Program Management: Linking Business Strategy to Product and IT Development Authors: Russ Martinelli – Intel Corporation ( Jim Waddell – Tektronix, Inc. ( Introduction Program management is not a new concept or latest management fad. In fact, it’s been utilized for decades to develop products and infrastructure in the high technology, aerospace and automotive industries. In these industries, program and project management are two components of an effective product or infrastructure development system, with program management responsible for the business surrounding the system and project management responsible for the planning and execution of the system output. Even though program management is a widely used and accepted approach to managing complex product development and infrastructure efforts, its definition, methods and tools are not widely understood. This paper is intended to demystify the program management business model by defining program management, describing its link to business strategy, clarifying the difference between program and project management, and describing how program management is implemented in two well known high technology product development companies, Intel Corporation and Tektronix, Inc. Why the need for program management? Many organizations that take a purely project management approach to developing products and infrastructure find themselves struggling with the following problems: • A chasm usually exists between business objectives and project management activities. Therefore projects may be “on target” with respect to time, cost and quality but fail to achieve the business results anticipated such as increased market share or increased worker productivity. • Most efforts do not consist of a single project to achieve desired results, rather multiple projects with activities and deliverables that are tightly linked. The intricate interdependencies and common business objectives are many times left unmanaged. • Resources seldom report directly to the person managing the development effort. Instead, they usually report directly to functional managers and are “loaned” to the project manager in a matrix manner. Many project managers are not adept in the leadership skills required to influence a team that does not directly report to them, nor have the breadth, depth or experience to successfully manage across a wide array of functional disciplines required to bring a new products to market. By contrast, companies such as Santa Clara, California-based Intel and Beaverton, Oregon-based Tektronix have instituted a program management business model to resolve the problems described above. Both companies utilize program management to link business strategy to project output, to integrate the efforts of multiple project teams to achieve a common set of 1
  2. 2. business goals, and to structure highly matrixed organizations into cross-functional program core teams to establish the synergy needed to effectively link multiple project teams. Program Management Defined Program management is defined as the coordinated management of interdependent projects over a finite period of time in order to achieve a set of business goals. It is a business model whereby companies provide the means by which new products or infrastructures are conceived, developed and brought to market in order to generate a major share of their profit. Program management has the following characteristics: • A program is strategic in nature. Program management ensures the program is closely aligned to and directly supports the achievement of a business’ strategic objectives. • Program management provides a focal point for ownership and accountability for successfully delivering the intended business results for the organization. • A program has both business and technical focus. Program management ensures the program is successful in both aspects. • Each interdependent project within the program has a set of objectives. Program management ensures the project objectives contribute to the achievement of the business goals of the program. • A program is normally cross-functional and matrix organized. Program management is the glue that coalesces the matrix to ensure the functions perform as a cohesive team. Organizationally, program management provides the opportunity to manage effort across the traditional line structure contributing to faster decision making and improved productivity. • A program is led by a program manager who is responsible for the characteristics above. Program Management versus Project Management Program and project management are related but distinct disciplines. It is important for everyone within the organization to fully understand the distinctions between the two, as well as the differing roles and responsibilities of program and project managers. In general, the greatest difference between program and project management is that program management focuses on achieving business results to create a competitive advantage while project management focuses on planning and executing the work required to deliver the end product. In the program management model, the program manager manages across the multiple functional projects, while the project manager manages within a single functional project. Other distinctions between program and project management are shown in Table 1. Program Management Project Management Strategically focused Tactically focused Business and technical in nature Technical in nature Aligned to strategic objectives of business Aligned to goals of the program Assures the work effort remains feasible from a Assures the work effort generates desired business standpoint deliverables on time, within budget and at required performance levels Change managed from both a business and Change managed from a technical perspective 2
  3. 3. technical perspective Risk spread across the projects and concerned Risk contained within a single project and with probability of business and technical concerned with probability of technical success success Cross-functional at all times May be partially cross-functional Broad range of management and business skills Project management and technical skills required and experience required Table 1: Program Management vs. Project Management Linking Program Management to Business Strategy Program management is a proven business model used by many organizations to achieve their business objectives, and is designed to be used strategically by business management. Although all projects and programs deliver the tactical and operational deliverables, the real power of program management is the ability to link similarly aligned projects into programs that are tied to the business strategy of the organization. Figure 1 illustrates the link between program management and business strategy. During the strategic planning process, organizations create a set of strategic objectives to gain competitive advantage and achieve business growth. Strategic objectives are the results an organization wants to achieve within a specified strategic horizon. Programs are then developed to create the means to achieve the objectives. For each program, a program strategy is developed to define how the program will contribute to the achievement of the strategic objective, and serves as the guiding vision to align the resulting project work. The program strategy guides the behavior required to achieve the business results. Strategic Objectives Program Management Program Strategy Project Management Figure 1: Linking Program Management to Strategy To extend the model further, program management links interdependent projects that possess a common set of objectives to achieve the program goals and strategy, and aligns them for overall management and coordination. For example, Intel Corporation defined a strategic objective to develop and brand a line of microprocessors specifically targeted toward the server and workstation market. A program was established, and a program strategy was created to define and develop the new microprocessor architecture, manufacture the microprocessor, and create a marketing campaign to launch the 3
  4. 4. microprocessor in the second quarter of the target year. Projects were established to develop the architecture, circuitry, software, and the data infrastructure, verify and validate the design, integrate the elements, develop the manufacturing processes, and create the marketing campaign. Program management was utilized to coordinate the activities, interdependencies, and deliverables of the projects which resulted in the development of the initial Xeon TM microprocessor. Program Management and the Organization Projects and programs have been managed in a wide spectrum of organizational structures with varying degrees of success and efficiency in the past. These structures have ranged from the purely functional organization at one extreme to the purely project-oriented structure at the other extreme. It has been observed that the program management model works at its optimal level in a compromise between these two extremes. This structure is a matrix organization as shown in Figure 2 that enables the program to operate efficiently within the long-term and permanent structure of the required functional organizations of the business. General Manager Program Engineering Marketing Manufacturing Finance Validation Director Functional Mgr. Functional Mgr Functional Mgr Functional Mgr. Functional Mgr. Program Engineering Marketing Manufacturing Finance Validation Manager Project Mgr Project Mgr Project Mgr Project Mgr Project Mgr and Team and Team and Team and Team and Team Cross-functional Program Team F igure 2: The Matrix Structure In the matrix organization, the functional managers supply the project managers and project team who possess the functional expertise for the program. The project managers and project teams indirectly report to the program manager of the program and are responsible for delivery of the project deliverables. The matrix organization structure enables the following: • Functional resources, expertise and training are maintained by the functional managers for the long-term viability of the firm. • Programs have access to the entire available labor pool within an organization • Program managers and their functional team representatives are responsible for delivery against the program and project objectives. • Roles and responsibilities are clearly defined within the organization. The Program Team Program management meets the traditional management attribute of getting things done through people. Therefore, a key element to successful implementation of the program management model is the program team structure. In order to be successful, the team must coordinate its 4
  5. 5. activities and interdependent deliverables, effectively communicate what is being accomplished, and collectively make decisions that support the program objectives. The full program team consists of two entities as illustrated in Figure 3: The Program Core Team and the Extended Program Team. Figure 3: Full Program Team Structure It has been demonstrated that cross-functional teams can create higher performance, lower cost and higher quality products in a shorter amount of cycle time than other organizational approaches to product development. The Program Core Team (PCT) is the cross-functional leadership and decision-making body of the program which is responsible for ensuring that the program objectives and customer satisfaction are achieved. The PCT consists of the program manager, the functional project managers, and other critical support representatives such as quality assurance. The two inner concentric circles in Figure 4 illustrate a typical PCT structure for product development programs. The particular functions and support organizations which make up the PCT vary by company and organization and are dependent upon the elements and scope of the product or infrastructure under development. The size of the PCT is situational, but typical PCT size varies between four to twelve members, including the program manager. PCT membership may vary as a program progresses through the development life cycle. When developing an Intel dual-microprocessor server product, the program manager established the program core team upon approval of the product concept and business case. The structure of the core team depended upon the sub-systems of the server, including a motherboard, a memory board, an enclosure, a power source and multiple levels of software. Membership on the program core team consisted of the program manager, the project managers for each of the sub- systems as well as representatives from key support organizations. Figure 4 shows the program core team for the dual-microprocessor server product development effort. 5
  6. 6. Figure 4: Intel Server Development Program Core Team Roles and Responsibilities There are a few key roles and corresponding set of responsibilities that must be well understood within an organization for the program management model to operate successfully. These roles and responsibilities are even more critical when applied to the product development environment due to the market and revenue potential at stake. Senior management is responsible for establishing and maintaining the processes and procedures by which programs and projects are managed within their organization. Senior management owns the product portfolio and approves products to be initiated into a product development program. They select and empower the program manager to form a team and organize the program. Senior management also sets the key objectives and constraints for the program and provides the necessary leadership and guidance on issues and barriers outside the control of the program team. Senior management or their delegates approve all key milestones signifying phase transition during the product development program. The program manager must establish the program core team and work with the team to define its structure, scope and communicate the program objectives. The program manager is accountable for the financial, business and other deliverables for the program and is responsible for developing and maintaining an integrated plan and schedule with the team. The execution of the program, including any necessary trade-offs and other decisions, is managed by the program manager in order to remain within the constraints imposed by senior management. The team must identify the key risks to the program and develop and implement appropriate mitigation plans for resolving these risks. The program manager makes recommendations to senior management for the closure of the program and release of the team resources upon achievement of the program objectives and deliverables. The functional manager is responsible for the hiring, training and professional development of the functional personnel. He/she is also responsible for the maintenance of the skills, capabilities, best practices and tools to sustain the long-term functional expertise. The functional manager makes the resource and work commitments for functional activities in support of the 6
  7. 7. program and assigns a qualified functional project manager to represent the function on the program. The functional manager must notify and negotiate with the program manager if reallocation of any previously committed resources becomes necessary. The functional project manager serves on the team as the expert of the function he/she represents and manages the individual contributors within the function. Execution of the functional requirements and policies is the responsibility of the functional project manager. He/she drives the integration of the functional plan and work commitments for the program and manages the completion and closure of the functional deliverables. The functional project manager is also the key conduit for communication on the program between the program team and the functional organization he/she represents. Management Oversight of Multiple Programs Senior management plays a key role in the review and monitoring of all program activities underway within their organization. There are several processes that have been developed and used to enable senior management to do this effectively. Portfolio Management: Whether in a product development, continual improvement or infrastructure environment, management generally will be responsible to develop and maintain a portfolio of current and future programs to be managed by the organization. For product development, this will normally take the form of managing the product road map and the corresponding portfolio. It is recommended that senior management lead this process for evaluation, prioritization and selection of the product or infrastructure ideas to be approved. Additionally, effort must be undertaken to balance and align the available resources and dollars to the competing program opportunities. At Tektronix, Inc., program priorities are assigned by management based upon the assessment of each of the following: • Fit to the strategic objectives • Risk versus potential return • Meeting future customer needs • Balance of the product portfolio for the appropriate mix of new products, enhancements and timing for the launch of new major products Life Cycle Management: Senior management is responsible for identifying and maintaining the process steps by which programs are to be initiated, implemented and completed within their respective organization. The program manager and team must be very familiar with the methodology for managing their program. At the bare minimum, programs will have formal approved start and completion milestones. In the case of new product development, the process steps are well defined and institutionalized. This has become the case due to the complexity, cost and revenue potential involved. Most companies involved in product development have adopted some form of the phase/gate process for managing the life cycle of the product development activity. Phases and gates are defined as follows: 7
  8. 8. • Phases: Phases represent the major steps of the product development life cycle which include such activities as feasibility of the product, planning, design, ramp up in manufacturing and product launch. • Gates: Gates or transition milestones represent control points by which the team and management determine if sufficient progress has been achieved within a phase in order to transition to the next phase. Generally, a comprehensive set of criteria have been established as a baseline for assessing whether these criteria have sufficiently been achieved to enable the phase change to be approved. Program Management Office (PMO): Many organizations have benefited by establishing what the industry has described as a Program Management Office (PMO). The PMO is a centralized program operations and support control point. Its primary purpose is to effectively manage several programs that are simultaneously underway in an organization. Simultaneous programs put a major strain on the ability of an organization to successfully manage and coordinate scarce resources, consistently track program progress, ensure that deliverables are completed correctly and on time, and that senior management is receiving the appropriate information they need to run the business. The PMO provides direction, coordination and monitoring for programs and their teams. The high-technology sector represents an example of real-time use of PMOs for managing new product development programs. In some cases, high-tech organizations have expanded the use of the PMO to cover worldwide operations. For example, Tektronix, Inc. has implemented a worldwide PMO that is designed to integrate the coordination and control of all of its global product development activities and provide senior management with frequent “Dashboard”-style reporting of program progress. The PMO infrastructure and activities have significantly improved communication worldwide and contributed to the company’s responsiveness for resolving key program barriers and issues. Additionally, the PMO has helped Tektronix maintain consistent process implementation and practice across all programs and well-defined roles and responsibilities for both management and program team members. Benefits of Program Management The use of program management to develop products and infrastructure offers many benefits for an organization. The key benefits are as follows: • Direct linkage of product and infrastructure development efforts to the strategies and objectives of the business. • Improved communication and decision making for executive management. • Similar or related projects possessing common objectives are linked into a coordinated and synergistic whole. • Improved resource management and utilization across multiple projects, sites, and geographies. • Effective risk management across multiple and inter-related projects and programs. • More effective management of change and control of product “scope creep". • Consistency in managing programs and projects and reporting of progress. 8
  9. 9. • Systematized processes for developing new products by linking all of the elements for managing successful product development. • Cross-functional coordination and control contributing to improved time-to-market, cost, and quality for new products. • Enables an effective project-oriented organization to reside concurrently and successfully within the framework of the traditional functional organization structure. • Provides executive management the tools and capabilities for control and visibility of multiple programs occurring within the organization simultaneously. Conclusion Program management is defined as the coordinated management of interdependent projects over a finite period of time to achieve a set of business goals. A program is strategic in nature, has both a business and technical focus, is typically managed in a cross-functional matrix structure, and is led by a program manager. The program manager manages across the functional projects, whereas the project manager manages within a single function or domain. Program management serves as an enabler for achieving business strategies because it provides a systematic approach to organize, plan, implement and complete complex product development endeavors within a company. The power of the program management model is the ability to link similarly aligned projects that are tied to the business strategy of a firm. 9