5th Edition PMBOK® Guide—Chapter 1: Projects, Strategic Plan and Business Need


5th Edition PMBOK® Guide—Chapter 1: Projects, Strategic Planning and Business Value

1. Strategic Plan

In order to be initiated, projects have to have a reason for being carried out, a reason that is both internal and external to the organization. The reason that is external to the organization in most cases is the strategic plan which the project is a part of.

According to the PMBOK® Guide, here are the reasons for a project being initiated:

Strategic Consideration

Example of Project

1. Market demand Building more fuel-efficient cars in response to higher gasoline prices.
2. Strategic opportunity/

business need

Training company creates new Scrum Master certification preparation program in response to increasing demand.
3. Social need NGO creates infrastructure projects in developing countries
4. Environmental

consideration

Company creates electric car-share service to reduce air pollution
5. Customer request Electric utility creates new substation to serve new industrial park
6. Technological advance Advances in computer memory cause company to create smaller laptop
7. Legal requirement Establishing guidelines for proper handling of toxic materials.

To those I would add “industry standards” such as ISO standards, which may not be a legal requirement, but which may represent “best practices” for an industry and could be the reason for performing Six Sigma projects to reduce defects.

So the above “strategic considerations” are actually the external motivating factors out there in the world of business, government, or the society at large which create some sort of a need which the business will fulfill by doing a project. This is important, because if that need goes away, the project may go away as well. For example, if a project is initiated as a result of a customer request (strategic consideration #5 in the above chart), it can also be cancelled due to a request from that same customer.

2. Business Need

The second reason for being of a project is the proverbial “bottom line”, i.e., it needs to add value to the company either in terms of something tangible like monetary value, or something intangible such as brand recognition. This internal reason for being or business need has to be there as well. This is important for a similar reason as the strategic (external) consideration: if it goes away, so may the project. If a project is no longer profitable, because of excessive delays in executing it, or excessive increases in the required budget, it may be cancelled because the company will lose less money writing it off as an incomplete project than it would be seeing it through to the finish.

The external reason for the project (i.e. the strategic plan), and the internal reason for the project (i.e. the business need), are essential to understand in order to get the project initiated. The business need, the strategic plan, and a description of the product scope (i.e., what the product is designed to do) together make up the Statement of Work which can be considered the “seed” of the project. When you tie all these elements of the statement of work together, you are making the business case for the project.

Fig. 1 Elements of the Statement of Work

So you should always be aware for your project what the business need and strategic plan are; because if circumstances change that cause a change in either of these two, it can directly affect the continued existence of your project.

The next topic will be that of the role of the Project Management Office, which some organizations use to oversee projects within their organization.

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