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John P. Reiling, PMP: PMs: Put on Your “Strategic Thinking” Cap!

Porter five forces of strategyEmployers say that project managers need to hone strategic thinking skills. Read on for a primer on how jump start your own strategic thinking.

…but first, here’s the PMI’s take.

Strategic Thinking and PDUs

Effective 1 December 2015, the PMI’s requirements for how you earn your PDUs will change to ensure you are equipped to remain relevant in a continually changing business environment.

Here’s a quick synopsis:

  1. 60% of PDUs, or at least 35 PDUs over three years, must be in the ‘Education’ category to emphasize employer-demanded skills.
  2. At least 8 PDUs are required in each area of the PMI Talent Triangle: Technical Project Management, Strategic and Business Management, and Leadership.
  3. No more than 25 PDUs can be earned in the ‘Giving Back’ Category – Volunteering, Creating Knowledge, and Working as a Professional.

New, different, and notable in this change is that much more emphasis is being placed on strategy skills – due to substantial emphasis by employers who want project managers to possess strategy skills.

As a result, I thought I’d write about a fairly simple framework to help you begin to think strategically right away.

This framework, an innovation of strategy guru Michael E. Porter of Harvard University, is commonly called the Porter five forces analysis framework. Here’s a simple view graph to illustrate what the five forces are all about.

Porter five forces of strategy
I’ll try to explain each of the five forces at a high level from a PM perspective. Keep in mind that this strategic framework is very private sector oriented, but that it nonetheless provided the impetus for further efforts to provide related frameworks to help in public sector organizations. Still, it applies as-is to the public sector in that the public sector needs to work with, and therefore understand, the private sector.

In the middle, you will see “Industry Rivalry”, and this is where direct competitors reside. This includes the microcosm of competitors, large and small, that are at work within your industry.

Rotating clockwise from the top, there are four forces that interact with and influence the industry rivalry in the center: 1. bargaining power of suppliers, 2. threat of substitutes, 3. bargaining power of buyers, and 4. threat of new entrants.

Let’s explore each a bit.

  1. The bargaining power of suppliers refers to the ability of suppliers to your company and industry to be able to control terms, prices, and solutions. Naturally a supplier to your industry that has a highly unique product, for example, is in a relatively strong bargaining power position.
  2. The threat of substitutes refers to the industry’s vulnerability to competitive alternative products. Your company may have a strong position in one area, but be vulnerable in another, and will always benefit from reducing its vulnerability to substitute products.
  3. The bargaining power of buyers refers to the strength of buyers as a whole to challenge what the company is offering. For example, if there are lots of alternative products, or if the buyer can even make their own, the bargaining power of buyers is very strong.
  4. Finally, the threat of new entrants refers to the vulnerability of the company and industry to new competitors entering the industry. If your company has a high market share and it would be extremely expensive for a new competitor to enter the industry and compete, the threat of new entrants is low.

The Value of Thinking Strategically

As a project manager, I hope you can see how valuable it can be to add strategic thinking to your bag of tricks! Here are just a few valuable and infuential situations where you, as a PM, can apply strategic thinking:

  1. looking for opportunities for new high return projects to enhance your company’s position
  2. understanding which factor(s) any particular project is addressing, and therefore where the value is
  3. deriving metrics for your project(s) based on performance against key strategy-driven factors
  4. using the five factors as an input to project portfolio management
  5. enhancing your understanding of the big picture for better C-level communication and personal career advancement

The PMI’s new requirements for PDUs are an opportunity to grow in your strategy skills. For now, if you can just grasp and begin to assimilate the five factors framework, as I have outlined above, you will be well on your way to mastering and gaining the benefits from strategic thinking.

John Reiling, PMP
PM Training Online   

Related article: New CCR Requirement Dec 2015

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