How to prioritize projects: the 2 principles businesses ignore

Project prioritization is more than just resource allocation.

It is, first and foremost, a strategic decision. Whether you prioritize your projects effectively depends on two things: the clarity of your strategic intent and the accuracy of the expected value generated by each project.

If you nail these two, then your effectiveness in project prioritization could very well shift the scales of the competitive landscape.

Read on to find out:

• Why you want to excel in prioritizing projects
• 3 ways companies fail to prioritize
• The 1st principle of prioritization: A good strategy dictates priorities
• The 2nd principle of project prioritization: How you measure expected project value matters
• The truth about project prioritization nobody will tell you

Why you want to excel in prioritizing projects

Project prioritization is how high-level business focus translates into execution.

When a company fails or finds it very difficult to distinguish between important and unimportant work, the problem isn’t bad processes. It’s a lack of focus on a more strategic level.

In a large organization, a lack of strategic focus at the top quickly cascades to all levels and can very well cost the company’s leading position in the market. That’s what happened to Apple in the late 90s when Steve Jobs was called back to lead the company in 1997. Jobs discovered that in the company he had founded, people were working hard toward “18 different directions” and on the “wrong things.” In other words, he discovered a company with no strategy and a lot of fractured effort.

What did he do?

He abandoned projects that didn’t fit his long-term vision and determined Apple’s core assets to invest heavily in them and direct people’s effort on growing. In other words, he reduced distractions and focused Apple’s efforts on a handful of key directions. Making these kinds of decisions isn’t easy because they usually entail firing people, pissing people off, and letting people down.

But what was the result?

During the 14 years of Steve Jobs' tenure, Apple brought incredible innovations and technologies to the market, including the iPhone, one of the most influential consumer electronics devices ever released.

In more concrete numbers, Steve Jobs' clear strategy and relentless focus took Apple's revenue from $9.8 billion in 1997 to north of $108 billion in 2011, an 11-fold increase.

3 ways companies fail to prioritize

Project prioritization has a strategic and a technical side. Trying to solve the technical side without addressing the strategic first is a recipe for failure.

Any project manager can come up with reasons to promote their own projects. And most project managers do. But linking the project to the bigger picture, arguing for its potential business value, and following a consistent set of criteria based on a long-term strategic vision to evaluate projects is an approach very few businesses adopt.

In fact, when a company fails at project prioritization, it’s usually due to one of the following reasons:

1. Absence of a real strategy
2. No consistency in solving decision conflicts
3. Prioritization based on resource availability

There is an underlying cause responsible for all three reasons. It’s an insufficient understanding of what a good strategy is.

1. Absence of a real strategy

This is arguably the most common reason for failed project prioritization.

A pitfall most executive leaders in large corporations fail to avoid. They don’t understand what prevents them from developing a great corporate-level strategy. For large organizations with years of market presence, the biggest enemy is complacency. That’s what killed Kodak, Xerox, and Blockbuster. They thought they were too big to fall, but history thought otherwise.

How exactly does complacency destroy corporate-level strategies?

By making risk the company’s number one enemy. Complacent leaders avoid risk in their strategic plans but make promises for big results. Their projections show huge growth, but their action plans focus on maintaining current processes. This approach doesn’t work. It handicaps the organization and denies it the opportunity to focus its efforts on one breakthrough move.

Thus the organization delivers mediocre, at best, results and unknowingly bets its competitive advantage on the assumed permanence of the market conditions.

2. No consistency in solving decision conflicts

Prioritizing projects is essentially the management of conflicting intentions at a higher level of the organization.

Too often, leaders determine a small set of strategic priorities and align every project with at least one of those priorities. This is a great move until a decision between two conflicting priorities has to be made.

If a project portfolio manager (PMO) doesn’t have an explicit understanding of stakeholder expectations, then conflict resolution is random and unguided. Trade-off decisions don’t follow a consistent direction, and the business ends up fracturing its efforts.

3. Prioritization based on resource availability

This one screams a lack of strategic thinking and maturity.

It takes the demand for the company's services or products for granted and, in the case of a sudden shift in market conditions, leaves the business in a heavily disadvantaged position.

Availability of resources should never dictate strategic priorities. On the contrary, resources should be bent and reallocated based on the strategic needs of the company. Don’t approve projects because you can fund them, free up resources to feed the projects with the biggest business impact.

A common method for allocating resources is the Eisenhower matrix, where you evaluate projects based on their urgency and importance. Although an effective tool for time management, on the highest level of decision-making, it doesn’t take into account other important factors.

Resource allocation comes after strategy formulation.

Note: if your company prioritizes work based on resource availability or in an ad hoc and uncontrolled manner, go back to the foundations, i.e., vision, mission, and values.

The 1st principle of prioritization: A good strategy dictates priorities

A lot of talk about strategy and project prioritization. So what exactly is a good strategy, and how does it dictate priorities?

What is a good strategy?

In the context of prioritizing projects, a good strategy does three things well:

1. Identifies the challenge
2. Clarifies the plan to overcome it
3. Focuses effort without a blindfold

A good strategy identifies the major challenge the company is facing. Which means a solid external and internal analysis that helps you diagnose the greatest challenge the company currently faces. Is it a strong new player in the industry? Does a new technology render half your services or products obsolete? Is there a steady decline in demand due to the eclipse of the category? Or do you need a transformation due to major internal processes in need of an update? Whatever it is, your strategy should diagnose and address the challenge.

A good strategy is clear. Half of the solution is outlined by the way you frame and state the problem. A clear challenge helps you develop a viable solution. And a good strategy is clear on the approach you take to overcome the defined challenge, and your people understand it. That way, they are empowered to make decisions and not wait for approval. In our 2022 strategy report, we discovered that less than half of team members feel part of the strategy.

A good strategy is focused and with strong, active antennas. In large, complex organizations, focusing resources is rare. They pursue so many goals at the same time that it’s impossible to achieve a real competitive breakthrough. A good strategy concentrates all efforts toward a single long-term goal. One step at a time, one top priority at a time. But such a focus is a big bet, so every sane leader ought to have metrics and ways to determine whether that bet will pay out before it’s too late. Whenever that’s possible, of course.

How does a good strategy dictate the highest priority projects?

A clearly articulated challenge draws everyone's attention to a commonly shared struggle.

And it enables the senior management team to come to a consensus to solve it. Thus, it’s easier to agree on the priority list, the plan’s Focus Areas, and where to invest most of the resources. Meanwhile, the solution, AKA the strategy, provides a logical structure that everyone can follow and remember. People have shared guidelines to make decisions without having someone define exactly what to do.

A good strategy scales consistent decision-making.

It helps teams and team members make choices that lead in the same direction no matter how disconnected they are from each other. It makes choosing the projects that matter a walk in the park and the technical side of measuring each project’s value a simple exercise. 

A hidden aspect of a good strategy is its risk level. Generally speaking, good strategies are ambitious and, for that reason, inherently risky. They are extraordinary moves and extraordinary bets. And for an extraordinary move to work out, the player needs to make extraordinary decisions that focus efforts and resources on a few key strategic initiatives.

The extraordinary resource allocation is more natural when a consensus precedes it.

Further readings:

How successful PMOs deliver value and avoid the hot seat

3 wildly effective strategies to manage project dependencies

The 2nd principle of project prioritization: How you measure expected project value matters

With a clear set of priorities and a long list of projects, how do you choose which ones you should pursue?

To answer this question, you need to get a bit technical. Specifically, you need to measure each project’s value to decide where to invest your resources. This isn’t a completely straightforward exercise because it involves some guessing in the form of an estimated projected value. But it’s a lot easier if you’ve got a strategy to guide you.

There are two ways to measure a project’s value:

• By the expected business value measured in $$$
• And by the potential business capabilities

Measuring a project’s value by developing a business case

There are many ways to measure a project's value.

For example, you might create a scoring system by defining a set of criteria, determining a weight for each criterion, and then scoring the projects against each criterion. Be parsimonious when defining the criteria. Focus on two factors: strategic goals and customer needs.

No matter the scoring system you adopt, make sure you’re consistent. You can’t have marketing measuring a project’s business value as a percentage of revenue, product development as an absolute dollar number, and sales as a percentage of growth. Everyone should speak the same language, i.e., the same number. Otherwise, you’re comparing oranges with chairs. 

We recommend translating everything into dollars (or your company’s currency), so you can contrast it with the resources dedicated to the project.

Further reading:

The top 10 PMO KPIs you should be tracking (+ how to track them)

Executive project status reports: 6 best practices for writing one

Measuring a project’s value by the potential business capabilities

There is a reason we separate business capabilities from the expected business value.

It’s because sometimes, you need to choose projects that have a smaller expected business value but support a specific strategic goal. For example, a project might be an integral part of a series of actions aiming at inhibiting competition from duplicating the resources underlying your competitive advantage. The absolute value of the project measured in isolation could be substantially lower, but as part of a coordinated set of actions, the project becomes crucial.

Take, for example, Zara, the apparel company part of the Inditex Group. The company has brought its production inhouse. In isolation, that move increases costs and doesn’t make sense. However, as part of its overall strategy to be the fastest and most affordable provider of trendy clothes, the evaluation changes. Zara has decreased the development-to-selling time from the industry’s average of 6 months to less than 2 weeks while adjusting products to local market needs and being the first to bring new trends to the market. The company spends 1/10 in marketing compared to competitors and, in 2020, achieved almost 70% net sales share of the Inditex Group. Nobody else went above 9%.

This approach requires a shift in thinking.

And clarity in your strategic intention. Instead of trying to evaluate projects in isolation, make a timeline with the expected or desired business capabilities defined by your strategy. Then align projects with the business capabilities they contribute towards and make prioritization decisions based on their contribution.

When implementing, choose your tools wisely

There are two huge obstacles to implementing the second principle of project prioritization:

1. Scaling
2. And tracking progress and changes

To effectively scale a process, you need to minimize friction and standardize it. The latter ensures consistency in implementation, and the former facilitates adoption. Using multiple tools and approaches to track project progress, the number of projects aligned with strategic goals, and measuring business value makes both consistency and adoption harder.

In addition, the modern business environment changes at an accelerating pace. To keep up with these changes, you need to adapt your strategy quickly and implement the changes even faster. As such, you need to make processes like tracking project progress and prioritizing projects highly dynamic. Poor communication and tracking habits are the most common reasons for project failure.

Excel and PowerPoint are neither dynamic nor scalable. They’re static tools that require proficiency and countless hours of work to stay detailed and up-to-date.

It’s far better to have a single source of truth for your strategy and your project portfolio. A dynamic digital platform where all progress is recorded and everyone has access to update their progress. Platforms like Cascade scale tracking and reporting while reflecting changes in the plan almost instantly. 

For example, in Cascade, you can define your business capabilities as high-level objectives on their respective Focus Areas and then align the associated project(s) with 2-3 clicks. Then you can set up an automatically generated dashboard that answers specific or big picture questions like:

• What is the health of our project portfolio?
• Are all our desired business capabilities sufficiently supported by projects?
• Have we allocated our resources effectively?

Further readings:

1. Best 7 Project Portfolio Management Software For Portfolio Managers in 2022
2. 23 Best Strategy Tools For Your Organization in 2022

The truth about project prioritization nobody will tell you

The process of prioritizing projects in an organization reveals a lot about its strategic maturity.

An uncontrolled or ad hoc prioritization indicates a business in need of a more organized strategic planning process. A business piling up projects is unfocused. A reactive stance to market changes indicates a business with inconsistent tracking habits. Difficulty in tracking and monitoring portfolio progress indicates a business using non-scalable tools and methods.

Our strategy execution platform has helped customers in every strategic maturity stage evolve their processes and focus their efforts on what matters most. Book a demo today to find out how Cascade can help you evolve and prioritize projects.