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Systems Thinking in Project Management
By Michael D. Taylor

Most project managers tend to think only conventionally when managing projects. This means that they begin from a given project goal, plan the project to meet the goal, then execute the plan in order to meet the project goal. Little thought is given to strategic thinking or systems thinking. As a result, many projects are may be deemed “successful” but are actually ineffective. In addition to thinking conventionally project managers must also think strategically in order to manage projects that are truly successful. The cross-functional flow diagram at the end of this article suggests one way that strategic thinking can be applied when managing projects today.

What Is Strategic Thinking?

Strategic thinking begins not with just “what?” but “how?” Conventional thinking addresses the “what” aspects. What needs to be achieved in order to meet the project goals? Strategic thinking looks at how the goal is established, and how it will affect the customer, the corporation, the competitors, and the co-workers. The diagram below illustrates the author’s 4-C Model of strategic thinking.

The 4-C Model

The 4-C Model

The Customer

The primary question asked here is “will the new product meet and exceed the customer’s needs and wants? While this may be the primary focus at the beginning of the project, it often becomes lost in the flurry of design changes often made throughout the project’s lifecycle. “Design drift” occurs when product changes are approved that are not necessarily appealing to the customer or end user. Strategic thinking focuses not only on the initial customer needs but also identifies methods that will be used to prevent design drift.

One such tool that keeps the product design centered on the “voice of the customer” is Quality Function Deployment. QFD helps transform customer needs (the voice of the customer [VOC]) into engineering characteristics (and appropriate test methods) for a product or service, prioritizing each product or service characteristic while simultaneously setting development targets for product or service.

Another excellent tool for keeping the product’s design centered on customer needs is Analytic Hierarchy Process. Based on mathematics and psychology, it was developed by Thomas L. Saaty in the 1970s and has been extensively studied and refined since then. The AHP provides a comprehensive and rational framework for structuring a decision problem, for representing and quantifying its elements, for relating those elements to overall goals, and for evaluating alternative solutions. It is used around the world in a wide variety of decision situations, in fields such as government, business, industry, healthcare, and education.

The Corporation

Next, the strategic question must be asked, “Is our product in line with our corporation’s strategies and goals?” While a project’s goal may be challenging and interesting even to the customer, it must be aligned to the corporation’s overall strategic plans, otherwise, a project may not be based on corporate competencies. Working in non-strength areas will certainly have a negative effect on its true success.

The Competitors

Having a product that meets the customer’s needs and wants, is aligned with corporate strategic plans may still be ineffective if it is not competitive. Strategic thinking asks the question, “Is our product better than our competitor’s products, and will it be entered into the market at a propitious time?”

A common marketing strategy is to introduce a new product with a high price-to-cost ratio. As time goes on the price is slowly reduced while trying to maintain its price/cost ratio. Those coming into the market with a similar product must adjust their product’s price to the latest competitor price; however, the initial cost will most likely be close to the competitor’s initial cost thus reducing the price/cost ratio and resulting in a much smaller profit margin. Not only must a new product be competitive in the market, it must also be introduced at the right time in order to achieve a reasonable profit.

The Co-Workers

Not only must the project manager think of how the project influences the customer, the corporation, the competitors, consideration must also be given to the co-workers involved in the project. Specifically, the “What’s in it for me” (WIIFM) factor must be weighed. Optimal performance on the part of co-workers will never be achieved unless they can see some personal benefit in participating in the project.

Herzberg’s two-factor theory posits that money will not provide long-term motivation. The two-factor theory (also known as Herzberg’s motivation-hygiene theory) was developed by Frederick Herzberg, a psychologist who found that job satisfaction and job dissatisfaction acted independently of each other. The theory states that there are certain factors in the workplace that cause job satisfaction, while a separate set of factors cause dissatisfaction. According to Herzberg, individuals are not content with the satisfaction of lower-order needs at work, for example, those associated with minimum salary levels or safe and pleasant working conditions. Rather, individuals look for the gratification of higher-level psychological needs having to do with achievement, recognition, responsibility, advancement, and the nature of the work itself. These factors will best satisfy the WIIFM question.

External Influences

Two external influences will have an impact on the project, either directly or indirectly. These are the political influences and the cultural influences. To think strategically is to consider both when managing projects.

Political Influences

Informal politics within a corporation can have a profound impact on managing a project. When it comes to making decisions about the nature and goals of a project not every stakeholder is effectively at the same level of power.

Some may exert a greater pressure on decision making even when they do not possess higher institutional authority. For example, a functional manager may have more political power than a vice president. When project managers work with a group of key stakeholders during the inception of a new project, the political influences must be taken into account along with their potential negative and positive outcomes. Project managers must, therefore, take into account the political influences as well as the institutional influences of all key stakeholders.

Cultural Influences

Cultural influences may be exerted from an internal corporation culture, or from various international cultures. The later being important when outsourcing portions of a project.

More often, it is the internal corporation culture that has a greater influence on the formation and management of a project. Project managers who receive modern, up-to-date training may find strong opposition when attempting to incorporate the latest project management techniques. For example, if corporations are not accustomed to using project charters to define a project, the trained project manager will face reluctance on the part of the project sponsor to develop and sign a project charter. Project managers facing cultural opposition must find ways to negotiate new techniques into the decision making processes and in establishing best practices.

What Is a System?

System (from Latin systēma, in turn from Greek σύστημα systēma) is a set of interacting or interdependent entities forming an integrated whole. From a project management perspective a system could be viewed as the various organizational disciplines such as finance, marketing, engineering, quality assurance, information, communications, political, cultural, etc. From a broader perspective, a system can be viewed as the 4Cs—the customer, the corporation, the competitors, and the co-workers. The point here is that these disciplines are interactive and interdependent. There is a synergy that is produced when a system is managed strategically.

What Is Systems Thinking?

When project managers view not only the job to be done but also the manner in which these organizational disciplines relate to the project, and vice-versa, the project manager begins to think in terms of a whole system.

As project managers begin to think about the goals of the project, they should also think about how the finished product meets customer needs, how it satisfies corporate goals, how it compares to competitive products, and it might be managed so that it motivates co-workers. Within this broader system project managers must also be sensitive to interactions between the organizational disciplines, the political aspects, and the cultural aspects of the project environment.

What Is Systems Management?

Systems management is more than simply being aware of the synergistic relationships between the various entities. To manage a system one must be able to direct, monitor, and control the interplay of these disciplines to some degree. This can be accomplished either directly or indirectly by leveraging another person’s institutional authority. Systems management attempts to solve problems by looking at the total picture, rather than through an analysis of the individual entities. When this is done is such a way that it brings a positive effect on the customer, the corporation, the competitiveness of the product, and satisfies the “what’s-in-it-for-me” aspects of co-workers, it becomes strategic thinking. Such thinking is not only beneficial to the project it is mandatory in today’s competitive market.

Thinking Vertically and Horizontally

Typical thinking among project managers is vertical. Beginning with what needs to be achieved, the general goals and specific objectives are defined. To think strategically the project manager must also ask how these goals are to be achieved, especially as they relate to the 4Cs. From there specific strategies and tactics can be developed.

Thinking Vertically and Horizontally

Thinking Vertically and Horizontally

As can be seen, the skills required of project managers today are far more extensive than those of the past. Corporations that extend their focus beyond traditional project management to include strategic management will be the survivors of the future.

Strategic Thinking Process

Strategic Thinking Process

MICHAEL D. TAYLOR, M.S. in systems management, B.S. in electrical engineering, has more than 30 years of project, outsourcing, and engineering experience. He is principal of Systems Management Services, and has conducted project management training at the University of California, Santa Cruz Extension in their PPM Certificate program for over 13 years, and at companies such as Sun Microsystems, GTE, Siemens, TRW, Loral, Santa Clara Valley Water District, and Inprise. He also taught courses in the UCSC Extension Leadership and Management Program (LAMP), and was a guest speaker at the 2001 Santa Cruz Technology Symposium. His website is

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