Two types of project strategy - empirical illustrations in project risk management

In this paper we suggest that there are two types of project strategy: project's business strategy and project's execution strategy. The project's business strategy focuses on the purpose of the project, addressing the question: Why does the project exist? The project's execution strategy addresses the question: How is the project executed? We conduct a conceptual analysis of the distinctive contents of these two project strategy types by focusing on the project management literature. We also analyse the links of the two types of project strategy to other stakeholders in the project's environment than the parent organisation, and to other contextual factors in the project's environment. Our analysis suggests that the formation of these two types of project strategy is a complex process that is affected not only by the corporate level strategies and guidelines of the project's parent firm, but also by stakeholders and contextual factors in the project's context. In the empirical study, we investigate risk strategies and risk management strategies in eight power plant delivery projects in one major energy system supplier company. For the empirical study, we define the corresponding project strategy concepts in the project risk management application area. Risk strategy corresponds to the project's business strategy by addressing the "why" question for the management of risks being in place. The risk strategy includes the project's approach to different kinds of risks, and it includes statements of the project's attitude to risks: for example, what kinds of risks are acceptable and what kind of risks must be avoided. Risk management strategy corresponds to the project's execution strategy by including the project's approach to organize its risk management in a most effective way ("how") to meet goals for risk management as defined in risk strategy. The results of our study suggests that in addition to the parent firm, also the customer, subcontractors and local authorities are major stakeholders that have an influence of strategy formation of the two types of the project's strategy. The influence of these stakeholders on the project's strategies varied, depending on the case project. The parent firm has a significant influence on the risk strategies (or business strategies) of the case projects. The other stakeholders' impact can be seen more clearly on the risk management strategies (or execution strategies). The parent firm thus sets the purpose of a project, but the project sets its management strategies by taking into account the contextual factors and stakeholders.