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Portfolio Mgt Presentation

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Information about Portfolio Mgt Presentation

Published on January 14, 2009

Author: csreid1

Source: slideshare.net

Description

Overview of Portfolio Management
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Portfolio Management Carolyn Reid, PMP, MBA CSR Consulting

Bad Reasons for Choosing Projects and Investments A leading executive’s wife came up with an idea over the weekend Clear is so much prettier than cola color Dry Beer (as opposed to wet?) The guy who had the last good idea has another one If you make it they will buy The presentation of the idea was very convincing The Boss is so sold on the idea that we can save costs of proving its validity

A leading executive’s wife came up with an idea over the weekend

Clear is so much prettier than cola color

Dry Beer (as opposed to wet?)

The guy who had the last good idea has another one

If you make it they will buy

The presentation of the idea was very convincing

The Boss is so sold on the idea that we can save costs of proving its validity

Which of these were actually products or concepts taken to Market? Beer/ Gatorade drink Scotch Tape Store Pepsi AM Hula Burger: bun, cheese, mustard, ketchup, pickle, grilled pineapple Staple–less Stapler Animal of the month club Shipping exotic pets

Beer/ Gatorade drink

Scotch Tape Store

Pepsi AM

Hula Burger: bun, cheese, mustard, ketchup, pickle, grilled pineapple

Staple–less Stapler

Animal of the month club

Shipping exotic pets

Contact Information Carolyn Reid, CSR Consulting Email: [email_address] net Cell: 602-882-5292 Paper: http://www.bettermanagement.com/Library/Library.aspx?LibraryID =9326

Carolyn Reid, CSR Consulting

Email: [email_address] net

Cell: 602-882-5292

Paper: http://www.bettermanagement.com/Library/Library.aspx?LibraryID =9326

Discussion The Business Issue The Solution Portfolio Management Process Initiating a Portfolio Management System Define the Investments Selecting and Prioritizing Investments Reviewing/ Approving Investments and Balancing the Portfolio The Tools Business Cases Summary

The Business Issue

The Solution

Portfolio Management Process

Initiating a Portfolio Management System

Define the Investments

Selecting and Prioritizing Investments

Reviewing/ Approving Investments and Balancing the Portfolio

The Tools

Business Cases

Summary

The Issue

Corporate leaders increasingly face a confusing, complex, and uncertain environment. Globalization and technology constantly change the market and industry structures that have historically defined the nature of competition. The pace of change is accelerating!

“ According to Analysts, most companies spend close to 40% of their capital budgets on investments that do not align with their corporate strategies .”

Government Issues Clinger-Cohen Act Calls for the implementation of a “portfolio investment process” for IT in Federal agencies President’s Management Agenda (PMA) Office of Management and Budget (OMB) to identify government’s most glaring problems Government Performance and Results Act (GPRA) Capital Planning and Investment Control (CPIC)

Clinger-Cohen Act

Calls for the implementation of a “portfolio investment process” for IT in Federal agencies

President’s Management Agenda (PMA)

Office of Management and Budget (OMB) to identify government’s most glaring problems

Government Performance and Results Act (GPRA)

Capital Planning and Investment Control (CPIC)

The Business Issues: Investments are not selected on the basis of adding to achievement of the high level goals, are not related to Strategic Plans. Failing Projects are not stopped. The current Business Processes don’t keep up with the pace of the Business Environment.

Investments are not selected on the basis of adding to achievement of the high level goals, are not related to Strategic Plans.

Failing Projects are not stopped.

The current Business Processes don’t keep up with the pace of the Business Environment.

The Solution

From McKinsey Quarterly: “ As the global environment continually changes and risk levels rise, a portfolio-of-initiatives approach holds out the opportunity for corporations to be as flexible and adaptive as the markets themselves .”

From McKinsey Quarterly:

“ As the global environment continually changes and risk levels rise, a portfolio-of-initiatives approach holds out the opportunity for corporations to be as flexible and adaptive as the markets themselves .”

“ Portfolio Management is a disciplined and structured process of selecting and governing the projects, programs and work that best meet the goals and objectives of the organization, based upon established criteria.”

“ It enables organizations to categorize, evaluate, prioritize, purchase, and manage assets, projects and resources so they are aligned with current and future business strategy and goals to achieve an acceptable balance of risk and reward.”

Portfolio Management Goals Maximize the value of the Portfolio Balance the Portfolio Ensure Strategic alignment of the Portfolio Choose the right number of projects Optimize capacity

Maximize the value of the Portfolio

Balance the Portfolio

Ensure Strategic alignment of the Portfolio

Choose the right number of projects

Optimize capacity

Why Portfolio Management is important Top Execs say Portfolio Management does this for the organization: Maximum Return Maintain competitive position Properly allocate resources Link between projects and business strategy Achieve Focus Achieve Balance Better communicate priorities vertically and horizontally Weed out bad projects Creates Flexibility to respond

Maximum Return

Maintain competitive position

Properly allocate resources

Link between projects and business strategy

Achieve Focus

Achieve Balance

Better communicate priorities vertically and horizontally

Weed out bad projects

Creates Flexibility to respond

PMI View of Portfolio Management Standard Project Activity Established team to develop Program/ Portfolio Management Standard for PMBOK 2005 Team discussion and research determined that Program and Portfolio Management processes are different, requires 2 standards

Established team to develop Program/ Portfolio Management Standard for PMBOK 2005

Team discussion and research determined that Program and Portfolio Management processes are different, requires 2 standards

PMI Portfolio Management Standard Project Activity Team is gathering best practices Deliverable: Provide standards that define processes recognized as good practices to manage programs and portfolios Provide standards that can be widely recognized and consistently applied

Team is gathering best practices

Deliverable:

Provide standards that define processes recognized as good practices to manage programs and portfolios

Provide standards that can be widely recognized and consistently applied

The Portfolio Management Process

The Business Cycle Strategic Objectives Select, Prioritize, Review, Approve Investments Balance the Portfolio. Review Project Performance Core Competency Have goals changed? Is the Project failing?

Initiating a Portfolio Management System

Initiating a Portfolio Management System Educate Organization Portfolio Management purpose, significance and Process Investment Request Process Decision Making requirements

Educate Organization

Portfolio Management purpose, significance and Process

Investment Request Process

Decision Making requirements

Initiating a Portfolio Management System Collect What projects are already in work? What are the new investment requests? What is the financial and resource capacity of the organization? What are the logical portfolios? Tie: Business Strategies to Investments Project Management performance to Portfolio review

Collect

What projects are already in work?

What are the new investment requests?

What is the financial and resource capacity of the organization?

What are the logical portfolios?

Tie:

Business Strategies to Investments

Project Management performance to Portfolio review

Portfolios Usually reflect separate budgets Examples: Departments Mergers and Acquisitions Special Project Budgets Regulatory projects Business Strategy/ Goals

Usually reflect separate budgets

Examples:

Departments

Mergers and Acquisitions

Special Project Budgets

Regulatory projects

Business Strategy/ Goals

Initiating a Portfolio Management System Define: Investment Business Case information requirements Selection, Ranking and Prioritization criteria Review and approval process Go/ No Go and “kill” criteria Portfolio Review schedule

Define:

Investment Business Case information requirements

Selection, Ranking and Prioritization criteria

Review and approval process

Go/ No Go and “kill” criteria

Portfolio Review schedule

Initiating a Portfolio Management System Control: Are the projects on track? What is the status of the projects with regard to risk? Has a change in the business environment caused a change in corporate strategy?

Control:

Are the projects on track?

What is the status of the projects with regard to risk?

Has a change in the business environment caused a change in corporate strategy?

Define the Investments

Select and Prioritize Because you can’t do everything… Market Attraction Client Satisfaction Company Image Improved Bottom line Performance Improvements Cost Reduction Other Criteria Selection and Prioritization Criteria Select and prioritize the investment requests based on market objectives, performance and capacity... Strategic Contribution Pay-back period Profitability Reversibility and Risks

Determining the value of the Investment Strategic Fit/ Business Need Benefit/ cost analysis Risk/ Benefit comparison Categorize: Maintain, Grow or Transform the Business Regulatory, Issue resolution Payback Cost Savings

Strategic Fit/ Business Need

Benefit/ cost analysis

Risk/ Benefit comparison

Categorize: Maintain, Grow or Transform the Business

Regulatory, Issue resolution

Payback

Cost Savings

Determining the Market Value of an Investment Competitive Rationale Market Attractiveness Commercial Attractiveness

Competitive Rationale

Market Attractiveness

Commercial Attractiveness

Viability of an Investment Time to positive cash flow Personnel Requirements Funding Requirements Technical Feasibility

Time to positive cash flow

Personnel Requirements

Funding Requirements

Technical Feasibility

Investment Fit Initiative Alignment with core capabilities Alignment with other company initiatives Fit with organizational structure Fit with company culture values Competitive Rationale Commercial Attractiveness

Initiative

Alignment with core capabilities

Alignment with other company initiatives

Fit with organizational structure

Fit with company culture values

Competitive Rationale

Commercial Attractiveness

Risk Types Schedule Risk Organizational Risk Technological Risk Risk of Not Doing the Project Project Support Costs

Schedule Risk

Organizational Risk

Technological Risk

Risk of Not Doing the Project

Project Support Costs

Benefit areas Financial Return Cross-Functional Impacts Improving Internal Culture Improving External Customer Services Efficiency Improvements Increased Market Share

Financial Return

Cross-Functional Impacts

Improving Internal Culture

Improving External Customer Services

Efficiency Improvements

Increased Market Share

Scoring and Ranking Can be based on: Strategic Alignment and importance Competitive advantage Market Attractiveness Leverage Core Competency Technical Feasibility Financial Reward

Can be based on:

Strategic Alignment and importance

Competitive advantage

Market Attractiveness

Leverage Core Competency

Technical Feasibility

Financial Reward

Balanced Scorecard Financial Maximize Profit by x % ROI, ROE, EVA, Revenue - Revenue up x% over previous year Cost Cutting (by target amount) or improved technology initiatives Customer Increase Market Share Customer Satisfaction Improve customer satisfaction ratings by 20% Initiatives derived from Customer Feedback

Financial

Maximize Profit by x %

ROI, ROE, EVA, Revenue -

Revenue up x% over previous year

Cost Cutting (by target amount) or improved technology initiatives

Customer

Increase Market Share

Customer Satisfaction

Improve customer satisfaction ratings by 20%

Initiatives derived from Customer Feedback

Balanced Scorecard Learning and Growth Improve Expertise Training hours Increase high level training by 20 hours/ employee Contract with University Internal Business Process Continuous Improvement Cycle Time improvement Reduce Cycle time by x% Implement new process

Learning and Growth

Improve Expertise

Training hours

Increase high level training by 20 hours/ employee

Contract with University

Internal Business Process

Continuous Improvement

Cycle Time improvement

Reduce Cycle time by x%

Implement new process

Review/ Approve Investments and Balance the Portfolio

 

Periodic Investment Review The Business Environment is changing constantly. A Business must change at the same rapid pace. Change is constant – You need to keep ahead! Has the strategy changed? Is the Project Failing?

The Business Environment is changing constantly.

A Business must change at the same rapid pace.

Change is constant – You need to keep ahead!

Has the strategy changed?

Is the Project Failing?

ProSight Stakeholder Collaboration Business Unit/ Program Focus Team/ Project Focus Corporate Focus Portfolio Management Document Management Forms Investor Map Scorecard Workbook

Investor Map Contents Displays at least four dimensions for correlation View a complete Portfolio at a glance View distribution across defined strategic buckets Set goals for each strategic bucket and show gaps Drill down to a different View Create “what if” analysis through Versions

Displays at least four dimensions for correlation

View a complete Portfolio at a glance

View distribution across defined strategic buckets

Set goals for each strategic bucket and show gaps

Drill down to a different View

Create “what if” analysis through Versions

Scorecard Contents View the status of Items or Portfolios across multiple Categories View the status of a Category across multiple Items or Portfolios View the status of a Category over time (trend view) Drill down to another View Assign / highlight actions Update data

View the status of Items or Portfolios across multiple Categories

View the status of a Category across multiple Items or Portfolios

View the status of a Category over time (trend view)

Drill down to another View

Assign / highlight actions

Update data

Approval Process – Stage Gate Idea Screen Preliminary Investigation Build Business Case Development Testing and Validation Full Production and Market Launch

Idea Screen

Preliminary Investigation

Build Business Case

Development

Testing and Validation

Full Production and Market Launch

Balancing The Portfolio What we want to do What we are able to do What we actually do INVESTMENTS CAPACITY Optimal Plan Portfolio Management The Balancing Act

Balancing Act Balance your Portfolio of investments (Portfolio Theory) Long Term versus Short Term Benefit versus Risk Cost versus Risk Business Specific Sustains/ Improves/ Revolutionizes the Business

Balance your Portfolio of investments (Portfolio Theory)

Long Term versus Short Term

Benefit versus Risk

Cost versus Risk

Business Specific

Sustains/ Improves/ Revolutionizes the Business

Elements of the Investment Review Prioritize current mix Benefit/ Risk Contribution to current strategy On Schedule? In Budget?

Prioritize current mix

Benefit/ Risk

Contribution to current strategy

On Schedule?

In Budget?

Investment Review Process Frequency of Reviews Reports required at review Integration of Project Management information and Strategic planning information Investment Review Process

Frequency of Reviews

Reports required at review

Integration of Project Management information and Strategic planning information

Investment Review Process

Portfolio Review Meeting Agenda Current Strategic Goals Changes Obsolete Goals/ Associated Portfolios New Goals Assign Portfolio Managers Portfolio Performance Review PM Report on Budget and Schedule Strategic Achievement Portfolio Management Reports New Project Business Case Summaries Approvals and Prioritizations Summary

Current Strategic Goals

Changes

Obsolete Goals/ Associated Portfolios

New Goals

Assign Portfolio Managers

Portfolio Performance Review

PM Report on Budget and Schedule

Strategic Achievement

Portfolio Management Reports

New Project Business Case Summaries

Approvals and Prioritizations

Summary

Summarizing Our Portfolio Management System First: Strategies Established PfM Education Portfolios Budgeted/ Projects grouped Define business case requirements Next: Selection/ Prioritization criteria Portfolio Review Plan

First:

Strategies Established

PfM Education

Portfolios Budgeted/ Projects grouped

Define business case requirements

Next:

Selection/ Prioritization criteria

Portfolio Review Plan

Summarizing Our Portfolio Management System - Continued On going Activity: Review current business environment: Business Strategy changes? Business Cases Defined Review Portfolio Prioritize/ Select Monitor Progress Note: Portfolio Mgt Process changes as Strategic goals change

On going Activity:

Review current business environment:

Business Strategy changes?

Business Cases Defined

Review Portfolio

Prioritize/ Select

Monitor Progress

Note: Portfolio Mgt Process changes as Strategic goals change

The Tools

Portfolio Management Tools “Tools used to uncover critical, long-term opportunities, track and assess current business/ investment positions…. Or controlled, consistent backup for decision modeling and making.”…. Meta Group

“Tools used to uncover critical, long-term opportunities, track and assess current business/ investment positions…. Or controlled, consistent backup for decision modeling and making.”…. Meta Group

Criteria for selecting tools Technology Ability to keep up with maturing customer needs “Functionality .. centers on scenario creation, assessment, planning; highly automated optimization techniques that produce actionable opportunity models and decision output..” Meta Group

Technology

Ability to keep up with maturing customer needs

“Functionality .. centers on scenario creation, assessment, planning; highly automated optimization techniques that produce actionable opportunity models and decision output..” Meta Group

Resources Portfolio Management Information: www.BetterManagment.com www.portfoliomgt.org Software analysis: www.Gantthead.com www.Metagroup.com www.gartner.com

Portfolio Management Information:

www.BetterManagment.com

www.portfoliomgt.org

Software analysis:

www.Gantthead.com

www.Metagroup.com

www.gartner.com

Business Cases

Business Case 1: The Merger Large Merger 10 Electric generating plants MANY: Scattered databases Duplication of effort Re-packaging information for different levels of the organization Manual data entry that could be automated Huge amount of time spent in generating reports

Large Merger

10 Electric generating plants

MANY:

Scattered databases

Duplication of effort

Re-packaging information for different levels of the organization

Manual data entry that could be automated

Huge amount of time spent in generating reports

Business Case 1: the Goal Centralized Business Management of all plants to: Realize synergy from collective expertise Recognize economies of scale Improve short and long term planning Improve Asset Management and Control

Centralized Business Management of all plants to:

Realize synergy from collective expertise

Recognize economies of scale

Improve short and long term planning

Improve Asset Management and Control

Business Case 1: the Solution Key project characterization Central information database Real-time project information Alerts defined

Key project characterization

Central information database

Real-time project information

Alerts defined

Business Case 1: Results Eliminate multiple databases Eliminate manual data entry Reduce number of reports and automate process Goal is paperless process Achieve corporate goals Ensure most valuable projects are funded

Eliminate multiple databases

Eliminate manual data entry

Reduce number of reports and automate process

Goal is paperless process

Achieve corporate goals

Ensure most valuable projects are funded

Business Case 2: Background Automotive, travel, insurance and financial services In the midst of a powerful cultural transformation (Vision & Values)

Automotive, travel, insurance and financial services

In the midst of a powerful cultural transformation (Vision & Values)

Business Case 2: The Concerns Are we Investing in the right projects? Do we have the capacity to execute? Can the Organization absorb the changes? Are we realizing the expected benefits?

Are we Investing in the right projects?

Do we have the capacity to execute?

Can the Organization absorb the changes?

Are we realizing the expected benefits?

Business Case 2: What Was Accomplished Prioritized 200+ investments based on strategic / operational alignment and value added Effective prioritization ensured strategic and operational alignment while delivering superior value

Prioritized 200+ investments based on strategic / operational alignment and value added

Effective prioritization ensured strategic and operational alignment while delivering superior value

Business Case 2: Capacity Optimization Enterprise operational capacity assessment and decision making tool Master Program Schedule used as basis for “What if Analysis” Managed operational capacity risks via resource availability, system impacts, schedule levers Minimized resource gaps/ constraints Optimized and improved operational delivery

Enterprise operational capacity assessment and decision making tool

Master Program Schedule used as basis for “What if Analysis”

Managed operational capacity risks via resource availability, system impacts, schedule levers

Minimized resource gaps/ constraints

Optimized and improved operational delivery

Business Case 2: Benefit analysis Developed and enhanced benefit realization framework Tangible benefits for same year investment Grounded decision-making in metrics

Developed and enhanced benefit realization framework

Tangible benefits for same year investment

Grounded decision-making in metrics

Business Case 2: Results Exceeded aggressive portfolio targets across multiple dimensions (scope, schedule, budget, resources, quality and benefits) Built on a pragmatic, scalable and flexible approach (think big, act on immediacy and scale appropriately)

Exceeded aggressive portfolio targets across multiple dimensions (scope, schedule, budget, resources, quality and benefits)

Built on a pragmatic, scalable and flexible approach (think big, act on immediacy and scale appropriately)

Summary

Optimized Portfolio Management Sr. Management commitment and consensus Clear, communicated strategic objectives Institutionalized investment management process Close alignment between portfolio management activities and the business plan Strong link between business objectives and investment selection Governance framework aligned with enterprise decision-making Well thought out, controlled project selection criteria Well defined decision making process Go/ No go decision criteria clear and controlled

Sr. Management commitment and consensus

Clear, communicated strategic objectives

Institutionalized investment management process

Close alignment between portfolio management activities and the business plan

Strong link between business objectives and investment selection

Governance framework aligned with enterprise decision-making

Well thought out, controlled project selection criteria

Well defined decision making process

Go/ No go decision criteria clear and controlled

Optimized Portfolio Management Credible Financial metrics and tools Quality Business Cases Well defined and controlled selection and prioritization criteria Strong link between business objectives and investment selection Consistent risk and performance measurement Effective balance of investments

Credible Financial metrics and tools

Quality Business Cases

Well defined and controlled selection and prioritization criteria

Strong link between business objectives and investment selection

Consistent risk and performance measurement

Effective balance of investments

The Purpose: Creating a successful, flexible and adaptable Organization doing the right things and keeping up with the changing market.

Thank You!!

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