Published on July 9, 2009
Project Portfolio Management Holistic Approach to manage Strategic Initiatives Anand Subramaniam
“There are four things that hold back human progress. Ignorance, stupidity, committees and accountants.” - Charles J.C. Lyall 2
Highlights Project Portfolio Management (PPM) PPM - Risk vs. Value PPM vs. Project Management PPM - Importance of Strategy Alignment PPM - Strategy Evaluation Process PPM Life Cycle PPM - Screening Process PPM - Selection Process Change Management Approach Link - PPM, Governance & Project Office PPM - Implementation PPM - Software Solution Vendors PPM - Reference Materials 3
Project Portfolio Management (PPM)
What is PPM? Corporate Focus on Balance Risk Regulatory Changing Project Strategy Value Vs. Value Compliance Priorities Changes Ongoing Re-calibration Align Plan Execute Measure Core Operating Processes (Prioritisation, Governance, Monitoring, Resources) Project Optimal Work Output & Continuous Net Value Approvals, Resource / $$ Performance Improvement Contribution Completions & Utilisation Trends Recommendation Cancelations 5
Symptoms calling for PPM… Teams overworked / Seek accurate Intense competition under appreciated estimates based on internally with regard to financing / staffing firm’s history & lessons learned projects Rework and “out of control” costs with Many projects are not 3rd party vendors adding “strategic value” Symptom to the organisation No prioritisation s process for Project benefits not business requests captured or tracked Excessive Too many project No tracking Frequent change of small delays due or status of projects projects to lack of accountabilit (active – on-hold – underway resources y for project priority – on-hold) success 6
PPM – Hub & Spoke Project Business Control & Performanc Opportunity Resource Performanc e Managemen Allocation e t Project Budget & Manage Selection & Cash Risk Portfolio Flow Management Scope Demand Change / Resource Strategic (Internal Cost Availabilit & Tactical Projects) Control y Plans 7
PPM - Assumptions Roadmaps in place Technology transfer defined Strategic business drivers identified Key decision-making tools selected Cross functional teams work together Organisation Vision and Mission known Project portfolio is strategically balanced Project Management process are mature Knowledge Management process in place Process in place to handle resource utilisation Governance in place to monitor and kill projects Resource capabilities data base current and up to-date PPM process, driven Top Down by Senior Management Project Managers and functional managers have no control Detailed project reporting in place to support decision analysis Excellent communication, regular training and post investment reviews 8
PPM – Best Practice Strategy to Using prioritise cross- and screen functional projects teams Responsiv e to PPM external Customer orientation Best environ- mental Practice change Tough Go/ Allocate Kill scarce decision resources points 9
PPM - Benefits Justifies killing projects that do not Improves communication and supports support organisation strategy agreement on project goals Balances risk across Builds discipline into all projects project selection process Links project selection GRB & PMO jointly Benefits to strategic metrics execute PPM Processes Prioritises project Provides executive Allocates oversight of the firm proposals across a resources to common set of projects that criteria, rather than align with Provides the structure/process on politics or emotion strategic for project portfolio governance direction & avoids duplication / waste 10
PPM - Goals Helps the organisation to make the best use of its resources Enables the removal of low value projects from the portfolio Ensures that all new and existing projects are aligned with the organisation’s mission, goals and objectives Produces and maintains a comprehensive listing of all projects which the organisation is undertaking Develops a “bigger picture view” and a deep understanding of the project collection as a whole Creates an “objective” methodology for identifying, ranking, prioritising and selecting new projects Ensures that a healthy balance across different types of projects with different cost, schedule, complexity and risk profiles is maintained 11
PPM - Essentials Project Prioritisation ROI / Value Capacity Forecast Planning Project Portfolio Opportunity Management Work Identification Scheduling Project Program/Project Performance & Management & Value Assessment Execution 12
PPM – Challenges Resource Conflicts and Implementation Organisation Multitasking Gap Politics Multi-project The lack of Project selection is understanding and environment consensus on creates inter- based on the strategy among top dependency persuasiveness and management and relationships of power of people middle-level shared resources advocating the (functional) which results in the projects managers who starting, stopping, independently and restarting implement the projects. strategy. 13
PPM - Limitation Adds another layer of bureaucracy to organisations Difficult to perform in environments marked by frequent change Tendency to rely too heavily on PPM tools / software for decisions May cause conflict, confusion and stress (eg. due to shifting priorities and resources) Could require a “cultural change” in the organisation (overcoming resistance by some managers and getting sustained commitment by senior management) Good project selection requires large amounts of quality information which is often not always available at the beginning of pre-selection stage Cannot be effective without well-documented project plans, accurate estimates of resource requirements and resources consumed 14
PPM - Recap Activities Dimensions Objectives • Initiative categorisation • Financial, Customer, • Maximising portfolio Internal, Innovation value • Project / programme (BSC) • Linking portfolio to selection • Renewal, strategy • Monitoring and review transformation, process • Balancing the portfolio improvement, experiment • Strategy, response, opportunity, external 15
PPM – Risk vs. Value
PPM - Value Project Portfolio Management Project Value Change Management Management 17
PPM – Balancing Risk Vs. Value Do the projects contribute Alignment to the strategic goals of the company? Is this project doable Value Is the company receptive to and do with the current they invest in resources? Is the value received something New? worth the effort / risk ? Fit Innovation 18
PPM – Value in terms of Resources Alignment • Determine & align with strategy • Decide on evaluation criteria • Select prioritised projects Executive • Allocate funds Management • Re-scope • Check resource needs • Re-classify • Re-assign resources • Cull projects not aligned • Re-design (merge) • Define monitoring process Functional • Re-move (eliminate a • Impact on existing projects Management cancelled project) • Re-evaluate new projects & • Re-schedule (delay, move to cross project dependencies pipeline) • Project execution • Performance reporting • Project information archived & used to Project Management & Teams improve the process Fit Innovation 19
PPM vs. Project Management
Project / Portfolio Oriented Business Project Portfolio • Effectiveness not efficiency • Projects are used to achieve • A means of selecting projects organisations’ strategic goals • Approach to project selection • Projects are the primary based on investment when vehicle for organisation compared to returns change • Returns are not necessarily • Need for multiple projects to financial achieve strategic goals • Closing projects that are no longer strategically important 21
Project Portfolio Vs. Project Management PPM PM “Doing the Right Projects” “Doing Projects Right” Alignment of projects with Consistent application of best organisational objectives practices for improved efficiency and effectiveness in project Reduced risk of achieving oversight and execution objectives through consistent oversight of multiple opportunities Improved communication between stakeholders resulting in Financial effectiveness through higher rate of acceptance and the controlled allocation of scarce client satisfaction resources to projects based on strategic priorities Alignment and coordination of interdependent projects 22
Project & PPM – Triple Constraints Scope Goals Project Project Portfolio Managemen Managemen t t Process Time Cost Culture Maturity 23
PPM – Importance of Strategy Alignment
Importance of Alignment Align Execute Measure Doing The Doing Things Exploit What Right Things Right We Did Holistic Approach to manage Strategic Initiatives 25
# 1 Metric to Evaluate Project Success Source – Gartner Inc. 2008 26
PPM - Strategy Evaluation Process
Strategy Management - Planning Levels Mission Identify Objectives Mission Business Company Strategy Objectives Units PRODUCT STRATEGY Business Strategy • Alliance • Technical Categories • Organisation Competencies • Strategic Principles Portfolio Strategy PRODUCT PORTFOLIO STRATEGY • Project Mix Brands • Resource Levels • Milestones Project PRODUCT DEVELOPMENT STRATEGY Strategy • Resource Allocation • Timing Projects • Technical Approaches • Deliverables 28
PPM - Types Compliance Projects Strategic Operational Projects Projects 29
PPM - Process Review / Revise Mission Inter Exte -nal r-nal Mission, Goals, Objectives, Culture, New Goals & Structure and Infrastructure, Objectives Processes, Environment etc. Comprehensive listing of all active, Portfolio of Strategic on-hold and proposed projects at all Choices levels of the organisation. Multiple Assessment Criteria, Quali- Strategy tative & Quantitative Tools, Software Implementation Applications etc. Maintain “balance” of projects to Project Selection create “optimal mix” based on their cost, return, risk, schedule etc.. Periodically review and modify port- folio by retaining, modifying and (when necessary) killing projects. Projects 30
Link – PPM Process & Firm’s Strategy Review / Revise Mission Inter Exte Ch Strategic Management -nal r-nal an eg New Goals & M an Objectives ag em Portfolio Management Portfolio of Strategic en Choices t Ap pr oa Strategy ch Implementation Program Management` Project Selection Project Management Projects 31
PPM – Strategy Evaluation Process Strategic Management Ch an Strategy / g Strategy e Portfolio Translate M Reevaluate an ag Portfolio em Mngt en t Portfolio Portfolio Ap Mngt Planning pr oa ch Program Management Project Management 32
Recap - Portfolio Planning Creation Selection Sequencing Driven by strategy Desirability How much value will the initiative In the In response to bring to the organisation? context of an issue all other projects, Feasibility when is the An identified best time to opportunity Is the organisation capable of deliver this successfully delivering this project? initiative? Driven by external causes 33
Eg. Link Strategies to Potential Projects 34
PPM Life Cycle
PPM - Engagement Model Initial Business Tools Assessment Prioritisation Strategy Innovation Re Prioritise Process Engage Prioritise Plan Build Sustain Sustain phase Diagnosis and often Relationship prioritisation Capability accompanied by building phase phase to assess Strategic development periodic diagnosis during which the the company's planning based phase with audits to assess capabilities and capabilities in on in-depth targeted use of any changes and opportunities of relation to its assessment of tools for business adjust the nature the company are priorities and the the company areas requiring of the intervention preliminary environment attention as appropriate; assessed within which it supported by operates mentoring 36
Screen - Ideas, Opportunities, Needs Develop / Strategise Capture Formulate Evaluate Define Promote Test Fuzzy Front End Analyse the Brainstorm & Business case Review and Build project & Review projects Design for X business capture rationale/ score assign team Select Prototypes and Set business Research & justification Portfolio Design, project(s) market testing drivers initial proof of Cost benefit analysis marketing, legal Assign budget Manufacturing Establish a concept assessment Proof of Customer & time horizon MRO strategy Publish & share Reviews & rating concept feedback Approve & Reuse, recycle funding promote 37
PPM – Life Cycle Process Gates Test & Validate Business Case Development Relaisation Scoping Launch Benefit Idea / Need G1 G2 G3 G4 G5 Stages Portfolio Management Project Management 38
PPM - Gates Gate 1 - Initial Screening Does the idea warrant any further work? Gate 2 – Second Screening Does the idea justify extensive analysis? Gate 3 – Business Case Decision Is the business case sound? Gate 4 – Post Development Review Is the project ready for pilot? Gate 5 – Pre-commercialise Business Analysis Is the initiative ready to support the market? 39
PPM - Stages Stage 1 – Idea / Need / Opportunity It fosters idea generation A perpetual process of crafting new products, processes & services It integrates partners, geographies, technologies etc Stage 2 - Scoping Quick investigation and shaping of the concept / definition Scope definition brings together cross functional team Litmus test - to ensure the new potential value and to deliver on the promise Stage 3 - Build the Business Case Goes into detailed analysis where factual data is collected (costs, profitability, service levels) Utilises advanced tools to model or simulate scenarios 40
PPM – Stages (Contd.) Stage 4 - Development Detailed process mapping & assigning the correct metrics Establish the new or altered relationships Stage 5 - Testing and Validation Undertakes pilot testing and verifies details with the business case Provides the feedback loop and lessons, to minimise risks Stage 6 – Launch Implements changes and fine tune to support full market demand Contingency scenarios activated in the event of a significant disruption Stage 7 – Benefit Realisation Examine benefits realised or not Use lesson leant for the next round of product or services innovation 41
PPM - Screening Process
PPM – Functions Screen Ideas & Opportunities Select Projects for the Portfolio Manage the Project Pipeline Monitor Approved Projects for possible de- selection, termination, or delay. 43
Project Screening Process Project Proposal Idea Review Strategic Fit / Data Collection ROI / Payback / Risk Self Evaluate Project by Cancel Project Criteria Project Team Evaluate Request for more Periodic Assessment Proposal & Review information of Priorities Portfolio & Risk Reject Accept Assign Priority, Resources, Project Manager & Hold / Reject Project Evaluate Progress 44
Eg. Project Screening Matrix 45
Project Portfolio - Matrix Dimensions High Bread & Butter Pearl Technical Success (revolutionary commercial (evolutionary improvements to advances using proven current products and services) technical advances) White Elephant Oyster (Projects that at one time (technological breakthroughs showed promise but are no with high commercial payoffs) longer viable) Low Reward (NPV) High 46
PPM - Selection Process
PPM - Selection Model Project Source, Solicit Rank Proposal & Model Selection Manage Portfolio Classification Project Proposal Select Projects Deciding how Applying a Within the Prioritising Senior well a strategic weighted scoring organisation requires management or operations model to align discipline, input project fits the projects with the Request for accountability, organisation’s organisation’s proposal (RFP) responsibility, The priority team strategy strategic goals. from external constraints, (project office) sources reduced responsibilities Ensure the (contractors and flexibility, and model selected vendors) loss of power 1. reduces the number of wasteful projects 2. helps identify proper goals for projects and 3. why a project is selected 48
Selection Process – Detailed Steps Resource Periodic Risk Strategy Availability & Balancing Measure-ment Assessment Alignment Allocation Schedule Risk Availability Based on Balancing Identification (In-house, Strategy Plan different Cost Outsource) parameters types of Quantitative / for project projects by :- Resources Qualitative Allocation selection – Assessment (Committed, identifies purpose and Scope soft needs / benefit Risk allocation) opportunities Response opportunity, Planning Optimal or Set resource, benefits and acceptable budgets need risk Risk size of the Monitoring & project Set Risk purpose and Control pipeline posture benefit 49
PPM – Selection Criteria Financial Non – Financial Payback Net Present Value Projects of Strategic (NPV) importance to the firm. Internal Rate of Return (IRR) Several weighted selection criteria could be used to evaluate project proposals 50
PPM Selection Model - Checklist Approach Will we build or buy? Sponsorship Who is the project sponsor? Success metrics How will we measure success? Finance What is estimated cost of the project? Driver What business problem does the project solve? Training Will staff training be required? Strategy alignment What specific organisation does this project align with? Risk What is the impact of not doing this project? What is the project risk to the organisation? Benefits What is the value of the project to this organisation? Organisation Is the organisation culture right for this type of project? culture Portfolio How does the project interact / link with current projects? 51
Pipeline Management Project Status & Evaluate against Variance Stage Gate – Pipeline Critical Reporting Go / No Go Parameters Schedule Earned Value Reporting items Applying stage Analysis outside of gate techniques Cost targets / limits / for continuation or Milestone thresholds termination Resources Analysis decisions Identify Scope Dashboard Charts consequences Set milestones (Set Criteria & and action items (phases) & test Tolerances) for follow through against criteria Make Go/No Go decisions 52
Eg. Project Selection - Criteria Human and Physical Project’s “Strategic Fit” Project’s “Strategic Fit” Resource Requirements Impact on Organisation’s Employees and their Environmental Impact Motivation & Estimated Cost and Time Performance Size and Composition of Ethical Considerations Existing Program & Complexity and Risk Project Portfolio Impact on Organisation’s Organisation’s Experience With Similar Organisation’s Image Competencies Projects Strategic Partnership Expected Benefits Temporal Distribution of Building (Quantitative & Quantitative Returns Qualitative) 53
Eg. Prioritisation Criteria Sample Weight Financial – Economic Cost and Benefit 0.25 Business Impact – Contribution to Business Performance 0.35 Risk – Likelihood of Success/Failure 0.25 Architectural fit – Compatibility with Guidelines 0.15 1.00 Ranking Process 3. Simple Scoring – everyone votes, one to seven (favorable) 4. Case for score is presented – open to debate 5. Use the information at hand 54
Eg. Attractiveness Capability Matrix Maximum Project Project Score A B Attractiveness Strategic importance 40 33 25 Economic reward 40 35 17 Time to market 10 5 7 Robustness 5 3 5 Indirect benefits 5 5 5 Total 100 81 59 Capability Validity of the idea 30 19 24 Adequacy of resources 25 20 19 Production/market skills 25 21 12 Readiness to scale-up 10 10 10 Quality of the proposal 10 7 5 Total 100 77 70 55
Eg. Risk Exposure 56
Change Management Approach
Change Process Change Management Process Change Proposition Business Definition Management Infrastructure Execution and Control Develop Change Focus on Priorities Ensure Benefits are obtained Programme Management Proposition (Solution Delivery) • Business Level Embed control mechanisms • Business Strategy Objectives Stakeholder understand : • Market Drivers • Business Level View of • Benefits Management • Regulatory Portfolios Risk profile • Portfolio Prioritisation • Business Priorities • Benefits Management • Risk Management • Risk Management Process across portfolio • Project Management Office Business owned & managed. • Benefits Management Enable decision making • Project Portfolio Management • Solution Delivery Enable decision making Develop Focus Ensure Project Change on Benefits are Execution Proposition Priorities Driven Out and Control 58
Link – PPM, Governance & Project Office
PPM – Conceptual Overview Strategic Governanc Business e Process Planning Project Continuous Improvement Management Office Business Process Reengineering Project Maturity Portfolio Models Projects Management 60
PPM Alignment – Strategy, GRB & PMO Feedback Direction Governance Governance Enterprise Review Review Board Strategy Board Project Portfolio Management Prioritisation Prioritisation Project Management Program / Office Project QA / QC Manager Project Status Reports, Time Sheets, Expenses, Project Schedules Feedback Feedback 61
PPM – GRB & PMO GRB PMO • Policy Centre • Information Center • Make Decisions • Recommends • Reviews and probes data • Prioritises projects and recommendations • Maintains data on resources • Interprets strategic plans and • Evaluates project performance initiatives • Supports development of • Provides enterprise budget project proposals and resource parameters • Builds database of potential • Responsible for the final and current projects selection decisions • Recommends projects for selection, de-selection, or delay. Governance Review Board (GRB) & Project Management Office (PMO) jointly execute the Project Portfolio Management (PPM) Processes 62
PPM - Implementation
PPM – Implementation Challenges Resistance to change Isolated groups avoiding processes Lack of accountability and follow through Resistance to transparency and tracking No rigor around structured documentation Business’ reluctance to committing to ROI 64
PPM – Critical Success Factors Train, Train, Train Dedicated PMO Staff Commitment – C Level to All Levels Focus on business Benefits Realisation Consistency of the message at all levels Simultaneous communication at all levels Prioritising and managing project initiatives Communicate, Communicate, Communicate Experienced Leader that can prevent pitfalls Linking priorities to the current business objectives Developing an effective framework for managing a PPM Process 65
Strategy Alignment - Activities Ensure PPM is in-sync with strategy Develop long-term technology capability roadmaps Manage the business requests queue Business Case Definition Costs Resources Classification Solution Evaluation Feasibility Study Identify and manage stakeholder expectation 66
Strategy Alignment - Deliverables Scope PPM Charter ROI Analysis Business Case Roles & Responsibilities Opportunity Assessment Project Screening, Selection & Scoring 67
PPM – Optimisation Activities Rank & prioritise based on value Balance portfolio – risk vs. value Matching bottom-up and top-down Overall resource capacity vs. demand analysis Available budget vs. funding needs analysis 68
Benefit Realisation Benefits Identified Project Management Office Responsibility Matrix Key Benefit Key Measurement Success Business Criteria Criteria Benefit Benefits Case Delivery Delivered Execution Benefit Progress Ownership Monitoring Risk Management Communication Plan 69
PPM – Management Activities Time & budget tracking Project issues mitigation forums Resource planning and allocation Project governance – stage gated funding and approval Standardised project delivery methodology Ongoing portfolio re-calibration & oversight 70
PPM – Management Reporting Distribution of effort On-time delivery rate Resource utilisation rate Project benefits realisation Project estimated vs. actual hours Distribution of effort / dollars by strategy 71
PPM – Software Solution Vendors
PPM - Software Solution Providers 73
PPM – Reference
PPM - Books 75
“You will never stub your toe standing still. The faster you go, the more chance there is of stubbing your toe, but the more chance you have of getting somewhere.” - Charles Kettering 76
Good Luck http://www.linkedin.com/in/anandsubramaniam 77
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