Project portfolio management is very much a multi-faceted management discipline. Portfolio management directly impacts strategic execution resulting in greater benefit to the organization and its customers. At the same time portfolio management focuses on increasing project value, often measured financially, by selecting the best projects with the right balance of risk. Portfolio management also provides much needed organizational infrastructure to enable the organization to launch more successful projects. At the same time, portfolio management is very much about people, the senior managers who make decisions, the project managers who provide key data, resource managers who play an integral role in resource allocation, and team members who participate on project teams and possess a variety of skills that can be utilized in multiple ways. Finally, the nuts and bolts of portfolio management centers around data—strategic data, financial data, resource data, schedule data, and performance data to name a few.
Based on the information above, project portfolio management can be broken down into four basic components: selecting the right projects, optimizing the portfolio, protecting the portfolio’s value, and improving portfolio processes. In order to implement portfolio management, we must understand PPM with these four components in view.
1) Select the Right Projects—selected projects must align with the business strategy and meet other important criteria. This results in the portfolio containing a higher percentage of winning projects.
2) Optimize Portfolio Value—all the steps necessary to construct an optimal portfolio given current limitations and constraints.
3) Protect Portfolio Value—during the execution of an optimized portfolio, the aggregate project benefits (portfolio value) must be protected. This occurs by monitoring projects, assessing portfolio health, and managing portfolio risk.
4) Deliver Portfolio Value—Ensure that portfolio value is delivered by comparing expected benefits with actual benefits. Drive PPM maturity which translates into a greater realization of the benefits of project portfolio management.
One of the primary goals of portfolio management is to execute strategy. There is an important distinction between strategy creation and strategic execution. Possessing a strategy (and spending the energy to create one) is meaningless if the organization cannot accomplish the strategic goals. Although many people acknowledge that strategic projects are vehicles for a accomplishing a strategy, senior leadership needs to make the right project decisions at the right time to advance the goals of the company. Hence, making smarter and better decisions is a precursor for solid strategic execution. In order to make smarter and better decisions, the right data needs to be available at the right time.