Optimizing your portfolio and mode(s) of operation.

Portfolio Management: Methods & Models

PPM is:

Maximize return/effectiveness/impact on investment.   (Maximize Value)

Find the right mix of investment areas

Ensure that highest value is delivered (in line with our purpose & strategy)

Via:

o   Proper selection  (resource allocation, contribution       Do the right things

o   Timing of delivery (coordinate dependencies, reduce delays)   At the right time

o   Size of solution delivered  (Positioning, size of market, size of problem/opportunity)

o   Efficiency/ methodology      and Do them the right way.

Where do we start?

• Take all of the initiatives in your backlog, strategic retreats, wishlist, etc.

• Weed out the junk. (Stuff you know you won't get to - or don't really need to do.)

• Start to organize around themes.

  • Why? - To have fewer drivers of priorities.

    • Pick ONLY ONE innovation project.  Commit sufficient resources to it, don't go halfway.  (Maybe you can do two next year.)

  • Segment the rest of the work by Type (Lights-on, Growth/Improvement, Compliance) to prevent dropping critical work. 

• This is a bottom-up approach.  It’s not ideal, really – but it’s often the reality – because the knowledge that exists about business opportunity comes from granular intelligence.  It rarely comes from a predilection or omniscient vision.

  1. These are not goals - they are themes.  (Goals come after this.)

  2. These are not (necessarily) Lines of Business.  That’s similar in purpose, but LOB is market-driven, and themes are purpose-driven.

  3. This might be what you want to structure your portfolios around.  (Or maybe not. Don't let a model dictate it to you. Use the model to help you make the decision you want to make.)

1. Determine allocation of budget to those themes.  (How do you determine those budget allocations?  YOU figure it out. ;-)    Data is how.  Until then, it’s educated guesses, refined over time to be more educated.)

2. Stick to it (the allocations.)  If it needs to change, change it formally. That is, take your best guess on how to allocate funding and don't stray from that decision, unless you are taking a large step backward to replan. Consistency and measurement is the foundation for improving this process.

Strategic, Discretionary, Nondiscretionary

Determine how much is allocated to each category overall.  This can be the basis for establishing individual portfolios OR can be categories within a portfolio.

Project Modes

When defining major projects, the 'mode', i.e. the way of working, should be different depending on the type of project.

Project Portfolio Management FAQ

1. What are the key metrics that senior executives care about in project portfolio management?

Senior executives prioritize metrics that directly impact the company's financial performance and strategic goals. These include:

• Profitability: The ability of projects to generate revenue and contribute to the company's bottom line.

• Return on Investment (ROI): The financial gain realized from the investment in a project.

• Delivery of Benefits: Ensuring projects deliver tangible benefits aligned with the company's strategic objectives.

• Capitalizing on Windows of Opportunity: Selecting and executing projects that align with favorable market conditions and competitive advantages.

2. How does portfolio management contribute to maximizing value for the company?

Effective portfolio management aims to maximize value through the following:

• Proper Selection: Choosing the right projects that align with strategic goals and have a high potential for success.

• Optimal Timing: Sequencing projects to minimize dependencies and delays, ensuring timely delivery of benefits.

• Right-Sizing Solutions: Adjusting the scope and scale of projects to match market needs and opportunities.

• Efficient Execution: Employing effective methodologies and processes to optimize resource utilization and project outcomes.

3. What is the significance of segmenting projects by mode?

Segmenting projects by mode (e.g., Strategic, Discretionary, Non-discretionary, Regulatory) is crucial for:

• Targeted Resource Allocation: Allocating resources based on the strategic importance and impact of each project type.

• Prioritization and Focus: Ensuring that resources are directed towards projects that align with the company's strategic goals and priorities.

• Risk Management: Understanding the unique risks associated with different project types and applying appropriate mitigation strategies.

4. What is the difference between "Neutralizers" and "Differentiators" in project portfolio management?

• Neutralizers: Projects that aim to match or counter competitor offerings, maintaining a competitive position in the market. They should be executed quickly and efficiently to minimize competitive disadvantage.

• Differentiators: Projects focused on creating unique value propositions and competitive advantages. They require significant investment, testing, and learning to deliver innovative solutions that set the company apart.

5. How does a bottom-up approach to portfolio management work?

A bottom-up approach starts by gathering input and knowledge from individuals and teams working on specific projects and initiatives. It then consolidates and organizes this information to identify themes and potential opportunities. This approach leverages granular insights from those closest to the work but requires careful alignment with top-down strategic goals.

6. What is the role of governance in project portfolio management?

Governance in portfolio management involves establishing clear processes, decision-making structures, and accountability mechanisms to ensure that:

• Strategic Alignment: Projects are selected and executed in line with the company's overall strategic objectives.

• Resource Optimization: Resources are allocated efficiently across the portfolio to maximize value delivery.

• Performance Monitoring: Progress is tracked, risks are managed, and corrective actions are taken to ensure successful project outcomes.

7. What is the importance of using data to optimize the portfolio?

Data analysis plays a crucial role in portfolio optimization by providing insights into:

• Project Performance: Tracking actual versus planned performance, identifying potential issues, and enabling data-driven decision-making.

• Resource Utilization: Monitoring resource allocation, identifying bottlenecks, and optimizing resource deployment.

• Value Realization: Measuring the actual benefits delivered by projects and identifying areas for improvement.

8. What are some common challenges in project portfolio management, and how can they be addressed?

• Lack of Strategic Alignment: Ensure that projects are clearly linked to strategic objectives through a robust selection and prioritization process.

• Resource Constraints: Implement effective resource management practices to allocate resources based on project priorities and optimize utilization.

• Poor Communication: Establish clear communication channels to keep stakeholders informed and engaged throughout the portfolio lifecycle.

• Inadequate Measurement: Define and track relevant metrics to monitor portfolio performance and inform decision-making.