iv1021 l9 – project portfolio management gunnar wettergren 1 © gunnar wettergren

IV1021 L9 – Project portfolio managementGunnar Wettergren

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© Gunnar Wettergren

Agenda

•What is project portfolio management (PPM)

•Central concepts in PPM•The process•KPI

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Project portfolios

•A company runs a number of projects during a year

•These projects as an entity is referred to as a project portfolio

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Project portfolio management (PPM)•PPM deals with how to manage the

project portfolio•Dynamic decision process•New projects are evaluated, selected and

prioritized•Old projects are accelerated, cancelled, or

re-prioritized

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Project portfolio management

•This includes among other things▫Balancing the portfolio / Project selection▫Evaluating and analyzing the projects▫Strategic alignment▫Termination▫Resource management and much more▫Risk management

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PPM answers three questions

1. What projects should we start, what is the criteria in order to start a project in our organization?

2. How are the projects doing (during execution of the project plan)?

3. Which project should be killed and what is the criteria for this?

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Why use PPM?

•Get a complete picture of the projects in the organization

•Understand how projects fit together•Strategic alignment•Full utilization of resources•Avoid failure •Start and kill the right projects

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PPM Process (example)

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Balancing the portfolio

•Healthy mix of different types of projects is a must

•The layout of the portfolio depends on the organization and the business area

•The categorization can be done using different variables such as:▫Process impact vs. Product portfolio impact

•These models should govern and aid your project selection methods

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Examples of Categorization models•Boston matrix

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Boston matrix explained• Problem child

▫Unproven product and track record▫Difference between skills needed for product

development and market introduction and share increase

• Star▫Few problem child's become success stories

and Stars, addition of management• Cash Cow

▫A few stars remain and generate hefty profit• Dog

▫New competitors enter thus making our product obsolete

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Aggregate project plan

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Aggregate project plan (2)

•There are four different categories used▫Derivative projects – Incremental/Minor

Improvements to existing products /processes▫Breakthrough projects – Seek to develop a new

generation of products▫Platform projects – The creation of a platform

that can serve as a foundation for other products

▫R&D Projects – The development of new knowledge

Categorization

•How about ▫Business needs/requirements fulfilled vs.

Expected profit or benefit▫Suggestions?

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Strategic alignment

•All companies have business goals and needs

•It is vital to company survival that projects support or help companies reach the set goals

•We must make sure that all projects are aligned with strategic goals, unless it is a conscious decision

•How can we do this?

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Strategic alignment

•What are the goals of the organization?•For example

▫Increase market share▫Increase customer satisfaction and

retention▫Increase product portfolio

•What if 80% is spent on market share increase and 10% on each of the other projects, is this a problem?

•We need to realign the portfolio

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Resource management•How can we maximize the output of our

resources? How do we allocate resources between projects

•Resource bargaining process – The allocation of resources of many projects, based on:▫Prioritization ▫Strategic alignment▫Problem/hot spots

•The ultimate goal is to find the optimal usage of resources in the project portfolio

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Evaluation and analysis

•Economical analysis▫Various economical models such as

Discounted cash flow (DCF) Net present value (NPV) Return on investment (ROI) Ratios of any kind

•Plan analysis▫Burn down charts

Work left to do vs. time Often used in Agile models

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Burn down chart example

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Risk management

•Same as for a project put with a different focus, we focus on the set of project, the portfolio

•We can use the methods we talked about before

•Very important in PPM since it essentially entails everything we do!

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Termination•We have talked about the different ways a

project can be terminated, but what is the rational for a project being terminated, do we know?

•There is a bunch of information needed in order to terminate a project for the right reasons▫Budget, planning▫Strategic alignment▫Employee information▫……….

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Implementation

•Very complex and hard to do•Data collection from various parts of the

organization•Data must be merged

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Problems with PPM

•How to measure and identify Key Performance Indicators (KPI) that are relevant and form a valid picture of the portfolio

•How do we measure and keep track of the various aspects we have identified such as:▫Progress▫Economy▫Resources etc.

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Examples of KPI’s

•ROI•Resource utilization (%)•% of overdue tasks•Earned revenue to total expenses•Schedule Performance Index (SPI)

▫Earned Value divided by the planned value (BCWP/BCWS).

•% of projects on budget•… there are millions

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Questions?

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