portfoliomanagement pm presentation digitalboardroom public final

F.L.F. BeekmanCAPM Global Competence Center

October 2007

Project Portfolio Management

CAPM Global Competence Center, F.L.F. Beekman, October 2007 2

This presentation contains topics in a mix- of theory- and practice- supplemented by ideas- and thoughts- with hopefully some logic

[email protected] CAPM Global Competence Center = Shared Service Center for Project- and portfolio-Management for Philips Medical Systems


What is PPM?• Project Portfolio Management (PPM) is a significant advance over

traditional PM methods, (which focuses primarily on project execution).• PPM addresses a common problem where scarce resources (money,

people, facilities) are allocated to the wrong projects.• PPM, therefore, goes beyond the art of "managing projects right" and

focuses on "doing the right projects".


Project Portfolio Management

The objective of PPM is to create the mix of projects most likely to:• support the achievement of the organization's goals,• aligned with the preferred strategies, and• within the organization's resource (people and funding) constraints.

… studies reveal that as many as 70% of IT projects either significantly fall short of deadline and budget goals or they are abandoned altogether prior to completion. –IT Business Edge 2007-09-20


Why is it important to Philips? Make Philips’ growth ambition happen

“The company at large is now geared for profitable growth. It needs to extend leadership in existing markets, explore and develop new

markets, accelerate change. We’ve talked for long enough. Now we must devote ourselves to successful execution (Kleisterlee)”.

This requires:• Grow by ultimately starting new businesses• Increase profitability through re-allocation of capital towards higher

return opportunities• Leverage the Philips brand and our core competencies in the areas of

Healthcare, Lifestyle and Technology to grow in selected categories and geographies


ap

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ark

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applied technologiesexisting

exis

tin

g

new

new

CostInnovation

Break AwayInnovation

FeatureInnovation

MarketInnovation

The Growth Framework

Can it be made ?

Will it be bought ?

temporarycompetitiveadvantages

sustainablecompetitiveadvantages

Growth


Assignment

Problem description• Project portfolios are managed using Excel and

PowerPoint. • Projects are managed in Clarity• Clarity supports project portfolio management• Why not manage project portfolios in Clarity

Basic requirement:• Focus on communication and insight Charts

– Scatter (X: Chance of success, Y: Attractiveness)

– Pie (Budget percentage per Strategic Bucket)


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Worst Performers

Average Performers

Best Performers

Worst Performers

Average Performers

Best Performers

Worst Performers

Average Performers

Best Performers

Worst Performers

Average Performers

Best Performers

Worst Performers

Average Performers

Best Performers

Worst Performers

Average Performers

Best Performers

Worst Performers

Average Performers

Best Performers

Worst Performers

Average Performers

Best Performers

Worst Performers

Average Performers

Best Performers

Worst Performers

Average Performers

Best Performers

Role

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R&

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Busin

ess

Goals

Use

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buckets

Sr

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&D

Busin

ess

Clim

ate

support

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innovation

Form

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Bala

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Port

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Excele

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qualit

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execution

Tough,

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Go/K

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Decis

ion

pro

cess

Custo

mer

focused

Role of R&D in Business Goals

Use strategic buckets

Sr Mgt strongly committed to R&D

Business Climate supports innovation

Formal & systematic PPM in place

Balance resources across projects

Portfolio contains high value projects

Excellent quality of execution

Tough, rigorous Go/Kill Decision process

Customer focused

Percentage of businesses that embrace each best practice


The pipeline

Which projectsto initiate?

Which projectsto continue?

Which projectsto terminate?

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projwish

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Initiation Definition Design Preparation Realization Delivery AftercareConcept&feasibility Planning Development Execution Implementation Operation

Select projects

Manage project portfolio pipeline

screening Project management

Concept phase selection filter


Why is an active Go/Kill policy important?

0

10

20

30

40

50

60

70

80

90

Defint

ion

Desig

n

Realis

ation

a-te

st

b-te

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Usage

%

Error source

Repair moment

Repair costs


Money spend is never an excuse for spending

more money


POrtfolio Management Process

Co-operation AOP POMP

Transparency


Selection

Determination of the optimal or acceptable size of the project pipelineSurveys show: get more projects done with less people by doing fewer projects

- resources scattered over projects; changeover losses- project delays

Ranking projects; By Value and Benefits, such as- Financial models- Resource availability- Alignment with strategies- Risk/Reward (Net present Value NVP) Identification, probability, impact, mitigation -> risk WBS- Scoring Models- Check lists


Criteria for reporting a project in POMP

Criterion Indicator

1. Potential X-PD / Corporate Function impact

To be derived from portfolio overview of Corporate Functions

2. All projects that involve a significant investment

Component above x EURO

3. All architecture and new technology related projects

To be derived from portfolio overview of the PD’s

4. All projects that are marked as relevant by the Portfolio Governance Board

To be determined by the Portfolio Governance Board, using the existing decision making process


Distributed Portfolio Management model

PMS Vision, Mission &Business (PD) Strategy

Philips Vision, Mission & Corporate Strategy

Product plans

Integral Roadmapping

Innovation project portfolio management

Pipeline and project management

Business Planning

Portfoliomanagement

“Doing the right projects”

“Doing the projects right”


Why is “doing the projects right” important?

What if 99% went right???


406.000 passengers per year who depart on the wrong airplane from Schiphol airport


700 people will receive the wrong medicine from the pharmacist per day


161 baby's per month return home withThe wrong parents.


Why is doing the things right important?

90% x 90% x 90% x 90% x 90% x 90% = 53%

Initiation Definition Design Preparation Realization Aftercare

What does 53% mean for your product quality, for your Time to market?


Why is “doing the right projects” (=PPM) important?

PM

PPM

75% 100%

66%

100%

50% value realized

50% value lost

Selectingthe rightInvestment

‘Do the rightthings’

Delivering the investments right‘Do the things right’


• PD’s• Corporate

Functions• EISA• Domain

Boards

• EISA• PD’s• Corporate

Functions• Domain

Boards

• EISA• PD’s• Corporate

Functions

• EISA Board • Portfolio Meeting

• Portfolio Meeting

• Regular Planning & Control mechanism

• Apply selection criteria to portfolio

• Discussion with portfolio owners to select projects

• Ensure compliance to standards (apples-to-apples)

• Ensure completeness of data

• Score projects on evaluation criteria

• Execute fact-based analysis on portfolio via various dimensions

• Prepare recommen- dations on project portfolio mngt including prioritization of projects

• Determine project priorities, based on the business, strategy and existing resource constraints

• Communicate outcome to all stakeholders

• Ensure executive commitment

• Project execution using regular/existing Planning & Control mechanisms

DECISION

MAKING

COMMU-

NICATIONEXECUTION

Wh

at

Wh

o

SELECT

PROJEC

TS

GATHER

DATA

ANALYZE

DATA

PREPARE

DECISION

MAKING

Process steps


Project & portfolio definition

• Project definition– “Strategic bucket” {Must Do legal or technical, Business necessity, Bottom line

performance improvement, Top line competitive advantage, Innovation}– “Project attractiveness” with sub-fields

• Net Present Value over three years• Payback period• Alignment of project with business strategy

– “Risk / Chance of success” with sub-fields• Business risk• Organizational risk• Project / technology risks

• Portfolio definition– Portfolio with POMP projects

• 3 scenarios on how to lower the POMP budget– 3 program portfolios with existing projects


Percentage Strategic Bucket


Attractiveness versus chance of success


Attractiveness is the outcome of market attractiveness and strategic fit

Market attractiveness- Market size- Market growth- Market profitability- Market life cycle- Competitive intensity- Volatility of demand- Market predictability- …

Strategic fit- Contribution to strategic objectives- Fit with brand promise (brand pillars)- Contribution to financial and non-financial targets- Contribution to one Philips- …


Chance of success is the outcome of commercial and technical chance of successCommercial chance of success

• Commercial competitive strength- Relative market position (RMS)- Relative brand position- Relative marketing investments- …

• Ability to market and sell- Fit with marketing capabilities - Fit with sales organization- Fit with the required distribution channels- …

• Specific commercial risks - Lead-customer identification- Proven end-user acceptance- ….

Technical chance of success

• Technical competitive strength- Relative IP position- Relative R&D investment- …

• Ability to develop and create- Fit with development skills- Fit with manufacturing/sourcing skills- Fit with supply chain capabilities- Fit with technical know-how- Team maturity- …

• Specific technical risks- Availability of fall back scenario’s- Level of supplier risk - …


Attractiveness versus chance of success (2)


Other exciting graphs


Project maturity models at PMS (1/2)

Basics: Commitment, HW, infra

Basic PM & Time registration; process & practice

PM; process & practice

RM; process & practice

PPM; process & practice

Roadmapping; process & practice

REPORTS

Markets & Strategy

Classical business (operational) driven bottom up model

No aggregation to this level


Project maturity models at PMS (2/2)

Basics: Commitment, HW, infra

Markets & Strategy

Roadmapping; process & practice

PPM; process & practice

Program mgt; process & practice

PM; process & practice

REPORTS

Top-down model


PPM Maturity Model (1/2); Adoption of PPM

Maturity level 1 Maturity level 2 Maturity level 3 Maturity level 4 Maturity level 5Decision making process Portfolio-decisions are made ´on

the fly´ based on management insight

Portfolio-decisions are made fact-based but not via a systematic, consistent and explicit process

Portfolio-decisions are made fact-based via a systematic process. The process is however not yet clear, explicit and consistently deployed.

Portfolio-decisions are made fact-based via a systematic and explicit process. The process however is not yet consistently deployed over time and accross the organization.

Portfolio-decisions are made fact-based via a systematic, explicit and consistent process that allows for tracking and learning over time

Level of deployment Some isolated examples of business and/or project portfolio management

Business and/or project portfolio management is done on only one organizational level. Approaches are not aligned and linked

Business and/or project portfolio management is done according to Philips portfolio management framework on only one organizational level. Approaches are not aligned and linked

Business and project portfolio management is done according to Philips portfolio management framework on PD level and on all relevant levels below. Approaches are not aligned and linked

Business and project portfolio management is done according to Philips portfolio management framework on PD level and on all relevant levels below. Approach is aligned and linked

Level of process integration Portfolio management is a stand-alone process

Project portfolio management is linked with project management

Business portfolio management is linked to strategic business planning process.

Project portfolio management is linked to project management and resource management. business portfolio management is linked to strategic business planning process.

Business portfolio management and project portfolio management are fully integrated into the core business processes (business planning, resource planning and project management)

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PPM Maturity Model (2/2); Quality of PPM

Maturity level 1 Maturity level 2 Maturity level 3 Maturity level 4 Maturity level 5Critera Criteria are picked ´out of the

blue´, no check is done on elements like SMART, differentiation and consistency

Critera are selected with more care, they are SMART however not yet differentiating enough and not yet consistent over time

Critera are SMART and they differentiate well, however they cannot be assessed based on external sources and they are not yet consistent over time

Critera are SMART, differentiating and can be assessed based on external sources . They are however not yet consistent over time

Critera are SMART, differentiating, can be assessed based on external sources and are consistent over time

Data No validation or calibration of data Subjective validation/calibration of the data by own function.

Subjective, cross-disciplinary validation/calibration of the data

Cross disciplinary validation/ calibration of the data based on objective internal information (e.g. actual achievements in past projects)

Cross disciplinary validation/ calibration of the data based on objective internal and external information (if applicable e.g. benchmarks)

Functions involved Supported/driven by one function (i.e. technology, marketing, strategy or finance)

Supported/driven by one function (i.e. technology, marketing, strategy or finance) however some other functions are informed and/or involved

Supported/driven by two or more functions (i.e. technology, marketing, strategy or finance)

Supported/driven by two or more functions (i.e. technology, marketing, strategy or finance), other functions are informed and/or involved

Fully X-functional supported/driven

Availability of tools and training No tools and training available Some tools are available, no training

Some tools and partial training is available.

Portfolio management process is fully supported by tools.Training is available, but not all involved have participated

All involved (incl. decision makers) have been trained and portfolio management process is fully supported by tools

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