Innovation – Portfolio Management – Part 2
We are on the topic of Project and Portfolio Management (PPM). I discussed the value of PPM and established that the aim of PPM is to determine the best grouping and sequencing of projects to achieve the organisations’ business goals. In this article I want to go into more detail on the methodology of PPM and also make the case for an integrated PPM system.
Portfolio Management Methodology
In essence a PPM methodology is about having accurate information in the right view in order to facilitate the process of making the best choices, taking the applicable constraints into consideration. Portfolio metrics are an important part of PPM, i.e. defined, standard measurements to evaluate different project and program combinations. It does not have to be overly complex and elaborate; it can be as straightforward as a Net Present Value (NPV) calculation, as long as it makes sense for the organisation’s circumstances and environment.
PPM is a process and a discipline. Getting it implemented effectively on an enterprise-wide basis, however, requires the right software enablers. Unfortunately, many companies are stuck managing PPM with complex spread sheets that have evolved over time, are difficult to maintain, and provide limited value. Managing portfolios with spread sheets brings about a myriad of problems. While some might think of spread sheet software as the “easy” approach, quite the opposite is typically true. Spread sheets serve many useful purposes and can be manipulated to do almost anything, but the more complex they get the more difficult they are to use and to explain. They are also very difficult to share effectively across the enterprise. Effective PPM technology, on the other hand, is designed to provide transparency to portfolios up and down the organisation. PPM solutions have other advantages as well, offering intuitive evaluation and comparison of multiple options and scenarios, providing information in a graphical manner that aids decision-making, and helping promote consistent and accurate data. An enterprise level PPM system offers the benefit of more consistent data, analyses, and metrics, comparing “apples to apples” to make decisions more fact-based and objective.
An integrated PPM system can also serve to integrate different people and functions into a unified innovation process. For example, integration provides real information on project status and health. This helps ensure that strategic decisions are made on real data and that executives are working from “one version of the truth.” It also helps ensure that decisions are communicated back to those running the programs so portfolio decisions are implemented effectively. PPM also delivers some very straightforward improvements. Even with all of the significant top-line and bottom-line business improvements available, many companies simply develop a return on investment for PPM systems based on improving the efficiency of their planning process by replacing manual data-gathering and cumbersome spread sheets. That value may not be as strategic, but it shouldn’t be overlooked, either.
Simply by providing timely, reliable, relevant information companies can take big strides. Providing the right tool to visualize and analyse the data and reviewing multiple “what if” scenarios helps make better decisions. Organisations can get started quickly by leveraging best practice templates, reports, views, and workflows instead of reinventing the wheel. The important thing is to enable people to make better, more informed decisions – but not kill the process with too much burden from overly complex models and excess paperwork.
I have covered the methodology and the value of an integrated system for PPM. After deciding on the right project mix, the next important factor is to make sure projects are executed within budget and schedule and conforming to the planned project scope. Thus next time I will go into more detail on the link between innovation and proper project management. I conclude with a quote from Mark Twain: ““Data is like garbage. You’d better know what you are going to do with it before you collect it”.