November 23rd, 2020
Competition and market forces are challenging organizations more than ever. This makes the imperative to optimize return on investment vital to success. To keep pace, organizations need to ensure they invest in a mix of projects that delivers the highest value. They must implement solutions and strategies that allow them to quickly evaluate all ideas, opportunities, and potential projects. This is the essence of project portfolio management. But how can you optimize project portfolio management?
This is achieved most efficiently through an all-in-one Enterprise Project Performance solution that provides both high-level and detailed information on all projects for educated decision-making – thus keeping the entire portfolio aligned with overall corporate strategies and objectives and securing the highest return on investments.
Define Project Portfolio Strategy and Goals
Building investment scenarios starts constraints and targets. To optimize project portfolio management, we must start by defining the KPI’s that will serve as the basis for measuring our success when optimizing our portfolio. To summarize this approach:
- Define or identify available constraints or resources. These can include capital investment, operating expenses, equipment and facilities, and human resources. Available resources serve as the constraints.
- Define or identify targets. These include a mix of qualitative and quantitative KPI’s that help define expected benefits for ideas, opportunities, and potential projects. Quantitative KPI’s such as Net Present Value (NPV), Return on Investment (ROI), and Cost Savings are common and identify the tangible benefits delivered by projects. However, qualitative KPI’s are also important in ensuring that projects align with organizational strategy, address key markets, and risk tolerance.
These constraints and targets usually come from the top and are broken down in a top-down approach, by business unit and division.
Optimizing Project Portfolios
Optimizing portfolios can be achieved with a process that supports the project portfolio lifecycle. This starts with strategy and planning and includes organizational goals and targets as well as ideas and opportunities that support those targets. Also, key in this process is understanding current project execution while monitoring real time performance. The process needs to be flexible and capable of providing inputs to address changes when evaluating portfolios.
A natural fit in establishing strategic goals across a portfolio is to use a single software system for managing strategy and individual project planning & delivery. Make sure that data models include data captured in the business case as well as dashboards to support the portfolio management process. Implement a comprehensive and holistic approach that allows your organization to (1) plan, (2) prioritize, (3) change and (4) repeat.
Important steps in this process include:
- Align your strategy with day-to-day execution.
- Develop a connection between the portfolios and projects by ensuring projects can roll up KPI’s to the portfolio level.
- Make sure you have consistency in project planning and execution.
- Use dashboards to prompt discussions for competing, alternating, or complementary scenarios. Most effective are “what-if” dashboards that allow users to add or remove projects from scenarios while instantly visualizing the impact to constraints and targets.
- Make fact-based decisions, using real-time portfolio data to maximize the return on your portfolio investments.
- Creating a central repository with visibility into all relevant project data is critical for decision support and rapid response.
Image: Portfolio summary dashboard showing aggregated performance and the ability to drill down into individual project performance.
Essential Principles for Optimizing Portfolio Returns
Not all projects can be done, however good they are. Optimizing your portfolio starts with aligning projects with business objectives and making sure spending reflects business strategy.
- The foundation for portfolio optimization is rich, robust data that is current. Effective portfolio management must be tightly integrated with your existing business processes, capturing data whenever and wherever it is created. It cannot create additional work for portfolio practitioners. This necessitates an integrated project and portfolio management platform.
- Another key principle is the need for powerful visualization capabilities. Once an organization has confidence in its data, decision makers need to be able to leverage data to quickly gain insights and make decisions. This requires graphical, dashboard views that help people quickly understand performance with KPI’s, identify risks, and confirm strategic alignment.
- The ability to create insightful “what-if” scenarios. Effective planning systems provide powerful assessments of different investment profiles, and planners must be able to visualize tradeoffs across many factors, such as cost, reward, risk, resources, and timing.
- Finally, commit investment to make these plans a success. When teams are ready to commit to a revised “plan of record,” they must ensure the human and financial resources are available. Effective systems can secure resources and align them to execute on new plans.
Conclusion: Software Helps Optimize Project Portfolio Management
Ultimately, project portfolios are far from static. First you have to make the initial decision of which projects go into the portfolio. Then, you must review and optimize the portfolio as performance, internal priorities and external events shape the portfolio landscape.
Investments made in software for project portfolio management, especially when it is a system that simultaneously manages project execution, more than pay for themselves. These returns come in the form of lower project costs, increased efficiency and productivity, and the avoidance of the opportunity costs coming from the approval of projects that lack strategic alignment to your organization’s larger goals.
Mark Nelson has been in the Enterprise Project Performance industry for over 15 years. He has worked as a software implementation and business process consultant in helping customers define their processes and leverage best practices for large global organizations. His current role as part of the EcoSys go-to-market team is to identify industry trends, product strategy, and best practices for customer’s Enterprise Project Performance solutions. Mark has experience that spans multiple sectors including Transportation Infrastructure, Construction, High Tech, New Product Development, and IT.