week 02 - portfolio management
DESCRIPTION
TRANSCRIPT
Project Management2. Portfolio Management
Week 2
Project selection and portfolio management
Project selection and portfolio management
Project selection and portfolio management
What are the inputs that cause
the project process to begin?
What are the inputs that cause
the project process to begin?
Unit Objectives
Implement IT project planning and selection techniques
Appreciate the importance of project portfolio management
Strategic PlanningIdentifying IT Projects
Project ProposalsProject Selection MethodsApplying a Selection Model
Project SelectionProject Success
Strategic PlanningIdentifying IT Projects
Project ProposalsProject Selection MethodsApplying a Selection Model
Project SelectionProject Success
But first
Assignment 1
Assignment 1
“Write a project plan”
Assignment 1
“Write a project plan”
Topic: Week 3
http://www.teachers.ash.org.au/researchskills/Dalton.htm
Back to the programme…
Strategic Planning
Strategic Planning
1. What is strategy?2. How do projects relate to strategy?
Strategy 2Strategy 2Strategy 1Strategy 1 Strategy 3Strategy 3 Strategy 4Strategy 4
Organisation MissionOrganisation Mission
MoneyMoney
CustomersCustomers
Efficiency and EffectivenessEfficiency and Effectiveness
AdaptabilityAdaptability
5 Forces analysis
Supplier power
Supplier power
Customer power
Customer power
Threat of New
Entrants
Threat of New
Entrants
SubstitutesSubstitutes
Intensity of Intensity of competitioncompetition
Michael Porter’s ‘5 Forces’ – 1980’s
business model template
VALUEPROPOSITION
COSTSTRUCTURE
CUSTOMERRELATIONSHIP
TARGETCUSTOMER
DISTRIBUTIONCHANNEL
VALUECONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
REVENUESTREAMS
INFRASTRUCTURE CUSTOMEROFFER
FINANCE
Osterwalder’s Business Model framework 2006http://business-model-design.blogspot.com
Process efficiency
Process efficiency ScorecardScorecard Customer
satisfaction
Customer satisfaction
FinancialFinancial
Learning and
innovation
Learning and
innovation
Balanced Scorecard
Kaplan & Norton (1994?) HBR
Kaplan & Norton (1998?) HBRhttp://www.visual-literacy.org/periodic_table/pix/strategy-bsc-map.png
Strategy Map
Strategy 2Strategy 2Strategy 1Strategy 1 Strategy 3Strategy 3 Strategy 4Strategy 4
Organisation MissionOrganisation Mission
MoneyMoney
CustomersCustomers
Efficiency and EffectivenessEfficiency and Effectiveness
AdaptabilityAdaptability
• Strategic Management Overview– Involves determining long-term objectives,
predicting future trends, and projecting the need for new products and services
– Provides the theme and focus of the future direction for the firm
• respond to change• allocating scarce resources
– Requires strong links among mission, goals, objectives, strategy, and implementation
•
Set (SMART) GoalsSet (SMART) Goals
Review MissionReview Mission
Develop StrategiesDevelop Strategies
Implement Strategies through projectsImplement Strategies through projects
Align Strategies to goalsAlign Strategies to goals
Set (SMART) GoalsSet (SMART) Goals
Review MissionReview Mission
Develop StrategiesDevelop Strategies
Implement Strategies through projectsImplement Strategies through projects
Align Strategies to goalsAlign Strategies to goals
SWOT Analysis
SWOT = SITUATIONAL ANALYSIS
Where are we now?
S
T
W
O
S
T
W
O
Positive Negative
S
T
W
O
Inte
rnal
Exte
rnal
S
T
W
O
Inte
rnal
Exte
rnal
Positive Negative
S
T
W
O
Inte
rnal
Exte
rnal
Positive Negative
Set (SMART) GoalsSet (SMART) Goals
Review MissionReview Mission
Develop StrategiesDevelop Strategies
Implement Strategies through projectsImplement Strategies through projects
Align Strategies to goalsAlign Strategies to goals
http://en.wikipedia.org/wiki/SMART_(project_management)
SS Specific
MM Measurable
AA Achievable
RR Relevant
TT Time-bound
Letter
Major Term Minor Terms
SS Specific Significant[3], Stretching[3], Simple
MM Measurable Meaningful[3], Motivational[3], Manageable
AA AchievableAgreed, Attainable[6], Assignable[2], Appropriate, Actionable, Action-oriented[3]
RR RelevantRealistic[2], Results/Results-focused/Results-oriented[6], Resourced[7], Rewarding[3]
TT Time-boundTime framed[2], Timed, Time-based, Timeboxed, Timely[6][5], Timebound, Time-Specific, Timetabled, Trackable
E[1] Exciting, Evaluated, Ethical
R[1] Recorded, Rewarding, Reviewed[8]
http://en.wikipedia.org/wiki/SMART_(project_management)
Examples of “not smart”
goals?
Set (SMART) GoalsSet (SMART) Goals
Review MissionReview Mission
Develop StrategiesDevelop Strategies
Implement Strategies through projectsImplement Strategies through projects
Align Strategies to goalsAlign Strategies to goals
Set (SMART) GoalsSet (SMART) Goals
Review MissionReview Mission
Develop StrategiesDevelop Strategies
Implement Strategies through projectsImplement Strategies through projects
Align Strategies to goalsAlign Strategies to goals
Organisation MissionOrganisation Mission
MoneyMoney
CustomersCustomers
Efficiency and EffectivenessEfficiency and Effectiveness
AdaptabilityAdaptability
Strategy 2Strategy 2Strategy 1Strategy 1 Strategy 3Strategy 3 Strategy 4Strategy 4
Set (SMART) GoalsSet (SMART) Goals
Review MissionReview Mission
Develop StrategiesDevelop Strategies
Implement Strategies through projectsImplement Strategies through projects
Align Strategies to goalsAlign Strategies to goals
Organisation MissionOrganisation Mission
MoneyMoney
CustomersCustomers
Efficiency and EffectivenessEfficiency and Effectiveness
AdaptabilityAdaptability
projectsprojects
projectsprojects
projectsprojects
projectsprojects
Strategy 2Strategy 2Strategy 1Strategy 1 Strategy 3Strategy 3 Strategy 4Strategy 4
What are the goals of the projects?
Figure 2.1 Strategic Management Process (Gray & Larson, 2006, p25)
projectsprojects
projectsprojects
projectsprojectsprojectsprojects
projectsprojects
projectsprojects
projectsprojects
projectsprojects
projectsprojectsprojectsprojects
projectsprojects
projectsprojects
projectsprojects
projectsprojects
projectsprojects
projectsprojects
projectsprojects
PPPMProjectProgrammePortfolioManagement
The ‘O’ is for Organisational
OPM3
Programme
Programme
OPM3
PortfolioPortfolio
ProjectsProjects
ProjectsProjectsProgramme
Programme
PortfolioPortfolio
ProjectProjectProgramme
Programme
ProjectProjectProjectProjectProjectsProjects
ProjectProjectProjectProjectProjectsProjects
ProjectProjectProjectProjectProjectsProjects
One Portfolio or Several?
One Portfolio or Several?
CategoriesCategories
Approaches to project
portfolio management
One Portfolio or Several?
One Portfolio or Several?
CategoriesCategories
Venture: Projects that transform the business
Venture: Projects that transform the business
Growth: Projects that grow revenue or market
share
Growth: Projects that grow revenue or market
share
Core: Projects that help run the business
Core: Projects that help run the business
What are the benefits of Project Portfolio Management?
Benefits of Project Portfolio
Management
Builds discipline into project selection process
Links project selection to strategic metricsPrioritizes project proposals across a common set of criteria, rather than on politics or emotionAllocates resources to projects that align with strategic directionBalances risk across all projects
Problems with Project Portfolio
Management
Different views from senior management on what (and how) should
be done
Competition (& effective utilisation) for resources
How to
Senior Management Input
– provide guidance in selecting criteria that are aligned with the organization’s goals
– decide how to balance available resources among current projects
• The Priority Team Responsibilities– publish the priority of every project– ensure selection process is transparent – re-assess the organization’s goals /
priorities– evaluate the progress of current projects
Figure 2.8 Sample project portfolio approach(Schwalbe, 2005, p51)
Figure 1.5 Project management compared to project portfolio management(Schwalbe, 2005, p15)
MoneyMoney
CustomersCustomers
Efficiency and EffectivenessEfficiency and Effectiveness
AdaptabilityAdaptability
projectsprojects
projectsprojects
projectsprojects
projectsprojects projectsprojects
programme
programme
projectsprojects
projectsprojects
projectsprojectsprojectsprojects
programme
programme projectsprojects
Strategy 2Strategy 2Strategy 1Strategy 1 Strategy 3Strategy 3 Strategy 4Strategy 4
Organisation MissionOrganisation Mission
Programme
Programme
projectsprojects
projectsprojects
programme
programme
Sh
ort
te
rm
Sh
ort
te
rmM
id
termMid
te
rmLo
ng
te
rm
Lon
g
term
projectsprojects
projectsprojects
projectsprojects
projectsprojects projectsprojects
projectsprojects
projectsprojects
projectsprojects
projectsprojectsprojectsprojects
projectsprojects projectsprojects
Strategy 2Strategy 2Strategy 1Strategy 1 Strategy 3Strategy 3 Strategy 4Strategy 4
Organisation MissionOrganisation Mission
projectsprojects
projectsprojects
projectsprojects
projectsprojects
http://www.betterprojects.net/search?q=strategy
projectsprojects
projectsprojects
projectsprojects
projectsprojects projectsprojects
projectsprojects
projectsprojects
projectsprojects
projectsprojectsprojectsprojects
projectsprojects projectsprojects
Strategy 2Strategy 2Strategy 1Strategy 1 Strategy 3Strategy 3 Strategy 4Strategy 4
Organisation MissionOrganisation Mission
projectsprojects
projectsprojects
projectsprojects
projectsprojects
Identifying IT Projects
Identifying IT Projects
• Many organizations follow a planning process for selecting IT projects which is aligned with business strategy
• Research shows:– Supporting business objectives is the
number one reason for investing in IT projects
– Use of IT standards lowers development costs by 41 percent per user (Cosgrove Ware, 2002)(Cosgrove Ware, 2002)
Figure 2.1 Pyramid for the Project Selection Process(Schwalbe, 2005, p35)
Project Proposals
Most business units have a
strategic plan
Which SHOULD align with the organisation’s strategic plan
Which SHOULD align with the organisation’s strategic plan
Solicitation of Project Proposals
Within the organization
Request for proposal (RFP) from external
sources (contractors and vendors)
When ranking proposals, consider;
DisciplineAccountabilityResponsibilityConstraints
Reduced flexibilityLoss of power
Project Initiation forms
Figure 2.4B Risk Analysis(Gray & Larson, 2006, p39)
Figure 2.4A Major Project Proposal (Gray & Larson, 2006, p38)
Project Initiation forms
Figure 2.4B Risk Analysis(Gray & Larson, 2006, p39)
Figure 2.4A Major Project Proposal (Gray & Larson, 2006, p38)
Project Selection Methods
Not all project proposals make it to initiation
Every project idea isn’t progressed.
Why?
Time
Money
Focus
Methods for selecting projects include:
- Focusing on broad organizational needs
- Categorizing IT projects- Financial analysis- Using a weighted scoring model- balanced scorecard- Strategy mapping
Focusing on Broad Organizational Needs
– E.g. Non-financial, but important benefits
– Three important criteria:• need for the project• funds available for the project• will to make the project succeed
Categorizing IT Projects
– Does the project provides a response to:•a problem•an opportunity•a directive
– The time and date of expected completion
– The overall priority of the project
Financial Analysis
$$$
Net Present Value
Net Present Value
Payback model
Payback model
Return on Investment
Return on Investment
(there are more)
(there are more)
Financial Analysis
$$$
Net Present Value
Payback model
Return on Investment
(there are more)
Net Present Value
Net Present Value (NPV) ModelUses management’s minimum desired rate-of-return (discount rate) to compute the present value of all net cash inflows
positive NPV: the project meets the minimum desired rate of return and is eligible for further considerationnegative NPV: project is rejected
Net Present Value (NPV) Model cont’d…NPV Calculations
determine estimated costs / benefits for the life of the project and products it producesdetermine discount rate (ask organization)calculate the NPV some organizations consider the investment year as year 0, others consider it year 1some organizations enter costs as negative numbers, others do not (ask organization)
Example: CP829_Lecture_Week2_NPV.xls
Time to
StoStopp
and turn to a new
presentation pack
Time to
StoStopp
and turn to a new
presentation pack
Payback model
Figure 4.1 Charting the Payback Period (Schwalbe, 2006, p129)
Measures the time it will take to recover the project investment
Shorter paybacks are more desirable
Payback occurs when cumulative discounted benefits and costs are greater than zero
Limitations of payback:• ignores the time value of money• assumes cash inflows for
investment period only• does not consider profitability
Return on Investment
Return on Investment (ROI)Calculated by subtracting project costs from the benefits and then dividing by the costsFormula:
ROI = (total discounted benefits – total discounted costs) / discounted costs
Higher the ROI, the better. Many organizations have a set or minimum rate of return on investment projects
Example: CP829_Lecture_Week2_ROI.xls
(total discounted benefits – total discounted costs)
discounted costs
Non-financial Analysis
$$$
Weighted scoring model
Balanced Scorecard
$$$
Weighted scoring model
A weighted scoring model is a tool that provides a systematic process for selecting projects based on many criteria
– Steps in identifying a weighted scoring model:
• identify criteria for project selection• assign weights (%) to criteria add up to
(100%)• assign scores to each criteria for each project• multiply scores by weights to get total scores
– The higher the weighted score, the better– Example: CP829_Lecture_Week2_WeightedScore.xls
$$$
$$$
Balanced Scorecard
•Balanced Scorecard – Robert Kaplan and David Norton developed
this approach to help select and manage projects that align with business strategy
– Methodology that converts an organization’s value drivers, such as customer service, innovation, efficiency, and financial performance, to a series of defined metrics
– See http://www.balancedscorecard.org for more information
$$$
Applying a selection
model
Applying a Selection Model
• Project Classification– Deciding how well a strategic or operations project fits
the organization’s strategy
• Selecting a Model– Focus on competitive strategy and broad organizational
needs– Perform net present value analysis or other financial
projections– Use a weighted scoring model– Implement a balanced scorecard– Address problems, opportunities, and directives– Consider project time frame– Consider project priority
Project Selection
The Business Case
Impacts Costs & Benefits
Clearly compares alternatives Objective
Systematic
The Business Case
Elevator pitches?
Table 3.4 Sample business case(Schwalbe, 2005, pp74-76)
Example business case
Contents of a Business Case
1. Introduction/Background2. Business Objective3. Current Situation and Problem/Opportunity
Statement4. Critical Assumptions and Constraints5. Analysis of Options and Recommendation6. Preliminary Project Requirements7. Budget Estimate and Financial Analysis8. Schedule Estimate9. Potential Risks10.Exhibits
Figure 2.3 The Process for Developing a Business Case(Marchewka, 2003, p34)
Project Success
By the way,
Things are getting better
Source: CHAOS Report 1995 by the Standish GroupAccess it here: http://net.educause.edu/ir/library/pdf/NCP08083B.pdf
Not even complete
d
Typically 189% over
budget
OTOBOS
53%Challenged
16%Success
31% Critical Failures
1994
Not even complete
d
Still way over
budgetOTOBOS
51%Challenged
34%Success
15% Critical Failures
2002
Source: CHAOS Report 2002 by the Standish GroupAccess it here: http://www.standishgroup.com/quarterly_reports/index.php
53%Challenged
16%Success
31% Critical Failures
1994
51%Challenged
34%Success
15% Critical Failures
2002
$0
$50
$100
$150
$200
$250
1994 2005
Wasted money as a
share of total project
spend
Billions of dollars
What happened?
“The reasons for the increase in successful projects vary. First, the average cost of a project has been
more than cut in half. Better tools have been created to monitor and control progress and better skilled project managers with better management processes are being used. The fact
that there are processes is significant in itself.”
(Standish Group cited in Schwalbe, 2004, p13)
“The reasons for the increase in successful projects vary. First, the average cost of a project has been
more than cut in half. Better tools have been created to monitor and control progress and better skilled project managers with better management processes are being used. The fact
that there are processes is significant in itself.”
(Standish Group cited in Schwalbe, 2004, p13)
Smaller
projects
Smaller
projects
Better tools
Better tools
Better trainin
g
Better trainin
g
Better SelectionBetter
SelectionPortfolio
MgtPortfolio
Mgt
Strategic Alignme
nt
Strategic Alignme
nt
More recently
Things you
should have
(if you want to succeed)
1. Executive support
2. User involvement
3. Experienced project manager
4. Clear business objectives
5. Minimized scope
6. Standard software infrastructure
7. Firm basic requirements
8. Formal methodology
9. Reliable estimates
10. Other criteria, such as small milestones, proper planning, competent staff, and ownership
incrementalBut, change has been…
There is still plenty of room for
improvement.
?What do you think is still
going wrong?
BetterProjects.net
Title page pic care of jpellqen & CC @ Flickr
http://flickr.com/photos/jpellgen/444946201/