A project portfolio is a collection of projects, programs and processes that are managed together and optimized for the financial and strategic goals of an organization. A portfolio can be managed at either the functional or the organizational level. Unlike a project, which has a defined end goal or deliverable, a portfolio represents a more structural commitment to continuously optimizing the allocation, prioritization and scheduling of resources across many projects.
Project portfolio managers oversee the management of the project portfolio. They are responsible for getting a return on investment and meeting the goals and objectives of their organization. PPfM is fundamentally different from project and program management. Project and program management are about execution and delivery—doing projects right. In contrast, PPfM focuses on doing the right projects at the right time by selecting and managing projects as a portfolio of investments.
Project portfolio management (PPfM) enables organizations focus their limited resources on the best projects. The resulting collection of projects is a focused, coordinated, and executable portfolio of projects that will achieve the goals of the organization. The selected projects are turned over to program and project management, which is the engine that initiates and completes them successfully.
PPM combines three disciplines of organizational management:
1. Business management (maintaining that projects are in line with the overall portfolio strategy)
2. General management (understanding of risks; awareness of resources)
3. Project management (collecting, viewing, analyzing, prioritizing projects and ensuring that they meet or beat the overall goals of the company’s portfolio)
Tasks of Project Portfolio Management
Project portfolio management (PPM) is the analysis and optimization of the costs, resources, technologies and processes for all the projects within a portfolio.
Good portfolio management increases business value by aligning projects with an organization’s strategic direction, making the best use of limited resources, and building synergies between projects. However, applying PPM effectively requires proper techniques for selecting, prioritizing, and coordinating projects as a portfolio to deliver strategic results by increasing the value to an organization.
Finding a market fit is a vital part of any product. We need to figure out what to build and who needs it before actually building it. So, product development can be divided into two phases: discovery and delivery.
The goal of product discovery is the creation of a constant learning loop that provides the team with feedback to get a better read of market needs.
The Discovery process comprises two big sets of activities: exploration and validation.
- Exploration is what most people think of when they hear the “discovery” term. It denotes all activities concerning the research stage of a product, communication with stakeholders, exploring existing problems, solutions, and customer pains. This phase includes research, ideation, and evaluation activities.
- Validation is a set of activities intended to check each assumption made during the exploration process. Before anything is designed, the product should pass a solid test on whether the ideas can generate value for the end-user. This is done with the help of prototyping and testing using data and customer feedback. The activities are prototyping, testing, and learning.
The validation stage is similar to user acceptance testing conducted by the QA team, but takes place long before any user stories are written. It aims at creating prototypes and tests for each idea to make sure it has to be in a backlog. The results of testing either kill the ideas or decrease the level of uncertainty.
Both exploration and validation are iterative processes that precede the delivery stage of product development. So, product discovery can be seen as a scientific method to building software, as it suggests using experiments and tests as a tool. This gives us a more solid base to create an overall product strategy and roadmap the whole development.
Define and Initiate New projects to achieve strategic company goals
Evaluate, prioritize, Approve or reject Project proposals on the basis of opportunities, risks and strategic importance for the organization.
This process identifies the most important differentiators between projects, such as Return On Investment, risk, efficiency, or strategic alignment. Then it uses these differentiators to select the high-impact projects, clear out the clutter, and set priorities.
The process of calculating costs and benefits is also called calculating return on investment, or ROI. There are many ways to determine a project’s ROI, but the easiest way is to compare the upfront and ongoing costs to its benefits over time.
ROI = (G-C) / C
G represents the financial gains you expect from the project, and C represents the upfront and ongoing costs of your investment in the project. For example, imagine your project costs $6,000 upfront plus $25 per month for 12 months. This equals $300 per year, but you estimate that the project will bring in $10,000 in revenue over the course of that year. Using the formula above, you calculate the ROI as: ($10,000 – $6,300) ÷ $6,300 = 0.58 = 58%
Measuring project benefits also validates how well the portfolio governance team selected the right projects. Too often, the assumption is made that if we finish the project we will get the benefits that were identified at project initiation. It would be like making an investment without ever being notified on the financial return on that investment.
Control Current Projects in terms of risks, use of resources, increase in business value
Project portfolio management requires a balance of time, skills, budgets, risk mitigation and running the projects in the portfolio frugally and expediently without sacrificing quality. Managers do this through the use of five key processes.
- Change Control Management: Identifying and prioritizing change requests. These can be feature requests, operational constraints, regulatory, etc., based on demand, financial and operational constraints.
- Risk Management: Identifying risks in projects that make up the portfolio, and developing contingencies and risk response plans in order to mitigate uncertainty within the project portfolio.
- Financial Management: Managing financial resources related to the projects in the portfolio and demonstrating financial value of the portfolio in relation to organizational strategy, goals and objectives.
- Pipeline Management: Ensuring project proposals are in the pipeline and determining if they’re worth executing.
- Resource Management: Efficiently and effectively using an organization’s resources, from materials and equipment to people and technical skills.
Coordinate Ongoing Projects regarding resources, synergies, and conflicts
Enterprise or functional leaders often make project prioritization decisions without considering or understanding all the resource demands. If the demand for resource support is greater than the availability, projects won’t get done or will take much longer to complete. And forcing extended work hours for a long period will likely lead to frustration, mistakes, and turnover.
Having a reasonably accurate estimate of supply and demand provides data to make informed staffing decisions. Do you need to hire more resources? Should you shift specific resources from lower to higher priority initiatives? Would you benefit from enlisting temporary support for day-to-day work or projects? Or is it necessary to delay projects until resources are available?
It’s important to only start projects that can be properly resourced. If the data indicates there aren’t enough resources and the functional managers confirm it, there is a risk of failure.
Follow these three steps: develop the parameters for presenting resource demand, define supply capacity, and establish a review cycle.
Establish the type of resources required to support the project portfolio. Most organizations evaluate resource needs by department or role. Next, determine the parameters for how detailed project resource requests need to be. Requests may be as simple as an IT resource for about four hours a week throughout the project. In a more sophisticated model, requests will include resource estimates by project phase or milestone. Finally, determine the timeframe, or incremental breakdown, for resource demand requests.
Once demand parameters have been established, determine the support requirement. Limit the focus to the key project resources. Next, determine how precisely resource availability is calculated. The most basic method is by dedicating people—there are 12 individuals available to do project work. If people do project work on top of their day jobs, more detail is required.
The last step in designing a resource planning model is determining how often the data should be refreshed or updated. Dynamic, fast-moving project portfolios may require resourcing to be adjusted weekly. But for portfolios with longer projects, a quarterly review may be enough to monitor the status.
Benefits realization is one of the hardest portfolio management processes to get right. Strictly speaking, benefits realization occurs at the project and program level, since these are the vehicles for delivering business value and executing strategy, but benefits realization must fit within an overarching value framework which is at the portfolio level.
In short, benefits realization is about capturing the actual benefits (tangible and intangible) from a project (or program) following the completion of that work. Benefits realization often involves tracking the quantitative benefits of the project (e.g. financial benefits, operational benefits, etc.) so that senior leadership can answer the question “did we get the benefits from the project that we expected?” Projects have inherent value, and benefits realization is part of the accountability framework to increase the likelihood that organizations receive the intended benefits from completed projects.
Reduction of redundant and/or low-value projects; increasing the portfolio value
It requires completely different techniques and perspectives. In order to have the most profitable project portfolio, use PPM tools to rank and evaluate projects based on their ROI, scalability, estimated costs, expected timelines, and other variables that score how valuable a project is. Executives can then make an informed decision on which projects to select as a priority, valuable endeavors, which to put on the back burner or schedule for later, and which to entirely delete from the portfolio.
Shorter project completion time
The benefit of PPM technology for reducing completion time is that tasks can be scheduled and assigned to each individual team member, taking the guesswork of what they should be doing after they complete each task. Also, after PPM is implemented, the standardization of workflow and governance is used for the following project, saving on time spent on planning and preparing for the project
Collaborative project decision making
PPM provides advanced collaboration when each member is able to communicate seamlessly with each other team member. When all projects are consolidated into a single cloud-based PM software database, all parties of the project team have transparency into each other’s work. This allows executives and project managers to not only see the bigger picture but inspect whether there is any overlapping projects or projects that are low-value compared to others. Because of PPO’s insistence on clean data storage and availability, future decision-making is performed easily based on past project data, which can be accessed by all and shared in the decision-making process.
Scaling Agile and the Team-of-Teams
So our portfolio is made up of several programs, and a program can be thought of as an individual project or a product, or a web application, or a mobile application, that’s delivered to a customer
that’s built by a team-of-teams. It can also be a device, or a program can be a great security idea that is delivered to all of the products or all of the programs in the portfolio.
One area are the Scaled Agile Planning methods. Typically, we want all the teams in our programs almost always as a rule. We need them to plan together because these individual teams are not delivering the individual work product as a solution or to the customer. They’re delivering the final product to the customer. Therefore, they need to plan together, they need to be in alignment, and they need to be synchronized right from the start. So, there is a collaborative planning meeting, sometimes over several days. This one, this method here picks a two day planning session, also in person, if possible, virtual will also work.
And because teams are producing a single deliverable, number one, they need to be well versed in managing their own individual teamwork products. So that has to be up and running. However though, a big part of the solution is going to be developing that solution for product integration. This has to be designed, so we need to architect the solution for integration. It could be a hardware software integration. It could be integrating several layers of an application. It could be the server side, the database side, the UX side.
Customers are looking for this integrated solution delivered by that integrated scrum team. So we need to validate that full solution, which includes testing the full solution, that includes viewing and demoing the full solution.
So a DevOps team, it’s mostly always called DevOps. We need those solutions for continuous integration, continuous delivery and continuous testing. So DevOps is that combination of
development and operations together so we can continuously deliver and improve the product and grow the product. But we can also continuously integrate and continuously deliver an increment for evaluation and for testing, and obviously for continuous testing. And not only just testing new features but testing the features that were previously added to validate that they are still working because it is possible to introduce a defect to a feature that was previously working.
Shared services are also important because we have that team-of-teams, and there are going to be some common needs that they have. So to establish shared services teams such as, say, teams that are specialized in security that can certainly be shared amongst several teams and then also teams dedicated to the program.
Support organizations are also required to help roll out and establish the agile enterprise, such as
the Agile Program Management Office ( APMO), Agile Center of Excellence, and Agile Community of Practice. All of these together can establish that we not only have an Agile team, we not only have an Agile program, but we have an Agile enterprise.
A lot of teams focus on this V model or sometimes the shift left V Model where a feature will be written, and the features actually tested by behavioral-driven development. So a teammate diagram a feature and just validate that it is indeed something that the customer would want. So that’s a little bit different from the technical testing. It’s more of validating the actions of the
workflow, the same with the story level. So if we have either features or stories, it doesn’t matter, they both are validated using what’s called behavioral driven development
Agile Portfolio Management
Agile applies the “test, learn and adapt” principles and decentralized control concept on the portfolio level. Agile portfolio management means proceeding with iterations and increments even at the portfolio level.
For example, through rapid feedback loops, portfolio managers regularly review a particular set of projects and how they align with strategic initiatives. They also frequently engage in collaborative discussions with project managers or different team leaders to identify small experiments to evaluate projects or improve a given product/service delivery. This allows them to gather fast feedback and make data-driven decisions.
Moreover, instead of preparing highly detailed project roadmaps to apply for budgets, Agile portfolio management entails planning on multiple levels and cascading power downwards. In turn, financial resources are allocated towards experiments and value streams within the organization rather than separate projects.
Agile portfolio management
- Can be understood on three levels. The operational level (with sprints of 1-4 weeks), the tactical level (with iterations of 2-3 months) and the strategic level (with target definitions of 1-2 years). Management according to the Objectives and Key Results Principle (OKR), for example, also calls for such a phasing.
- Means that all levels proceed iteratively according to the PDCA/Deming (Plan – Do – Check – Act) cycle. Minimum Viable Products (MVP) are used for market evaluation.
- Requires continuous coordination of all goals at all levels
- Requires measurement of throughput across the entire company, e.g. using a company Kanban board with different flight levels
- Uses variables such as NPV Net Present Value (value that can be achieved by completing an item, considering delay costs and interest rate effects), CoD Cost of Delay (It’s based on pure economics and shows how much money you would lose if you delayed project delivery) or WSJF Weighted Shortest Job First (relative estimation of which item will quickly generate value and feedback) to prioritize backlogs
- Assumes that work comes to the teams and not vice versa
Scaled Agile Framework (SAFe)
The Scaled Agile Digital Framework (SAFe) is an industry-standard versatile framework for implementing Agile, DevOps, and Lean practices at scale. It’s also customizable and sustainable. SAFe follows ten agile principles to guide your strategy implementation in any business context. They will help you find solutions to unique, complex problems and ensure continuous improvement.
The SAFe portfolio aligns business strategy to portfolio execution through a collection of development value streams. Each value stream functions under a shared governance model. It provides one or more solutions for a business domain to fulfill its strategy.
The SAFe portfolio has three further core competencies:
- Lean portfolio management: Aligns business strategy to portfolio execution by applying lean-thinking approaches to plans and investment funding.
- Continuous learning culture: A set of practices and values that motivate individuals and enterprises. It is helping them to improve performance, knowledge, innovation, and competence.
- Organizational agility: Explains how disciplined agile teams and individuals with a lean mindset can create new strategies. They are always looking for ways to optimize their business processes and adapt quickly to new opportunities.
Lean Portfolio Management
Lean Portfolio Management (LPM) is a triad of terms used in Dean Leffingwell’s Scaled Agile Framework®, SAFe®. It is a new type of portfolio management characterized by a strategy for and financing of so-called value streams, agile, iterative working methods and lean management with a focus on continuous improvement.
Lean Portfolio Management differs from classical project portfolio management in these ways:
- Work is assigned to staff, not the other way around
- The desired results are defined, not the desired amount of results
- “Value” is clearly defined and constantly redefined and value creation is more important than cost controlling
- Decisions and plans are discussed retrospectively and at fixed intervals on the basis of new feedback
- Budget and financing is flexibly adjusted in short cycles, instead of being fixed annually
- Decisions are made decentrally in self-organizing teams
While traditional project portfolio management involves allocating resources to implement concrete plans that are expected to produce specific results, lean portfolio management focuses on assigning resources to a fixed team (the so-called team of teams) so that it can use its resources to implement initiatives. The resulting solutions are continuously evaluated for their value creation.
The complexity of managing projects within the Triple constraints has been increasing day by day. Various factors contributing include shortening product development cycles, changing customer expectations, exponentially increasing usage of the internet as well as more millennials in the project teams.
One of the ways to manage this complexity and the need of changing world, is using digitization. The digitization of Project Development phases will provide all synchronized database available to each stakeholders appropriately and same can be used for Managerial decision making. Building Analytics on this database, Risks affecting Project Performance Parameters – Time, Cost, and Quality can be effectively predicted and controlled.
In addition, status will be available for each project to individual project teams whereas Portfolio Dashboard will provide bigger picture for managerial decisions on Strategies & Organizational Priorities. Because of its real-time nature, it can be available across the world at the same time providing a common platform to network and common language to interact
PPM allows for organizations to minimize the risks of project delays, breaks in team communication, lack of team cohesion, lack of access to tools and data, muddied understanding of project and organizational goals, and mismanagement of company resources.
PPM tools allow for metrics that measure risk, and demonstrate that while a project may be honorable in merit, it needs to be put on hold and sent back to the drawing board, while a less risk-ridden project can be prioritized. Organizations that use PM software for PPM have a 60% higher project success rate than those that don’t use PPM, and are able to accomplish 30% more projects in general.
More often than not, projects fall victim to overspending due to poor cost estimation, which are swiftly mitigated by using PPM estimation tools. There are other factors that can cause project overspending, such as mismanaged resource allocation or miscommunicated project scheduling, but the most common spending monkey-wrench is estimation during project planning. PPM tools have estimation metric tools that factor in past project successes and the scope of the current project, helping make overspending on projects a headache of the past.
Analytics can be defined as the systematic quantitative analysis of data to obtain meaningful information for better decision making. It involves the collective use of various analytical methodologies such as statistical and operational research methodologies, Lean Six Sigma, and software programming. Though Analysis and Analytics terms sounds similar but they do have some differences.
Analytics: Analytics can be defined as a method to use the results of the analysis to better predict customer or stakeholder behaviors. Analytics look forward to project the future or predict an outcome based on past performance. Tools Predictive Analytics
Analysis: Analysis can be defined as the process of dissecting past gathered data into pieces so that the current (prevailing) situation can be understood. The analysis presents a historical view of the project performance.
Using analytics, project managers have the ability to go beyond simply capturing data and completing tasks as they are completed. Now, they can find out a multitude of information, including exactly how projects are performing, and whether or not they are in line with the overall objectives. Analytics provides project managers the ability to make strategic decisions and improve project success rate
Project Portfolio Management Software
Project portfolio management software is a tool that’s designed to centralize the management and maintenance of a portfolio. With the increasingly large amount of data now associated with a single project, let alone a portfolio, use of software has become a necessity for project managers.
Portfolio managers and project management offices (PMOs) use software to gather data, analyze information and use the results to better manage the portfolio and achieve the goals of their organization. Typical PPM software offerings are also used to optimize resources across the portfolio to better achieve the financial goals of the organization. Managers or PMOs use them to find complementary processes, methods and technologies that will help each project succeed and the portfolio flourish.
Desktop vs. Online Project Portfolio Management Software
The major differences are price, security and speed. For example, desktop software tends to cost more and require a license for each team member to use. This can add up.
Pros of Desktop PPM Software
Security on a desktop, even one linked to an office intranet, is likely better than many online services. Performance for a cloud-based software depends on your internet connection, and if your service goes out you’re out of luck. This, obviously, is not a concern for desktop apps.
Pros of Cloud-Based PPM Software
Online apps are monopolizing the project management sector, and for good reason; they excel at connectivity, collaboration and real-time data. So long as your team has an internet connection, they can use the tool—no matter where they are. This creates a platform where even distributed teams can work together anywhere and at any time. As teams update their status, you get live data that is more accurate and timely to help make effective decisions.