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Managing the portfolio to maximise the value delivered

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Title: Managing the portfolio to maximise the value delivered


1
Managing the portfolio to maximise the value
delivered
  • 22nd January 2009
  • Professor John Ward
  • Cranfield School of Management
  • j.m.ward_at_cranfield.ac.uk

2
A DEFINITION
  • Portfolio Management
  • Managing a diverse range of projects and
    programmes to achieve the maximum organisational
    value within resource and funding constraints.
  • ( International Centre for Programme Management
    (ICPM) 2008)

3
PROJECT PROGRAMME INVESTMENT PORTFOLIO
STRATEGIC
HIGH POTENTIAL
- projects/programmes to deliver changes
required to achieve the future business
strategy
- projects to evaluate options that
may be important in achieving future
success
  • projects to improve the
  • efficiency of the
  • organisation
  • projects/programmes to
  • deliver changes essential
  • to sustain or improve
  • current performance

KEY OPERATIONAL
SUPPORT
JW11
4
THE TRADITIONAL RISK v REWARD PORTFOLIO
Commission an RD evaluation
Priority investment
Strategic Projects/Programmes
High
High Potential Projects
Key Operational Projects /Programmes
Support Projects
Potential Benefits (Reward)
Proceed only if no higher value options exist
Low
Do not invest
Low
High
Degree of Change (Risk)
(adapted from Jeffrey and Leliveld)
5
ADVANTAGE DISADVANTAGE FROM THE PORTFOLIO
Gain Advantage
STRATEGIC
HIGH POTENTIAL
Creates and delivers the business advantage
Identifies the advantage and how to get it
In the short term - due to ineffective processes
In the longer term - due to increasing inefficienc
y
KEY OPERATIONAL
SUPPORT
Avoid Disadvantage
JW12
6
GENERIC SOURCES OF BENEFITFOR DIFFERENT
INVESTMENTS
HIGH POTENTIAL
STRATEGIC
Business Innovation and Change Business
Process /or Relationship Restructuring
Creating Opportunities for Business
Change (Proving the Benefits of Applications)
Business Effectiveness Process
Rationalisation and Integration
Business Efficiency Process/Task Elimination and
Cost Reduction
KEY OPERATIONAL
SUPPORT
JW56
7
INVESTMENT JUSTIFICATION
HIGH POTENTIAL
STRATEGIC
Enable the achievement of the business
strategy via explicit links to business
objectives
R D project to explore potential value and
cost - fund from R D budget


Risk money.
Disadvantage / Risk if it is not done (Critical
Failure Factors)
Net cost reduction through quantified savings

/ or quantified performance improvement

SUPPORT
KEY OPERATIONAL
extent to which benefits can be justified
financially
JW57
8
ANALYSING RESOURCE USEON THE PORTFOLIO

HIGH POTENTIAL
STRATEGIC
K
B
C
G
D
L
I
M
E
H
A
J
F
SUPPORT
KEY OPERATIONAL
Size of circle represents use of resources on
projects A - M. Resources could be funds or
people.
JW53
9
AN EXAMPLE PORTFOLIO ANALYSIS
STRATEGIC
HIGH POTENTIAL
HIGH
CRM Programme
Analytics
Product Development Programme
Sales Forecasts
Service Centres
IMPORTANCE TO FUTURE BUSINESS
Activity Costing
Purchasing
Mobile Sales Force
KEY OPERATIONAL
SUPPORT
LOW
HIGH
LOW
IMPORTANCE TO CURRENT BUSINESS
Key Italics projects and programmes underway
normal planned projects
10
Business Drivers
Project A
Project C
Cost Reduction
Project D
CRMProgramme
Project B
Sales Growth
3. Mobile Sales Force
4. Activity Costing
Customer Service
5. Purchasing
2. Service Centres
Safety Legislation
6. Analytics
1. Sales Forecasting
Staff Retention
Product Development Programme
Project B
New Product Development
Project C
Project A
Year 1
Year 2
11
HOW SUCCESSFUL ARE CURRENT PORTFOLIO MANAGEMENT
APPROACHES?
  • During 2006-8 we have surveyed over 200 large
    organisations worldwide concerning current
    practices and success in portfolio management and
    realising benefits from IS/IT and associated
    projects.
  • Of the organisations surveyed
  • 43 said they achieved the expected benefits for
    at least 50 of their investments.
  • 42 said senior management were satisfied with
    the value delivered from those investments
  • However 73 said there was significant scope for
    improvement in selecting the best
    projects/programmes and realising the benefits
    from them
  • From the survey we were able to differentiate the
    reasons why some organisations were more
    successful than others including their
    portfolio management practices.

12
State of the art Portfolio Management - 1
  • 90 of organisations in the survey do some form
    of Portfolio Management but 60 are not
    satisfied with how well they do it
  • Why they do it - Portfolio Management motives
  • Strategic alignment of projects 90 (59
    satisfied)
  • Preventing resource over-commitment 88 (58
    satisfied)
  • Priority setting 81 (58 satisfied)
  • Value maximisation 70 (69 not satisfied)
  • Balancing risk 38 (51 satisfied)

13
State of the art Portfolio Management - 2
  • Portfolio Management considerations most base
    decisions on desirability or reward but not
    feasibility or risk
  • Desirability ROI, Strategic or Tactical
    alignment (75)
  • Feasibility factors included by
  • Investment size (58),
  • Risks (40),
  • Resources (shared resources, skills) (40),
  • Project interdependencies (44)
  • The more successful organisations take
    feasibility factors into account more often than
    the less successful, which tend to only consider
    desirability.

14
SO WE STILL HAVE A LOT MORE TO LEARN
  • In the new economic climate effective portfolio
    management has become more critical
    uncertainties are greater and getting it wrong is
    less affordable. Therefore the need to improve
    portfolio management is a priority for the
    majority of organisations.
  • We believe further research is needed to
    understand which portfolio management approaches
    are most successful and why they work well in
    particular organisational contexts.
  • Hence we are starting a further phase of
    collaborative research in February 2009 and hope
    to publish the results in the Autumn. We would be
    pleased to include your organisation in that
    research Project Portfolio Management in
    Turbulent Times
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