Portfolio Management Concepts

Portfolio Management

• Portfolio management is the process of identifying and selecting projects to be funded
• The process generates more ideas than can be applied
• Projects are selected at stage gates
• Selection criteria include:
  • Fit with business strategy (qualitative: low, medium, high)
  • Benefits (NPV, ROI, IRR, payback, etc)
  • Durability of competitive advantage (short, medium, long-term)
  • Competitive impact on technologies (base, key, pacing and embryonic technologies)
  • Time to completion
  • Investments (R&D costs, marketing, operational costs, etc.)
  • Market or market type (old or new market)
  • Project type (new products or enhancements, fundamental research, etc)
  • Risk profile
• Key personnel in portfolio management include:
  • Portfolio Sponsor - the senior manager responsible for the portfolio (representing the highest layers of an organisation)
  • Portfolio manager - person responsible for the organisation of the portfolio management (not for the decisions)
  • Portfolio analyst - provides the strategic overviews of the portfolio
• Portfolio selection methods include:
  • Ad hoc approaches
  • Operational necessity
  • Comparative approaches, ranking
  • Scoring models
  • Portfolio matrices and bubble diagrams
  • Mathematical models like optimization, Monte Carlo and real option models
• Portfolio management process should include both prioritizing and monitoring and control aspects
  • Maintain a list of all current projects in a project database
  • Prioritise and select projects through a transparent system maintained centrally
  • Plan and assign resources on all projects centrally
  • Report the status of all projects

Project Management

• A Project is a unique, temporary, and focused endeavor.
• It has a beginning and an end, and requires a group of people with a shared sense of urgency.
• It delivers a product, service, or result within defined boundaries of schedule, cost, and quality.
• Projects have phases in their life cycle.
• Examples of Projects:
  • Building a bridge
  • Reorganising a department
  • Moving house
  • 20 billion remote oil production unit, with pipelines, harbours and refineries
  • Emergency evacuation of a chemical plant
• Projects can be classified based on:
  • Technologically complex: Projects involving new technologies, multidisciplinary expertise, etc.
  • Ambiguous: Projects with no clear best solution.
  • Multi-actor (stakeholders): Projects with multiple stakeholders, not all of whom have aligned interests.
  • Dynamic: Projects with continuously changing requirements..

Assignments

• Assignments are graded as Pass or Fail
• Email any questions during the course to [email protected]
• Include CT3101 – group nr – topic in the subject field

What is a Project?

• Unique: No routines, uncertainty, only long-term feedback, novel, few learning opportunities
• Temporary: Has a beginning and an end, requires group of people, sense of urgency (deadline)
• Focused: Delivers a product, service or result, boundaries (schedule, cost & quality)

Phases in the Project Life Cycle

• Not described

Projects

• Building a bridge: Yes
• Reorganising a department: Yes
• The supply of new goods to a supermarket: No
• Moving house: Yes
• Flight KL 494 from Amsterdam to Paris: No
• 20 billion remote oil production unit: Yes/No
• Can you find this out about customer X, before we meet him next week?: Yes
• Emergency evacuation of a chemical plant: Yes/No

Project Focus

• Technologically complex: New technologies, multi-disciplinary
• Ambiguous: No clear (best) solution
• Multi-actor (stakeholders): Not necessarily similar interests
• Dynamic: Continuously changing

Project: Building a Tower

• Build the highest tower that can carry a small cup
• Material: 50 straws & 20 paperclips per team
• Discuss the project review report (lessons learned)
• Project lasts 25 minutes
• Make adhoc teams of ~10 students

Why and When Project Management?

• Required for development of project management expertise
• How to select projects for implementation
• How to handle uncertainty or risk
• “Strategic Project Management”

Portfolio Management Characteristics

• Includes all projects executed by a company
• Aims at achieving strategic business objectives
• An effectively managed collection of projects
• Quantifiable (resources, finances, time, etc.)

Why Manage Project Portfolios?

• Identifies Projects that meet strategic needs
• Supports multiple goals
• Directs organizational improvement
• Prioritises potential projects
• Limits on-going projects to a manageable level
• Identifies risk-intensive efforts
• Balances short, medium, long-term returns
• Prevents projects from getting in via “Backdoor”

Five Key Questions of Portfolio Management

• Are we investing in the right things?
• How well are we executing?
• Are we optimising our capacity?
• Can we absorb all the changes?
• Are we realising the promised benefits?

Portfolio Management and Resources

• About making decisions about allocation of resources or choosing between alternatives

Portfolio Management Conclusions

• Doing the right projects in the right way
• Strategic fit, value added and portfolio risks
• Numerous ways to select a portfolio
• Highly complex process due to many interactions with many layers of the organization

Stakeholders

• Anyone who can influence or is influenced by the project
• Internal and external to the organization
• Influence based on power, interest & support
• Actions are based on position (stakeholder management)
• Not to be confused with shareholders
• Discuss with your neighbour: stakeholders in a building project, ICT project and another type of project

Power Interest Grid

• Classification on two dimensions: Power & Interest

Stakeholder Map

• Classification of stakeholders into power, support, and interest categories

Managing Stakeholders

• Options based on position in stakeholder map

Stakeholder Involvement

• One of the reasons for disappointing project performance
• Involve stakeholders!

Stakeholder Involvement Framework (Maylor)

• Includes planning, communication, managing expectations, monitoring and evaluation

Assignment 1

• The central case is the Notre Dame Cathredal Restoration project.
• Tasks:
  • Identify 10 stakeholders from at least 5 different groups/categories.
  • Key success criteria for the main client in 2024.
  • Stakeholder evolution: goals, power positions, and attitudes at the beginning and end
  • Project management approach for stakeholders
  • How your approach would differ throughout the years.

Teamwork

• "A group of people who work together towards a joint goal"
• Joint approach
• Unique roles for team members
• Specific abilities required
• Performance criteria adopted
• Output of the team > Sum of individual outputs
• Exploiting differences in individual thought processes

Types of Teams

• Not described

Basic Drives for Team Work

• Security effect of cooperation
• Performance effect of cooperation
• Socialisation effect of cooperation
• Rewarding effect of cooperation
• Learning effect of cooperation

Teamwork Efficiency

• Not very efficient on its own
• Needed for solving multidisciplinary problems

Working with Professionals

• Project professionals tend to be perfectionists
• Project manager manages the process
• Involve the team in decision making
• Team empowerment

Team Empowerment

• Participative management
• Ability of team members to adjust tasks
• Responsibility & accountability for team members
• Synergistic solutions (1+1 = 3)
• Feedback individual performance & team performance
• Ideally, put the authority there where the knowledge is….