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Premium member Presentation Transcript Project Portfolio Management Tools and Techniques: Project Portfolio Management Tools and Techniques February 2003 Christian Rosenstock, PMP BNY Clearing Services LLCAgenda: February 2003 Project Portfolio Management 2 Agenda Context and Portfolio Management Top-Down Bottom-Up Blended Categories of Metrics Value / Cost Performance Strategic Alignment Continuous Improvement Examples and ApplicationContext and Portfolio Management: February 2003 Project Portfolio Management 3 Context and Portfolio Management Portfolio Management must be designed to fit the context, the environment Choose metrics that are meaningful Product vs. Operations Strategy Consider who is making the decisions Know the disposition of the decision makers Use what will work (even if it is not the best)Context and Portfolio Management: February 2003 Project Portfolio Management 4 Context and Portfolio Management Three styles of Portfolio Management * Top-Down Start with Strategic Objectives / Budgets Bottom-Up Start with Ideas, From Anywhere Blended * Source: Cooper, et al. Portfolio Management for New Products . 2001Context and Portfolio Management: February 2003 Project Portfolio Management 5 Context and Portfolio Management Top-Down Bottom-Up BlendedCategories of Metrics: February 2003 Project Portfolio Management 6 Categories of Metrics Value / Cost Performance Spending and returns across portfolio * Strategic Alignment Scoring against stated strategic objectives Continuous Improvement Because Portfolio Management works at all phases of the life cycle ** * Source: Popper, Charles. “A Holistic Framework for IT Governance.” 2000 ** Source: Ausura, William. “Pragmatic Portfolio Management.” 2002Categories of Metrics: February 2003 Project Portfolio Management 7 Categories of Metrics Top Performers across multiple industries use Strategy analytics the most Poor Performers across multiple industries use Financial analytics the most Top Performers use a good blend of portfolio analytics 78% of companies surveyed use Financial * Source: Cooper, et al. Portfolio Management for New Products . 2001Categories of Metrics: February 2003 Project Portfolio Management 8 Categories of Metrics Value / Cost Performance Not always about ROI Points out where the company is spending Indicates returns that can be expected Can be used to compare how spending compares with company history or competitorsCategories of Metrics: February 2003 Project Portfolio Management 9 Categories of Metrics Strategic Alignment Measures strategic fit of projects and portfolios with stated strategic objectives Requires subjective scoring Scores should be assigned by governing committee that makes go/kill decisions* * Source: Cooper, et al. Portfolio Management for New Products . 2001Categories of Metrics: February 2003 Project Portfolio Management 10 Categories of Metrics Continuous Improvement Identifies level of “operational excellence” in the management of the portfolio* Less focused on what projects to choose More focused on managing the portfolio and project processes * Source: Popper, Charles. “A Holistic Framework for IT Governance.” 2000Examples of Portfolio Management Tools: February 2003 Project Portfolio Management 11 Examples of Portfolio Management Tools Objectives Matrix Score each project against stated strategy List Strategic Objectives in left column and Projects in top rowExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 12 Examples of Portfolio Management Tools Objectives Matrix Row scores reflect the emphasis placed on each strategic objective for proposed portfolio Column scores reflect how much a project contributes to the strategy Weighting can be applied to objectives to make project scores more accurate, but it will distort strategic scoringExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 13 Examples of Portfolio Management Tools External Impact Matrix Makes use of bubble charts Advantage: increased data can be shown Disadvantage: are you ready for it? Shows customer perception, as well as competitive insulation Works best in Bottom-Up environments where lots of ideas need to be comparedExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 14 Examples of Portfolio Management ToolsExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 15 Examples of Portfolio Management ToolsExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 16 Examples of Portfolio Management Tools Estimated Commercial Value (ECV) A financial metric for projects that have a commercial / marketable deliverable Improves upon NPV Incorporates Probability of Commercial Success and of Technical Success Also includes cost of launch and remaining development costs Not used for non-market projectsExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 17 Examples of Portfolio Management Tools Estimated Commercial Value (ECV) ECV=[(NPV*Pcs-C)*Pts]-D NPV=Net Present Value Pcs=Probability of Commercial Success C=Cost of Launch Pts=Probability of Technical Success D=Remaining Development CostExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 18 Examples of Portfolio Management Tools Strategic Bucket Budgeting A secondary layer of portfolio decision making (usually behind a layer that prioritizes projects in each bucket) Helps determine what projects make the cut Works best in companies that organize and budget by Business Unit or product line and use Top-Down planningExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 19 Examples of Portfolio Management Tools Strategic Bucket BudgetingExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 20 Examples of Portfolio Management Tools Effort by Strategic Category A simple tool, easy to use Display staff allocation to each strategic bucket Use a pie chart Technique used by AlliedSignal-Honeywell and others* Can be done in Excel so it is dynamic and useful during planning sessions * Source: Cooper, et al. Portfolio Management for New Products . 2001Examples of Portfolio Management Tools: February 2003 Project Portfolio Management 21 Examples of Portfolio Management ToolsExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 22 Examples of Portfolio Management Tools Internal vs. External Impact Matrix Excellent comparison of internal and external focus Works well in blended environments where the external ideas are Top-Down and the internal are Bottom-UpExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 23 Examples of Portfolio Management ToolsExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 24 Examples of Portfolio Management Tools Mortality Rate Analysis A tool for monitoring continuous improvement of decision making Indicates healthy funneling Can be a starting point to “throw away” cost analysisExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 25 Examples of Portfolio Management Tools Mortality Rate AnalysisExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 26 Examples of Portfolio Management Tools Mortality Rate AnalysisExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 27 Examples of Portfolio Management Tools Other Analytics Portfolio Value vs. Cost Capital Expenditure vs. Non-Capital Effort Hours and ROI Strategic Impact Matrix Risk vs. Return Chart Launch Pipeline Calendar Market by Technology Newness Risk vs. Innovation Minimum Requirement Checklist And more . . .Wrap Up: February 2003 Project Portfolio Management 28 Wrap Up What is most important is that you do it Pick the analytics that fit your business and company Find what works / is accepted, and use it consistentlyThe End: February 2003 Project Portfolio Management 29 The End Questions? 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Premium member Presentation Transcript Project Portfolio Management Tools and Techniques: Project Portfolio Management Tools and Techniques February 2003 Christian Rosenstock, PMP BNY Clearing Services LLCAgenda: February 2003 Project Portfolio Management 2 Agenda Context and Portfolio Management Top-Down Bottom-Up Blended Categories of Metrics Value / Cost Performance Strategic Alignment Continuous Improvement Examples and ApplicationContext and Portfolio Management: February 2003 Project Portfolio Management 3 Context and Portfolio Management Portfolio Management must be designed to fit the context, the environment Choose metrics that are meaningful Product vs. Operations Strategy Consider who is making the decisions Know the disposition of the decision makers Use what will work (even if it is not the best)Context and Portfolio Management: February 2003 Project Portfolio Management 4 Context and Portfolio Management Three styles of Portfolio Management * Top-Down Start with Strategic Objectives / Budgets Bottom-Up Start with Ideas, From Anywhere Blended * Source: Cooper, et al. Portfolio Management for New Products . 2001Context and Portfolio Management: February 2003 Project Portfolio Management 5 Context and Portfolio Management Top-Down Bottom-Up BlendedCategories of Metrics: February 2003 Project Portfolio Management 6 Categories of Metrics Value / Cost Performance Spending and returns across portfolio * Strategic Alignment Scoring against stated strategic objectives Continuous Improvement Because Portfolio Management works at all phases of the life cycle ** * Source: Popper, Charles. “A Holistic Framework for IT Governance.” 2000 ** Source: Ausura, William. “Pragmatic Portfolio Management.” 2002Categories of Metrics: February 2003 Project Portfolio Management 7 Categories of Metrics Top Performers across multiple industries use Strategy analytics the most Poor Performers across multiple industries use Financial analytics the most Top Performers use a good blend of portfolio analytics 78% of companies surveyed use Financial * Source: Cooper, et al. Portfolio Management for New Products . 2001Categories of Metrics: February 2003 Project Portfolio Management 8 Categories of Metrics Value / Cost Performance Not always about ROI Points out where the company is spending Indicates returns that can be expected Can be used to compare how spending compares with company history or competitorsCategories of Metrics: February 2003 Project Portfolio Management 9 Categories of Metrics Strategic Alignment Measures strategic fit of projects and portfolios with stated strategic objectives Requires subjective scoring Scores should be assigned by governing committee that makes go/kill decisions* * Source: Cooper, et al. Portfolio Management for New Products . 2001Categories of Metrics: February 2003 Project Portfolio Management 10 Categories of Metrics Continuous Improvement Identifies level of “operational excellence” in the management of the portfolio* Less focused on what projects to choose More focused on managing the portfolio and project processes * Source: Popper, Charles. “A Holistic Framework for IT Governance.” 2000Examples of Portfolio Management Tools: February 2003 Project Portfolio Management 11 Examples of Portfolio Management Tools Objectives Matrix Score each project against stated strategy List Strategic Objectives in left column and Projects in top rowExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 12 Examples of Portfolio Management Tools Objectives Matrix Row scores reflect the emphasis placed on each strategic objective for proposed portfolio Column scores reflect how much a project contributes to the strategy Weighting can be applied to objectives to make project scores more accurate, but it will distort strategic scoringExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 13 Examples of Portfolio Management Tools External Impact Matrix Makes use of bubble charts Advantage: increased data can be shown Disadvantage: are you ready for it? Shows customer perception, as well as competitive insulation Works best in Bottom-Up environments where lots of ideas need to be comparedExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 14 Examples of Portfolio Management ToolsExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 15 Examples of Portfolio Management ToolsExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 16 Examples of Portfolio Management Tools Estimated Commercial Value (ECV) A financial metric for projects that have a commercial / marketable deliverable Improves upon NPV Incorporates Probability of Commercial Success and of Technical Success Also includes cost of launch and remaining development costs Not used for non-market projectsExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 17 Examples of Portfolio Management Tools Estimated Commercial Value (ECV) ECV=[(NPV*Pcs-C)*Pts]-D NPV=Net Present Value Pcs=Probability of Commercial Success C=Cost of Launch Pts=Probability of Technical Success D=Remaining Development CostExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 18 Examples of Portfolio Management Tools Strategic Bucket Budgeting A secondary layer of portfolio decision making (usually behind a layer that prioritizes projects in each bucket) Helps determine what projects make the cut Works best in companies that organize and budget by Business Unit or product line and use Top-Down planningExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 19 Examples of Portfolio Management Tools Strategic Bucket BudgetingExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 20 Examples of Portfolio Management Tools Effort by Strategic Category A simple tool, easy to use Display staff allocation to each strategic bucket Use a pie chart Technique used by AlliedSignal-Honeywell and others* Can be done in Excel so it is dynamic and useful during planning sessions * Source: Cooper, et al. Portfolio Management for New Products . 2001Examples of Portfolio Management Tools: February 2003 Project Portfolio Management 21 Examples of Portfolio Management ToolsExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 22 Examples of Portfolio Management Tools Internal vs. External Impact Matrix Excellent comparison of internal and external focus Works well in blended environments where the external ideas are Top-Down and the internal are Bottom-UpExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 23 Examples of Portfolio Management ToolsExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 24 Examples of Portfolio Management Tools Mortality Rate Analysis A tool for monitoring continuous improvement of decision making Indicates healthy funneling Can be a starting point to “throw away” cost analysisExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 25 Examples of Portfolio Management Tools Mortality Rate AnalysisExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 26 Examples of Portfolio Management Tools Mortality Rate AnalysisExamples of Portfolio Management Tools: February 2003 Project Portfolio Management 27 Examples of Portfolio Management Tools Other Analytics Portfolio Value vs. Cost Capital Expenditure vs. Non-Capital Effort Hours and ROI Strategic Impact Matrix Risk vs. Return Chart Launch Pipeline Calendar Market by Technology Newness Risk vs. Innovation Minimum Requirement Checklist And more . . .Wrap Up: February 2003 Project Portfolio Management 28 Wrap Up What is most important is that you do it Pick the analytics that fit your business and company Find what works / is accepted, and use it consistentlyThe End: February 2003 Project Portfolio Management 29 The End Questions?