1. Project Management 2. Portfolio Management

2. Week 2

3. Project selection and portfolio management

4. Project selection and portfolio management

5. Project selection and portfolio management
What are the inputs that cause the project process to begin?

6. Unit Objectives Implement IT project planning and selection techniques
Appreciate the importance of project portfolio management

7. Identifying IT Projects Project Proposals Project Selection Methods
Strategic Planning
Identifying IT Projects
Project Proposals
Project Selection Methods
Applying a Selection Model
Project Selection
Project Success

8. Identifying IT Projects Project Proposals Project Selection Methods
Strategic Planning
Identifying IT Projects
Project Proposals
Project Selection Methods
Applying a Selection Model
Project Selection
Project Success

9. But first

10. Assignment 1

11. Assignment 1
“Write a project plan”

12. Assignment 1
“Write a project plan”
Topic: Week 3

14. Back to the programme…

15. Strategic Planning

16. Strategic Planning What is strategy?
How do projects relate to strategy?
Changes to organization’s mission and strategy
Project managers must respond to changes with appropriate decisions about future projects and adjustments to current projects
Project managers who understand their organization’s strategy can become effective advocates of projects aligned with the firm’s mission
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
SWOT analysis
Strengths, Weaknesses, Opportunities, and Threats
Strategic planning process should
Review and define the organizational mission
Set goals and objectives (see Doran’s SMART)
Analyse and formulate strategies to reach objectives
Implement strategies through projects

17. Efficiency and Effectiveness
Organisation Mission
Strategy 1
Strategy 2
Strategy 3
Strategy 4
Money
Customers
Efficiency and Effectiveness
Adaptability

18. Intensity of competition
5 Forces analysis
Threat of New Entrants
Intensity of competition
Supplier power
Customer power
Substitutes
Michael Porter’s ‘5 Forces’ – 1980’s

19. business model template
INFRASTRUCTURE
OFFER
CUSTOMER
PARTNER
NETWORK
CUSTOMER
RELATIONSHIP
CORE
CAPABILITIES
VALUE
PROPOSITION
TARGET
CUSTOMER
VALUE
CONFIGURATION
DISTRIBUTION
CHANNEL
COST
STRUCTURE
REVENUE
STREAMS
FINANCE
Osterwalder’s Business Model framework 2006

20. Balanced Scorecard Financial Process efficiency Scorecard
Customer satisfaction
Learning and innovation
Kaplan & Norton (1994?) HBR

21. Strategy Map Kaplan & Norton (1998?) HBR

22. Efficiency and Effectiveness
Organisation Mission
Strategy 1
Strategy 2
Strategy 3
Strategy 4
Money
Customers
Efficiency and Effectiveness
Adaptability

23. 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
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

24. Align Strategies to goals
Review Mission
Set (SMART) Goals
Develop Strategies
Align Strategies to goals
Strategic planning process should
Review and define the organizational mission
Set goals and objectives (see Doran’s SMART)
Analyse and formulate strategies to reach objectives
Implement strategies through projects
Implement Strategies through projects

25. Align Strategies to goals
Review Mission
Set (SMART) Goals
Develop Strategies
Align Strategies to goals
Strategic planning process should
Review and define the organizational mission
Set goals and objectives (see Doran’s SMART)
Analyse and formulate strategies to reach objectives
Implement strategies through projects
Implement Strategies through projects

26. SWOT Analysis SWOT analysis
Strengths, Weaknesses, Opportunities, and Threats
SWOT Analysis

27. SWOT = SITUATIONAL ANALYSIS
Where are we now?
Strengths Weaknesses Opportunities Threats (SWOT)

28. S W O T
SWOT analysis
Strengths, Weaknesses, Opportunities, and Threats

29. S W O T Positive Negative SWOT analysis
Strengths, Weaknesses, Opportunities, and Threats

30. S W O T Internal External SWOT analysis
Strengths, Weaknesses, Opportunities, and Threats

31. S W O T Positive Negative Internal External SWOT analysis
Strengths, Weaknesses, Opportunities, and Threats

32. S W O T Positive Negative Internal External SWOT analysis
Strengths, Weaknesses, Opportunities, and Threats

33. Align Strategies to goals
Review Mission
Set (SMART) Goals
Develop Strategies
Align Strategies to goals
Strategic planning process should
Review and define the organizational mission
Set goals and objectives (see Doran’s SMART)
Analyse and formulate strategies to reach objectives
Implement strategies through projects
Implement Strategies through projects

34. S Specific M Measurable A Achievable R Relevant T Time-bound
Doran’s characteristics of objectives
S Specific Be specific in targeting an objective
M Measurable Establish a measurable indicator(s) of progress
A Assignable Make the objective assignable to one person for completion
R Realistic State what can realistically be done with available resources
T Time related

35. Letter
Major Term
Minor Terms S
Specific
Significant[3], Stretching[3], Simple M
Measurable
Meaningful[3], Motivational[3], Manageable A
Achievable
Agreed, Attainable[6], Assignable[2], Appropriate, Actionable, Action-oriented[3] R
Relevant
Realistic[2], Results/Results-focused/Results-oriented[6], Resourced[7], Rewarding[3] T
Time-bound
Time 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]

36. Examples of “not smart” goals?

37. Align Strategies to goals
Review Mission
Set (SMART) Goals
Develop Strategies
Align Strategies to goals
Strategic planning process should
Review and define the organizational mission
Set goals and objectives (see Doran’s SMART)
Analyse and formulate strategies to reach objectives
Implement strategies through projects
Implement Strategies through projects

39. Align Strategies to goals
Review Mission
Set (SMART) Goals
Develop Strategies
Align Strategies to goals
Strategic planning process should
Review and define the organizational mission
Set goals and objectives (see Doran’s SMART)
Analyse and formulate strategies to reach objectives
Implement strategies through projects
Implement Strategies through projects

40. Organisation Mission Strategy 1 Strategy 2 Strategy 3 Strategy 4 Money
Customers
Efficiency and Effectiveness
Adaptability

41. Align Strategies to goals
Review Mission
Set (SMART) Goals
Develop Strategies
Align Strategies to goals
Strategic planning process should
Review and define the organizational mission
Set goals and objectives (see Doran’s SMART)
Analyse and formulate strategies to reach objectives
Implement strategies through projects
Implement Strategies through projects

42. Organisation Mission Strategy 1 Strategy 2 Strategy 3 Strategy 4
projects
Money
Customers
projects
projects
Efficiency and Effectiveness
projects
Adaptability

43. What are the goals of the projects?

44. Figure 2.1 Strategic Management Process (Gray & Larson, 2006, p25)

45. projects

46. projects
projects
projects
projects

47. projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects

48. PPPM OPM3 Project Programme Portfolio Management
The ‘O’ is for
Organisational
OPM3
Many organizations support an emerging business strategy of project portfolio management
Organizations group and manage projects as a portfolio of investments that contribute to organizations success
Managing the Portfolio
Senior management input
Priority team responsibilities

49. Portfolio
Programme
OPM3
Projects

50. Portfolio
Programme
Programme
Projects
Project
Project
Project
Projects
Project
Project
Project
Project
Projects
Projects

51. One Portfolio or Several?
Approaches to
project
portfolio management
One Portfolio or Several?
Categories
Sample Approaches for Creating a Project Portfolio
One approach is adopting a large portfolio for the entire organization. Sections of the portfolio are broken down into groups
IT projects are broken down into three categories:
Venture: Projects that help transform the business
Growth: Projects that help increase revenues
Core: Projects that help run the business

52. One Portfolio or Several?
Sample Approaches for Creating a Project Portfolio
One approach is adopting a large portfolio for the entire organization. Sections of the portfolio are broken down into groups
IT projects are broken down into three categories:
Venture: Projects that help transform the business
Growth: Projects that help increase revenues
Core: Projects that help run the business

53. Venture: Projects that transform the business
Categories
Growth: Projects that grow revenue or market share
Sample Approaches for Creating a Project Portfolio
One approach is adopting a large portfolio for the entire organization. Sections of the portfolio are broken down into groups
IT projects are broken down into three categories:
Venture: Projects that help transform the business
Growth: Projects that help increase revenues
Core: Projects that help run the business
Core: Projects that help run the business

54. What are the benefits of Project Portfolio Management?

55. Benefits of Project Portfolio Management
Builds discipline into project selection process
Links project selection to strategic metrics
Prioritizes project proposals across a common set of criteria, rather than on politics or emotion
Allocates resources to projects that align with strategic direction
Balances risk across all projects
Benefits of Project Portfolio Management

56. Problems with Project Portfolio Management

57. Implementation Gap
lack of understanding and consensus on strategy among top management and middle-level (functional) managers who independently implement the strategy
Different views from senior management on what (and how) should be done

58. Competition (& effective utilisation) for resources
Resource Conflicts and Multitasking
Multi-project environment creates interdependency relationships of shared resources which results in the starting, stopping, and restarting projects
Competition (& effective utilisation) for resources

59. 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

60. Figure 2.8 Sample project portfolio approach (Schwalbe, 2005, p51)

61. Figure 1.5 Project management compared to project portfolio management (Schwalbe, 2005, p15)

62. Organisation Mission Strategy 1 Strategy 2 Strategy 3 Strategy 4
projects
programme
projects
programme
projects
Money
Customers
projects
projects
projects
projects
projects
Programme
Efficiency and Effectiveness
projects
programme
projects
projects
projects
Adaptability

63. Organisation Mission Strategy 1 Strategy 2 Strategy 3 Strategy 4
Short term
Mid term
Organisation Mission
Strategy 1
Strategy 2
Long term
Strategy 3
Strategy 4
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects

64. Changes to organization’s mission and strategy
Project managers must respond to changes with appropriate decisions about future projects and adjustments to current projects
Project managers who understand their organization’s strategy can become effective advocates of projects aligned with the firm’s mission

65. Organisation Mission Strategy 1 Strategy 2 Strategy 3 Strategy 4
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects
projects

66. Identifying IT Projects

67. 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)

68. Figure 2.1 Pyramid for the Project Selection Process (Schwalbe, 2005, p35)

69. Project Proposals

70. Solicitation of Project Proposals
Within the organization
Request for proposal (RFP) from external sources (contractors and vendors)
Ranking Proposals
Discipline
Accountability
Responsibility
Constraints
Reduced flexibility
Loss of power

71. Most business units have a strategic plan
Solicitation of Project Proposals
Within the organization
Request for proposal (RFP) from external sources (contractors and vendors)
Ranking Proposals
Discipline
Accountability
Responsibility
Constraints
Reduced flexibility
Loss of power

72. 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)
Ranking Proposals
Discipline
Accountability
Responsibility
Constraints
Reduced flexibility
Loss of power

73. Solicitation of Project Proposals
Within the organization
Request for proposal (RFP) from external sources (contractors and vendors)

74. When ranking proposals, consider;
Discipline
Accountability
Responsibility
Constraints
Reduced flexibility
Loss of power

75. Project Initiation forms
Solicitation of Project Proposals
Within the organization
Request for proposal (RFP) from external sources (contractors and vendors)
Ranking Proposals
Discipline
Accountability
Responsibility
Constraints
Reduced flexibility
Loss of power
Figure 2.4A Major Project Proposal (Gray & Larson, 2006, p38)
Figure 2.4B Risk Analysis (Gray & Larson, 2006, p39)

76. Project Initiation forms
Solicitation of Project Proposals
Within the organization
Request for proposal (RFP) from external sources (contractors and vendors)
Ranking Proposals
Discipline
Accountability
Responsibility
Constraints
Reduced flexibility
Loss of power
Figure 2.4A Major Project Proposal (Gray & Larson, 2006, p38)
Figure 2.4B Risk Analysis (Gray & Larson, 2006, p39)

77. Project Selection Methods

78. Not all project proposals make it to initiation

79. Why? Every project idea isn’t progressed.
There are a variety of methods to assess whether a project is a good idea.
Strategic alignment is one of them
But there are several ways to address strategic plans, so a more detailed assessment process is needed.

80. Time
Money
Focus

81. Methods for selecting projects include:
Focusing on broad organizational needs
Categorizing IT projects
Financial analysis
Using a weighted scoring model
balanced scorecard
Strategy mapping
Methods for selecting projects include:
Focusing on broad organizational needs
Categorizing IT projects
Financial analysis
Using a weighted scoring model
Implementing a balanced scorecard
Focusing on Broad Organizational Needs
It is often difficult to provide strong justification for many IT projects, but everyone agrees they have a high value
Three important criteria for projects:
need for the project
funds available for the project
will to make the project succeed
Categorizing IT Projects
One categorization assesses if the project provides a response to:
a problem
an opportunity
a directive
Another categorization is based on the time and date of expected completion
Another categorization is the overall priority of the project

82. 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

83. 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

84. Financial Analysis $$$ Net Present Value Payback model
Return on Investment
(there are more)

85. Financial Analysis $$$ Net Present Value Payback model
Return on Investment
(there are more)

86. Measures the time it will take to recover the project investment
Payback model
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
Figure 4.1 Charting the Payback Period (Schwalbe, 2006, p129)

87. (total discounted benefits – total discounted costs)
Return on Investment
(total discounted benefits – total discounted costs)
Return on Investment (ROI)
Calculated by subtracting project costs from the benefits and then dividing by the costs
Formula:
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
discounted costs

88. Non-financial Analysis
Weighted scoring model
$$$
Balanced Scorecard

89. 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
$$$
$$$

90. $$$ $$$ 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 for more information
$$$
$$$

91. Applying a selection model

92. 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

93. Project Selection

94. Clearly compares alternatives
The Business Case
Impacts
Costs & Benefits
Clearly compares alternatives
Objective
Systematic
Successful organizations initiate projects to meet business needs, and a common business need is to spend money wisely
A business case is a document that provides justification for investment
It is a good idea to have one of the company’s financial managers review the information for accuracy – not formally part of the project management plan
Attributes of a Good Business Case
Details all possible impacts, costs, benefits
Clearly compares alternatives
Objectively includes all pertinent information
Systematic in terms of summarizing findings

95. The Business Case Elevator pitches?
Successful organizations initiate projects to meet business needs, and a common business need is to spend money wisely
A business case is a document that provides justification for investment
It is a good idea to have one of the company’s financial managers review the information for accuracy – not formally part of the project management plan
Attributes of a Good Business Case
Details all possible impacts, costs, benefits
Clearly compares alternatives
Objectively includes all pertinent information
Systematic in terms of summarizing findings

96. Example business case
Table 3.4 Sample business case (Schwalbe, 2005, pp74-76)

97. Contents of a Business Case
Introduction/Background
Business Objective
Current Situation and Problem/Opportunity Statement
Critical Assumptions and Constraints
Analysis of Options and Recommendation
Preliminary Project Requirements
Budget Estimate and Financial Analysis
Schedule Estimate
Potential Risks
Exhibits

98. Figure 2.3 The Process for Developing a Business Case (Marchewka, 2003, p34)

99. Project Success

100. By the way,
Things are getting better

101. Typically 189% over budget
1994
31% Critical Failures
53%
Challenged
16%
Success
Not even completed
Typically 189% over budget
OTOBOS
Source: CHAOS Report 1995 by the Standish Group
Access it here:
Since 1995 several subsequent versions have been published. Project performance has improved… incrementally.. Over the subsequent decade.
There is still significant improvement opportunities for the IT projects industry.
What do you think is going wrong at your workplace? What can be done to improve things?
The 1995 Standish (CHAOS) report found the following factors common to successful projects1.
User Involvement 15.9%
2. Executive Management Support 13.9%
3. Clear Statement of Requirements 13.0%
4. Proper Planning 9.6%
5. Realistic Expectations 8.2%
6. Smaller Project Milestones 7.7%
7. Competent Staff 7.2%
8. Ownership 5.3%
9. Clear Vision & Objectives 2.9%
10. Hard-Working, Focused Staff 2.4%
Other 13.9%
Source: CHAOS Report 1995 by the Standish Group
Access it here:

102. 2002 51% 15% Critical Failures 34% Still way over budget
Challenged
34%
Success
Not even completed
Still way over budget
OTOBOS
Improved Project Performance
Standish Group’s CHAOS studies show improvements in IT projects in the past decade
Source: CHAOS Report 2002 by the Standish Group
Access it here:

103. 1994 2002 31% Critical Failures 53% 16% 51% 15% Critical Failures 34%
Challenged
16%
Success
2002
15% Critical Failures
51%
Challenged
34%
Success

104. Wasted money as a share of total project spend
Billions of dollars
Wasted money as a share of total project spend
1994
2005

105. What happened?

106. “The reasons for the increase in successful projects vary
“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)

107. “The reasons for the increase in successful projects vary
“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
Better tools
Better training

108. Better Selection
Portfolio Mgt
Strategic Alignment
More recently

109. Things you should have (if you want to succeed)
Executive support
User involvement
Experienced project manager
Clear business objectives
Minimized scope
Standard software infrastructure
Firm basic requirements
Formal methodology
Reliable estimates
Other criteria, such as small milestones, proper planning, competent staff, and ownership

110. incremental
But, change has been…

111. There is still plenty of room for improvement.

112. What do you think is still going wrong?

113. Title page pic care of jpellqen & CC @ Flickr
BetterProjects.net
Title page pic care of jpellqen & Flickr