1. IV1021 L9 – Project portfolio management Gunnar Wettergren 1 © Gunnar Wettergren

2. Agenda What is project portfolio management (PPM) Central concepts in PPM The process KPI 2 © Gunnar Wettergren

3. Project portfolios A company runs a number of projects during a year These projects as an entity is referred to as a project portfolio © Gunnar Wettergren 3

4. Project portfolio management (PPM) PPM deals with how to manage the project portfolio Dynamic decision process New projects are evaluated, selected and prioritized Old projects are accelerated, cancelled, or re- prioritized © Gunnar Wettergren 4

5. Project portfolio management This includes among other things ▫Balancing the portfolio / Project selection ▫Evaluating and analyzing the projects ▫Strategic alignment ▫Termination ▫Resource management and much more ▫Risk management © Gunnar Wettergren 5

6. PPM answers three questions 1.What projects should we start, what is the criteria in order to start a project in our organization? 2.How are the projects doing (during execution of the project plan)? 3.Which project should be killed and what is the criteria for this? © Gunnar Wettergren 6

7. Why use PPM? Get a complete picture of the projects in the organization Understand how projects fit together Strategic alignment Full utilization of resources Avoid failure Start and kill the right projects © Gunnar Wettergren 7

8. PPM Process (example) © Gunnar Wettergren 8

9. Balancing the portfolio Healthy mix of different types of projects is a must The layout of the portfolio depends on the organization and the business area The categorization can be done using different variables such as: ▫Process impact vs. Product portfolio impact These models should govern and aid your project selection methods © Gunnar Wettergren 9

10. Examples of Categorization models Boston matrix © Gunnar Wettergren 10

11. Boston matrix explained Problem child ▫Unproven product and track record ▫Difference between skills needed for product development and market introduction and share increase Star ▫Few problem child's become success stories and Stars, addition of management Cash Cow ▫A few stars remain and generate hefty profit Dog ▫New competitors enter thus making our product obsolete © Gunnar Wettergren 11

12. Aggregate project plan © Gunnar Wettergren 12

13. © Gunnar Wettergren 13 Aggregate project plan (2) There are four different categories used ▫Derivative projects – Incremental/Minor Improvements to existing products /processes ▫Breakthrough projects – Seek to develop a new generation of products ▫Platform projects – The creation of a platform that can serve as a foundation for other products ▫R&D Projects – The development of new knowledge

14. Categorization How about ▫Business needs/requirements fulfilled vs. Expected profit or benefit ▫Suggestions? © Gunnar Wettergren 14

15. Strategic alignment All companies have business goals and needs It is vital to company survival that projects support or help companies reach the set goals We must make sure that all projects are aligned with strategic goals, unless it is a conscious decision How can we do this? © Gunnar Wettergren 15

16. Strategic alignment What are the goals of the organization? For example ▫Increase market share ▫Increase customer satisfaction and retention ▫Increase product portfolio What if 80% is spent on market share increase and 10% on each of the other projects, is this a problem? We need to realign the portfolio © Gunnar Wettergren 16

17. Resource management How can we maximize the output of our resources? How do we allocate resources between projects Resource bargaining process – The allocation of resources of many projects, based on: ▫Prioritization ▫Strategic alignment ▫Problem/hot spots The ultimate goal is to find the optimal usage of resources in the project portfolio © Gunnar Wettergren 17

18. Evaluation and analysis Economical analysis ▫Various economical models such as  Discounted cash flow (DCF)  Net present value (NPV)  Return on investment (ROI)  Ratios of any kind Plan analysis ▫Burn down charts  Work left to do vs. time  Often used in Agile models © Gunnar Wettergren 18

19. Burn down chart example © Gunnar Wettergren 19

20. Risk management Same as for a project put with a different focus, we focus on the set of project, the portfolio We can use the methods we talked about before Very important in PPM since it essentially entails everything we do! © Gunnar Wettergren 20

21. Termination We have talked about the different ways a project can be terminated, but what is the rational for a project being terminated, do we know? There is a bunch of information needed in order to terminate a project for the right reasons ▫Budget, planning ▫Strategic alignment ▫Employee information ▫………. © Gunnar Wettergren 21

22. Implementation Very complex and hard to do Data collection from various parts of the organization Data must be merged © Gunnar Wettergren 22

23. Problems with PPM How to measure and identify Key Performance Indicators (KPI) that are relevant and form a valid picture of the portfolio How do we measure and keep track of the various aspects we have identified such as: ▫Progress ▫Economy ▫Resources etc. © Gunnar Wettergren 23

24. Examples of KPI’s ROI Resource utilization (%) % of overdue tasks Earned revenue to total expenses Schedule Performance Index (SPI) ▫Earned Value divided by the planned value (BCWP/BCWS). % of projects on budget … there are millions © Gunnar Wettergren 24

25. Questions? © Gunnar Wettergren 25