beyond financial value: managing uncertainty and … · beyond financial value: managing...

Beyond financial value: managing

uncertainty and change to

enhance strategic portfolio

decisions

Prof. Miia Martinsuo

Tampere, Finland

UTS Sydney 31 October, 2017

Tampere University of Technology,

Center for Research on Operations,

Projects and Services (CROPS)

31.10.2017 2

Production and

operations

management

Supply chain and

network

management

Services, service

management,

service business

Projects, project

management,

project business

Organizing,

managing and

developing

value creating

processes

Repetitiveness

/ continuity

Uniqueness /

discontinuity

Companies /

organizationsNetworks of companies

/ organizations

M. Martinsuo

Beyond financial value in

strategic portfolio decisions

1 Doing the right projects makes a difference

2 Why structured portfolio management

methods are not enough

3 Leading towards optimized portfolios

31.10.2017 3M. Martinsuo

How can you consider strategic value to

achieve portfolio balance, strategic fit

and value maximization?

31.10.2017M. Martinsuo 4

Project

Project

control

Idea / Need

Project

sales and

marketing

Use

Services, support of use

Disposal,

recycling

Project

deliverable;

Project price

Benefits;

Use costsCosts

Value through

innovationValue through

efficiencyValue through

performanceValue through

re-sale/use

Strategic value

is specified already very early in the project

Drivers of strategic value

(example)

31.10.2017 5

Internal

Technical and service

capabilities

Sales process

Local agents (both sales

and delivery capabilities)

Solution scope

Trusted subcontractors

Reputation

External

Political drivers:

sustainability, national

policies, laws, standards

Local business and market

features and conditions:

culture, tempo,

distances…

Customer’s activities and

experiences

Competitors’ actions

Martinsuo & Killen 2017

The various stakeholders’ interests need to be negotiated not just

for the single project, but with the purpose of optimizing the

portfolioM. Martinsuo

Alternative futures for value

creation in the portfolio

31.10.2017 6

Business impact

Customer impact

Social impact / knowledge sharing and learning

Environmental impact

Technical / product impact

Reaching goals

Typ

ica

lstr

ate

gic

cri

teria

for

alig

nm

en

t/ b

ala

nce

/ m

axim

iza

tio

n

Portfolio-level criteria, assessments and

evaluations may drive completely different

alternative futuresM. Martinsuo

1 Doing the right projects makes a difference

2 Why structured portfolio management

methods are not enough

3 Leading towards optimized portfolios

31.10.2017 7M. Martinsuo

Structured idea to project

portfolio management

8

Project

proposals

Project

evaluation

Describing

and balancing

the portfolio

Portfolio

decisions

Strategy

Goals, methods,

resources

Opportunity

screening

Strategy renewal

Impact on projects;

project decisions on

(decision) gatesDye & Pennypacker 1999, modified

31.10.2017M. Martinsuo

Sources of uncertainties

affecting project portfolios

31.10.2017 9

Organizational

context

(realized

uncertainty)

• Organizational

complexity

• Portfolio

autonomy

• Managers’

competences

External context

(realized uncertainty)

• Macro-environmental

developments

• Customers’ needs and

actions

• Developing markets

• Environmental and

safety regulations

• Competitors’ actions

Single project

changes (realized

uncertainty)

• Customer

requirements

• Delays

• Learning

• The use of project

portfolio routines

Project portfolio

management in practiceMartinsuo et al. 2014

M. Martinsuo

Managers interpret and negotiate the

uncertain portfolio environment in

making decisions

Reaching goals … Achieving business

impact

Business level

Project level Project managers

Business

controllers

R&D directors

Product

managers

Portfolio

selection domain

Korhonen et al. 201431.10.2017 10M. Martinsuo

Project portfolio leadership requires

sensitivity to the context, stakeholders’

interests and situational demands

31.10.2017 11

Portfolio leader’s

interpretation and

negotiation:

Applying the rules and norms

and making decisions that fit

with the situation and context

Observing

others

Situation,

context

Learning

Project

portfolio

management

as a system of

rules and

norms

Practice and

success of

project

portfolio

management

Christiansen & Varnes 2008

M. Martinsuo

1 Doing the right projects makes a difference

2 Why structured portfolio management

methods are not enough

3 Leading towards optimized portfolios

31.10.2017 12M. Martinsuo

Need for new approaches to

project portfolio management

31.10.2017 13

Portfolio

management as a

rational decision

process

Martinsuo 2013

M. Martinsuo

Portfolio

management as

negotiation and

bargaining

Portfolio

management as

structural

(re)configuration

Portfolio

management as

entrepreneurial

capability

markets

Parent organization

Leading the optimal project

portfolio calls for good ”bundling”

and interface practices

31.10.2017M. Martinsuo 14

Project portfolio / program

External

business

environment

Summary: Key messages

1. Finding the right projects requires looking “outside” and defining and negotiating carefully what is of strategic value

2. In an uncertain environment, effective portfolio management requires managers’ sensemaking- interpretation and negotiation - to make adjustments and also tough decisions

3. We need good practices for steering and integrating, to make the complex portfolio and the multi-level decision process feasible

31.10.2017 15M. Martinsuo

References

• Artto, K., Martinsuo, M., Dietrich, P. and Kujala, J. (2008) Project strategy – strategy types and their contents in innovation projects. International Journal of Managing Projects in Business 1 (1) 49-70.

• Christiansen, J.K. and Varnes, C. (2008) From models to practice: decision making at portfolio meetings. International Journal of Quality and Reliability Management 25 (1), 87–101.

• Dye, L. and Pennypacker, J. (Eds.) (1999) Project Portfolio Management. Selecting and Prioritizing Projects for Competitive Advantage. Center for Business Practices, USA.

• Korhonen, T., Laine, T. and Martinsuo, M. (2014) Management control of project portfolio uncertainty: A managerial role perspective. Project Management Journal 45 (1) 21-37.

• Martinsuo, M. (2013) Project portfolio management in practice and in context. International Journal of Project Management 31 (6) 794-803.

• Martinsuo, M. and Killen, C.P. (2014) Value management in project portfolios: identifying and assessing strategic value. Project Management Journal 45 (5) 56-70.

• Martinsuo, M. and Killen, C. (2017) Decision making on strategic value at the front end of system delivery projects. Paper presented at EUROMA European Operations Management Association Conference, 3-5 July, 2017, Edinburgh, U.K.

• Martinsuo, M., Korhonen, T. and Laine, T. (2014) Identifying, framing and managing uncertainties in project portfolios. International Journal of Project Management 32 (5) 732-746.

• Martinsuo, M. Suomala, P. and Kanniainen, J. (2013) Evaluating the organizational impact of product development projects. International Journal of Managing Projects in Business 6 (1) 173-198.

• Müller, R., Martinsuo, M. and Blomquist, T. (2008) Project portfolio control and portfolio management performance in different contexts. Project Management Journal 39 (3) 28-42.

31.10.2017 16M. Martinsuo

Program integration in multi-

project change programs

Doctoral candidate Lauri Vuorinen

Tampere University of Technology

Tampere, Finland

Based on the article Vuorinen, L. & Martinsuo, M. (in review) Program

integration in multi-project change programs: agency in integration

practice.

Programs as vehicles for

organizational change

31.10.2017Doctoral candidate Lauri Vuorinen 18

Organization’s

change

objectiveProjects

A multi-project

change program

• Projects managed in a

coordinated way…

• …to reach benefits not

reachable by managing

the projects separately

Program integration: why and how?

31.10.2017Doctoral candidate Lauri Vuorinen 19

(Source: Turkulainen et al. 2015)

Why program integration?

• Division of work between subsystems:

1) organization and program, 2) projects of the program

• need for achieving unity of effort and ensuring alignment between the subsystems

What is program integration?

Three interfaces for program integration

1. Program-to-organization integration

2. Project-to-project integration

3. (intra-project integration)

The practice of program integration

• Integration mechanisms

• Roles and actors in pursuing program integration

Integration tasks and mechanisms:

program integration in practice

Program-to-parent integration

Integration tasks:

1. Creating and communicating a

change vision

2. Supervising a program’s progress

3. Exchanging information in the

program-parent interface

Program’s internal integration

Integration tasks:

1. Coordinating work in a multi-project

change program

2. Coordinating and supporting individual

projects and project managers

31.10.2017Doctoral candidate Lauri Vuorinen 20

Example integration mechanisms:

1. Documents, meetings and workshops

– clarifying and defining the change vision

– communicating the change vision

2. Steering group meetings

3. Representativeness

Example integration mechanisms:

1. Centralized program meetings

(for program and project managers)

2. Discussions, formal and informal

– between project managers

– between program manager and project

managers

Actors in program integration: program

manager in change programs

• The “traditional program manager”:

– Planning

– Control

– Coordination

• The role can be wider:

– Championing or visionary (change vision)

– A support person and discussant for the individual project managers

– An authority towards and a representative in the eyes of the external

environment

• The need to tailor program management between and within change

programs.

31.10.2017Doctoral candidate Lauri Vuorinen 21