6/10/13 ProjectManagement.com - Project Portfolio Management: Real-World Observations

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Gus Cicala is the President, CEO and founder ofProject Assistants, Inc., a fullservice projectmanagement consulting firm that providesconsulting services, custom development,education and products that form the foundationof enterprise project management solutions. Heis an expert in Project & Portfolio managementwith extensive executive leadership andconsulting experience and has worked with abroad range of clients throughout the U.S. andWestern Europe.

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Project Portfolio Management: RealWorldObservationsGus Cicala January 7, 2013

I'm often asked to share my observations on project portfolio management in the“real”world. In thinking on this topic, I've found that it is a particularly relevant issue tothe current events of our world. The value of PPM and the priorities people place withinit have seen drastic changes to go along with the dynamism of the world over the lastfive years.

Not too long ago, it was quite easy to achieve a positive return on investment on yourprojects. This made the budgetary process very easy for anyone merely looking forsatisfactory results from their business cases. Though this was obviously a great thingfor keeping businesses alive and healthy, it led to a business culture where projectefficiency and success rates were so abysmal that it would have been malpractice inmany other lines of business (if someone were equally careless in the banking ormedical world, they would assuredly be spending a lot of time in court).

Since the global economic crisis of 2007, though, we've been living in the “new normal”.There is now a distinct economic intolerance for failure, whereas before there were doover opportunities in the marketplace. Optimal realization of portfolio ROI is now a mustjust to simply stay alive, whereas before it was often just treated as a nice idea that acompany could do to improve their business success.

In short, organizations that rely on project management will see an improvement in thesuccess rate with projects, but that is no longer enough. Adaptability has become a

necessary trait for your organization. Not only has the economic turmoil contributed to this, but the unprecedented speed oftechnology advancements makes for an everchanging environment. From a technology standpoint, waiting a year to makeadjustments to your budget is going to leave you as much behind the times as waiting a decade would have in years past.

Finally, the fluidity of the global marketplace is another reason for the increased value of PPM. As international shippingbecomes cheaper, as global communication becomes more effortless and as more countries like China gain strong presencesin the marketplace, it becomes more and more crucial to not rely on yesterday's information to decide which projects to run(and how). This is especially true of industries like life sciences, where being first to market can make or break a project's (oreven an entire company's) profitability.

Unfortunately, the traditional annual portfolio review cycle isn'tnimble enough to adequately navigate these difficulties. In the newnormal, basing today's operations on information collected in thefourth quarter of the previous year is a much larger assumptionthan it used to be, which greatly increases risk.

Portfolio management solves this problem by increasing rigor sothat today's operations are not based on yesterday's data. One ofthe pillars of PPM is tracking and analysis throughout the yearusing objective measures to come to reliable conclusions. Evolvingfrom an unresponsive approach isn't just about collecting currentinformation, though; you have to review that information

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6/10/13 ProjectManagement.com - Project Portfolio Management: Real-World Observations

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continuously throughout the year. A proven PPM methodologyachieves this by defining and prescribing frequent reviewprocesses.

Additionally, there is the issue of sloppy business cases wheredecisions are being based on unsubstantiated claims, usingessentially madeup figures. As the economic pressure increases,the margin for error gets slimmer so that these guesses are muchmore likely to doom your project by sending your ROI into the red.A fundamental approach to PPM solves this problem by usingmore rigorous, objective and therefore more credible measures forproject selection. What you'll find is that, if nothing else, once youset up a precedent of doubleclicking on each of the businesscases, then people are more careful to present solid proposalswhich makes the overall process smoother. This emphasis onrealizing viable realworld benefits can then be leveraged intofuture portfolios. Objective projections can be compared to actualresults to provide valuable information on where and how toimprove.

Succeeding in all of these aspects of portfolio management willresult in a slate of projects that gives you the best chance, willprovide you with today's information and will standardize reviewingthat information throughout the year. But we've yet to uncover thekey to achieving true adaptability. Action still needs to be taken.Most importantly, your organization needs to have in place criteriafor identifying lost causes early and proactively canceling thosefailing projects to minimize investments.

It's also possible to breathe life into struggling initiatives withoutcanceling it altogether by modifying or reducing the scope of alame project without canceling it altogether. Conversely, reviewprocesses give you the opportunity to invest more in projects witha higher return than expected or to expand the scope of projectsthat are going beyond budget or schedule but are still worth anincreased investment. Regardless of what the answers are foreach given project to keep the portfolio optimal, action needs to betaken in order to adapt to the changing business environment.

ConclusionNot only is it more costly than ever to act today on the assumptionsof yesterday, but every cost in itself carries a higher relativeweight. These conditions mean that it's no longer safe or wise touse a traditional annual budget cycle. Project portfolio

management offers a viable solution to this problem, offering the prospect of assurance that the organization is doing the rightprojects at the right time. Optimal PPM processes will allow you to keep up in the “new normal” by reducing risk, increasingrigor, requiring more frequent review processes, basing project selection on objective criteria and enacting cancellation criteria.

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COMMENTS

Network:71

Linda HillSr. Program Manager,Microsoft Renton, WA, USA

I agree it is all about supporting doing the right projects at the right time for the rightreason. The process should evolve considering the company's position in themarketplace, what makes sense as we align the work, etc.

Posted: Feb 14, 2013 1:39 PM

Network:2

_ __ Lancaster, TN, USA

This points great reasons to sell PPM to your executives. It highlights items from AndyJordan's article... http://www.projectmanagement.com/articles/274854/TheEvolutionofAnnualPlanning

Posted: Jan 8, 2013 3:23 PM

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