MIS5102:Process Improvement and InnovationProject Portfolio Management

What is Project Portfolio Management (PPM)?

Five Questions(Pennypacker and Retna)

• Are we investing in the right things?

• Are we optimizing our capacity?• How well are we executing?• Can we absorb all the changes?• Are we realizing the promised

benefits?

Are we talking about “singular” or “comparative” evaluations?

What’s the difference?

Two broad approaches

Quantitative Qualitative

There are pros and cons of each approach…

Quantifying Options Using a Decision Tree

http://en.wikipedia.org/wiki/Project_portfolio_management

Each project has an associated• Cost• Revenue• Risk

Project Investment #1

-$3,500,000

Project Revenues$4,275,000

Opt. 50%$4,750,000

50%$1,250,000

Pess. 50%$3,800,000

50%$300,000

Project Investment #2

-$2,800,000

Project Revenues$3,250,000

Opt. 50%$3,900,000

0%$1,100,000

Pess. 50%$2,600,000

0%-$200,000

A Closer Look

TRUE

FALSE

= $4,750,000 * .5 + $3,800,000 * .5

= -$3,500,000 + $4,750,000

= -$3,500,000 + $3,800,000

= -$2,800,000+ $3,900,000

= -$2,800,000+ $2,600,000

Expected value of this part of the project portfolio:$1,250,000 * .5 + $300,000 * .5 + $1,100,000 * .0 + -$200,000 * .0 = $775,000

What are the pitfalls of this approach?

= $3,900,000 * .5 + $2,600,000 * .5

A more qualitative approach

Decision Points for PPM(Wikipedia)

• The criteria for filtering and ranking

• Which criteria are most important

• Which project ideas are worth developing

• Which projects should be considered as part of the portfolio

• Which projects to fund

http://en.wikipedia.org/wiki/Project_portfolio_management

But how do you prioritize?

politicsWhoGets

What?When?Where?Why?How?

Portfolio Categories

Innovation

NewBusinessModels or Competitive Capability

Discretionary

Growth

Increase RevenueIncrease Intimacy

Efficiency Cost-OutProductivity

Run the Engine Sustain Operations

Run The Engine

Some of the Big Questions

How can you blend quantitative and qualitative approaches? Should you?

How can a “do nothing” option help?

Why are lists important?

When doesn’t any of this matter?