Portfolio optimization overview
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Portfolio optimization is one of the core processes of portfolio management. In order for organizations to drive greater value from their portfolio management processes, they must learn how to optimize their project portfolio. To optimize means to “make the best or most effective use of a situation, opportunity, or resource (Dictionary.com).” Optimizing a project portfolio is to construct an optimal portfolio given current limitations and constraints. An “optimal” portfolio for your organization will depend upon the goals of your portfolio. Not every organization will optimize their portfolio in the same way, but there are four basic types of portfolio optimization: 1) Cost-Value Optimization: this is the most popular type of portfolio optimization and utilizes efficient frontier analysis. The basic constraint of cost-value optimization is the portfolio budget. 2) Resource Optimization: this is another popular way of optimizing the portfolio, and utilizes capacity management analysis. The basic constraint of resource optimization is human resource availability. 3) Work Type Optimization: this is a lesser known way of optimizing the portfolio, but corresponds to a more common term, portfolio balancing. The basic constraints of work-type optimization are categorical designations. 4) Schedule Optimization: this type of optimization is associated with project sequencing, which relates to project interdependencies. The basic constraints of schedule optimization are project timing and project dependencies.
Transcript of Portfolio optimization overview
Portfolio Optimization Overview
This presentation briefly covers key components of project portfolio management (PPM) and focuses on the four types of portfolio optimization
Portfolio Optimization Overview
At the highest level, Project Portfolio Management has four basic components:
All the steps necessary to construct an optimal portfolio given current limitations and
constraints
Ensure value is delivered by comparing expected benefits
with actual benefits; drive PPM maturity
Processes to select the right projects that align with business
strategy and key criteria
Optimize
Portfolio Value
Project benefits must be protected in order to deliver
maximum portfolio value
Protect
Portfolio Value
Deliver
Portfolio ValueThe Goal:
Maximize value delivered to customers
and stakeholders
Define the Portfolio
Portfolio Optimization Overview
Deliver
Portfolio ValueOptimize
Portfolio Value
Define the
Portfolio
Protect
Portfolio Value
Portfolio Analysis
Portfolio Risk Management
Manage Portfolio Value
Resource Capacity Management and Analysis
Improve Portfolio Maturity
Project Monitoring Lessons Learned
Portfolio Planning
PrioritizationIdeation
Portfolio BalancingWork In-take
Efficient Frontier AnalysisDecision Gates
Portfolio Communication
Portfolio Optimization Overview
EFFICIENT FRONTIER ANALYSIS(Cost-Value Optimization)
Constraint: Budget
CAPACITY PLANNING(Resource Optimization)
Constraint: Human resource availability
PORTFOLIO BALANCING(Work Type Optimization)
Constraint: Categorical Designations
PROJECT SEQUENCING(Schedule Optimization)
Constraint: Timing and Dependencies
Optimize Portfolio Value
The GOAL is to deliver maximum business VALUE
Portfolio Optimization Overview
The GOAL is to deliver maximum business VALUE
Prioritization
Capacity Planning
Portfolio Balancing
Project Sequencing
Cost-Value Optimization
Resource Optimization
Work Type Optimization
Schedule Optimization
MATURE ADVANCED
Portfolio Optimization Overview
Project Priority 1
Project Priority 2
Project Priority 3
Project Priority 4
Project Priority 5
Project Priority 6
Time Now
Re
sou
rce
Pri
ori
ty(R
eso
urc
e M
anag
ers,
Te
am M
emb
ers)
Schedule Priority(Portfolio Steering Team)
Priority Types
