Ppm workshop pmi

49
Project Portfolio Management & Business Value Brandon Olson, PhD

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Transcript of Ppm workshop pmi

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Project Portfolio Management & Business ValueBrandon Olson, PhD

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Workshop ObjectiveRe-Imagine Projects as Strategic

Efforts Understand Business Value of Projects Conceptualize Projects as a component of a larger

Portfolio Consider the Project Portfolio Approach Develop Strategies to Evaluate

Business Value in Projects

Note: Business Value in non-profits?

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Agenda Project Management Overview Introduction to Business Value Selecting Projects Portfolio Approach PPM Process Migrating to PPM Application to the PM

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Agenda Project Management Overview Introduction to Business Value Selecting Projects Portfolio Approach PPM Process Migrating to PPM Application to the PM

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What is a Project?

“…a temporary endeavor undertaken to create a unique product, service, or result.”

PMI, 2008

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Project Sources

Projects

Revenue Generation

Expense ReductionDirective

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Project Variables

Functionality

ScheduleBud

get

Q

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Project Success Rates

Successful Challenged Failed0%

10%

20%

30%

40%

50%

60%

199419961998200420092011

Gale, S. (2011). Failure rates finally drop. PM Network, 25(8), 10-11.

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Project Success? How do you define project success?

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Exercise – Information System

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Exercise – New Project Purpose: Deploy a new information system to

manage product inventory Functionality:

Track product inventory as it is used Real-time inventory reporting “Wouldn’t it be cool if we could also keep

track of the different types of inventory we used”

Budget: 1 pen/pencil, 1 sheet of paper, 1 developer

Schedule: 45 seconds

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Project Charter Purpose: Deploy a new information

system to manage product inventory

Goal: Reduce production time by 25%

Business Value

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Agenda Project Management Overview Introduction to Business Value Selecting Projects Portfolio Approach PPM Process Migrating to PPM Application to the PM

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Business Value? What organizational benefits are created

and realized from the project? Operational

New or improved functionality Strategic

Quantifiable organizational-level benefits

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Evaluating Business Value Example: Return on Investment (ROI)

Estimated Lifetime Benefits – Estimated Lifetime Costs

Estimated Lifetime Costs

Example: $310,000 - $160,000

$160,000= 0.94 = 94%

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Evaluating Business Value Alignment with Business Strategy

Objective

Objective

Objective

Objective

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Business Value

Benefits Alignment Value

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Agenda Project Management Overview Introduction to Business Value Selecting Projects Portfolio Approach PPM Process Migrating to PPM Application to the PM

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ProjectV

Project Selection:Resource Limitations

ProjectW

ProjectN

ProjectR Project

S

ProjectY

Productivity

TimeFunds

Personnel

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Project Selection:Common Practices Political Influence Squeaky Wheel FIFO LIFO Financial Attributes

(ROI/NPV/Payback)

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Project Monitoring

ScheduleBud

get

Functionality

Performance to Resource Usage?

Performanceto Timeline?

Performanceto

Deliverables?

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Project Environment

PM

PMPM

PM

PM

PM

PM

PM

PM

PM

PM

PM

PM

PM

PM

PM

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Agenda Project Management Overview Introduction to Business Value Selecting Projects Portfolio Approach PPM Process Migrating to PPM Application to the PM

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Portfolio ApproachProject PortfolioOperational Scope Strategic Scope

Governance Governance

Schedule Business Value

Budget Portfolio / Project Risk

Functionality Schedule & Budget

Project Risk Functionality

Distributed Management Centralized Management

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Project Portfolio Management Goal:

Determine and deliver the mix of potential projects that will result in the best utilization of human and cash resources and maximize long-range growth and return on investment for the firm.

Levine, 2005

AB

Y

S

AH

JW

B

Align = 9

Value = 8

Align = 3

Value = 10

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Project B

Project Governance

Project I

Project M

Project R

Project X

Project T

Project L

Project Q

Project P

Project Y

Project D

Project A

Project N

Project J

PMO

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Project Portfolio Governance

Executive ManagementPortfolio

Project Y Program

Project R

Project X

Project C

Project G

Portfolio

Program

Project A

Project Q

Project H

Project J Program

Project K

Project B

Project S

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2 Phases of PPM

Portfolio Selection

• Propose Projects• Align Projects• Evaluate Projects• Identify Risks/Value• Rank Projects• Select Projects

ProjectPipeline

Portfolio Maintenance

• Project Objectives• Portfolio Objectives• Forecast Impacts• Reevaluate Projects

• Value• Performance

• Determine Funding• Cancel• Continue

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Agenda Project Management Overview Introduction to Business Value Selecting Projects Portfolio Approach PPM Process Migrating to PPM Application to the PM

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PPM Process

Align Value Distribute Risk Select Monitor

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Strategic AlignmentOrganization Strategy and Objectives

Operations Planning Strategic Planning

Initiatives

Project Portfolio

Operational Resources

PMI, 2008b

Align Value Distribute Risk Select Monitor

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What is Value? Return on Investment (ROI)

Estimated Lifetime Benefits – Estimated Lifetime Costs

Estimated Lifetime Costs

Example: $310,000 - $160,000

$160,000= 0.94 = 94%

Align Value Distribute Risk Select Monitor

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Project Selection

18%

46%

25%

11%

InformationalInfrastructureTransactionalStrategic

Common IT Portfolio

CostAgility

MIT Sloan Center, 2007

InnovationIntegration

Align Value Distribute Risk Select Monitor

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Quasi-Quantitative Risk Evaluation

Scale Value Probability Value Schedule Cost

Very

High

1.0 90% - 100% > 10% > 10% > 10%

High 0.7 70% - 90% 5% - 10% 5% - 10% 5% - 10%

Medium 0.5 50% - 70% 2% - 5% 2% - 5% 2% - 5%

Low 0.3 30% - 50% 1% - 2% 1% - 2% 1% - 2%

Very

Low

0.1 10% - 30% 0% - 1% 0% - 1% 0% - 1%

Risk

Levels

Very Low Low Medium High Very High

Very Low .01 .03 .05 .07 .10

Low .03 .09 .15 .21 .30

Medium .05 .15 .25 .35 .50

High .07 .21 .35 .49 .70

Very High .10 .30 .50 .70 1.00

Probability

Risk

Impact Score =Average (Value, Schedule, Cost)

Adapted from Brewer & Dittman, 2010 and Lovelady &Anderson, 2006

Align Value Distribute Risk Select Monitor

Probability Score = Probability

Risk Score = Impact X Probability

or color

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Project Selection

Primary Funding

Selective

Funding

Selective

Funding

Not Funded

RISK

VA

LU

E

18%

46%

25%

11%

Risk Score

ROI

Align Value Distribute Risk Select Monitor

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Project Evaluation Alignment Value Distribution Risk Assessment Balance Resources ($ and people) Intangible Benefits

Align Value Distribute Risk Select Monitor

Consistency

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Monitor Portfolio

Project

Project

Project

Project

Program

Program

Distribution Risk

Alignment Value

Align Value Distribute Risk Select Monitor

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Agenda Project Management Overview Introduction to Business Value Selecting Projects Portfolio Approach PPM Process Migrating to PPM Application to the PM

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Steps to PPM

Define Portfolio

Gather Projects

Begin Weeding

Begin Evaluatin

g

The PPM Starter Kit, ganntthead.com

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Tips for PPM1. Start at the Top2. Avoid the Big Bang3. Develop a Governance Process4. Use a Proven PPM Tool5. Forgive Human Errors but not Process Errors6. Use the Tool in your Operations Reviews7. Use Executive Dashboards8. Be Open to Project Failures9. Anticipate Business Opportunities & Constraints10. Remember Who the Boss is

ganntthead.com

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Key Drivers of PPM 78% - Senior Management Receptivity 66% - Competent Portfolio Governance 62% - Standardized Metrics and Criteria 59% - Consistency & Logic of Objectives 58% - Mature Project Management

Office

PM Network Survey, 2012

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Formalized PM & PPM Practices Organizations with stable PPM practices

see 64% of projects meet targeted ROI (17% more than highly variable PPM practices)

Formalization at both the project and portfolio levels results in higher performance than formalization at just one level

Formalization provides transparency that leads to improved allocation of resources and an overall cooperation between projects

PM Network Survey, 2012 & Teller, Unger, Kock & Gemunden, 2012

64%

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Why PPM?

Improved Prod. Dev. Costs

Improved ROI

Revenue Growth

Cost Reduction

Customer Satisfaction

0% 10%20%30%40%50%60%70%80%

40%

45%

58%

59%

73%

PM Network Survey, 2012

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Agenda Project Management Overview Introduction to Business Value Selecting Projects Portfolio Approach PPM Process Migrating to PPM Application to the PM

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What does this mean to me?

PPM

MyProject

Business Strategies

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What does this mean to me?

PPM

MyProject

ProjectJ

ProjectC

ProjectQ

ProjectX

ProjectP

ProjectN

MyProject

ProjectG

Value

Functionality BudgetSchedule

Business Strategies

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Ensuring Value Develop a Project Value Chain

(Think Critical Path) Include Value in Risk Management

Strategy Evaluate Value Performance Frequently Target Metric for Change Management

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Suggested Readings

July, 2012Volume 30

Issue 5

http://faculty.css.edu/bolson1/presentations/PMIPPM.pdf

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References Brewer, J. L., & Dittman, K. C. (2010). Methods of IT

project management. Boston, MA: Prentice Hall. Lovelady, R., & Anderson, A. (2006). Psst: Want to take

a risk? In G. Richardson & C. Butler (Eds.), Readings in information technology project management (pp. 166-171). Boston, MA: Thomson/Course Technology.

Pearlson, K.E. & Saunders, C.S. (2010). Managing and using information systems: A strategic approach (4th ed.). Hoboken, NJ: Wiley.

Project Management Institute (2008). A guide to the project management body of knowledge (4th ed.). Newtown Square, PA: Author.

Project Management Institute (2012). The power of portfolio management. PM Network, 26(6), 14-15.

Teller, J., Unger, B.N., Kock, A., & Gemunden, H.G. (2012). Formalization of project portfolio management: The moderating role of project portfolio complexity. The International Journal of Project Management, 30(5), 596-607. doi:10.1016/j.ijproman.2012.01.020