Professional Documents
Culture Documents
High-Level Concepts
Projects are a Basis for Future Profitability of the Enterprise Portfolio Management is Managing a Logical Collection of Projects in a Manner that Achieves or Exceeds the Target Business Initiative(s) and Desired Profitability Levels
A Collection of Best-Practice Business and Project Management Techniques Exist to Aid Portfolio Management
Portfolio management can be used to manage the integration of projects, regardless of their function (Mfg, Mkt, Sales, IT, etc.)
Achieve and Manage the Integration & Coordination of Project Portfolios for the Center, Individual Businesses, or Combinations of Both
4
Result:
Greater Portfolio Alignment & Management Greater Recycling (Re-use) of Intellectual Capital Greater Shareholder Value, Market Leadership, Responsiveness to Change, Corporate Image, and Associate Retention Greater Coordination and Integration of Cross-Functional and 5 Cross-Business Initiatives and Teams
Costs
Schedule
Contain Risks
Contracts
Systems-Thinking Tools
Employ Causal Loop Analysis & Archetypes to Define the Behavior of Integrated Things 7
S-Curve
PMB
Project Start
Net Present Value (NPV) Revenue (Inflow) Net Present Value (NPV) Costs (Outflow)
2011 2012 2013
NPV =
Cash Yr 0 + (1+CoC)0
Cash Yr 2 (1+CoC)2
Cash Yr 3 (1+CoC)3
...
...
= $61-130M
$0 1.33
...
BCR =
Assumptions: 10% Cost of Capital (CoC) Internal Burdened Team Cost of $1M for two years prior to achieving benefit
(1) Assumes 5 years of program benefits
Evaluate Decision to Develop versus Dont Develop EMV (High Level Mfg) = (0.40)($500,000) + (0.60)(-$100,000) = $140,000 EMV (Low Level Mfg) = (0.40)(-$50,000) + (0.60)(-$50,000) = -$50,000 EMV (Develop w/High Level Mfg) = (0.70)($140,000) + (0.30)(-$200,000) = $38,000 EMV (Dont Develop) = $0 EMV Suggests Develop w/High Level Mfg
$0
10
Example Project Portfolio Snapshot Original Project Current Due Due EMV Name Date Date A $ 1,000 1-Aug 1-Aug B $ 2,000 1-Oct 1-Oct C $ 5,000 25-Nov 25-Nov D $ 10,000 30-Jan 30-Jan
Total Portfolio:
11
12
Project Portfolio Snapshot (after all Project Trade-offs Are Analyzed) Original Project EMV Current Due %Loss Per %Gain Per Due Name (revised) Date Week Late Week Early Date E $ 14,400 10-Feb 13-Jan 20 5 A $ 700 1-Aug 12-Sep 5 5 B $ 1,600 1-Oct 15-Oct 10 5 C $ 5,000 25-Nov 25-Nov 20 2 D $ 8,000 30-Jan 27-Feb 10 5
Total Portfolio: Expected Monetary Value: $ Cost ETC: $ Expected Net: $ Simple DIPP 29,700 10,700 19,000 2.8
13
Costs
Months EMV Variance in Market Due to Schedule Variance around a Seasonal Window
Months EMV Variance Based on Value and Probability of Being 1st or 2nd to Market
14
15
Archetype - Reinforcing Loop An important variable accelerates up or down with exponential growth or collapse
Fixes that Backfire - Symptom alternately improves and deteriorates (worse than before) Fix: Reframe Root Problem, Reduce Frequency & No. of Fixes Archetype - Shifting the Burden Three patterns exist side by side, reliance on short term fixes get stronger while solving the real problem gets weaker Fix: Dont Use Quick Fixes Archetype - Tragedy of the Commons - Total activity grows, but the gains are dropping Example:Freeway Congestion Fix:Focus on Common Good Archetype - Accidental Adversaries - All performance declines or stays level and low, while competitiveness increases Example: My Win Is Your Loss Fix: Focus on Win-Win Fixes
Archetype - Balancing Loop There is movement toward a target (w/o delay), or else oscillation (w/ delay) Archetype - Limits to Growth There is growth, leveling off or declining Example: Resource Availability is insufficient to Support Initiatives Fix: Isolate interrelationships between success strategies and potential limits
16
Portfolio As Needs
Portfolio Bs Needs
17
Project Performance Measurement and Reporting Must Be Performed in a Standard, Meaningful Manner
Actual Costs and Level of Effort (LOE) Tracked ETC Costs and LOE Tracked Earned Value Analysis (EVA) Used to Measure and Report Cost and Schedule Performance Resource Leveled Project Schedules & Resource Pools Managed Project Assumptions, Constraints, and Dependencies Validated Project Risks Properly Identified, Quantified, and Contained Benefit Cost Ratios (Per Project Profitability) Should Be Measured EMV & Decision Tree Analysis Used for Risk Management & Project Prioritization
18
References - Sources
Berry, David B., Planning and Managing Multiple Projects, (1999), PM Network, May 1999, Project Management Institute, p. 49-53 Brandon, Daniel M., Jr. (1998), Implementing Earned Value Easily and Effectively, Project Management Journal, June 1998, Vol. 29, No.2, Project Management Institute, p.11-18 Devaux, Stephen A., (1999), Total Project Control, A Managers Guide to Integrated Project Planning, Measuring and Tracking, Wiley Operations Management Series for Professionals, New York, NY, Wiley, p. 7-14, 277-297 IBM Education Services (1998), Risk Management, Armonk, NY, International Business Machines, Inc., p. 4-5 - 4-10 IBM Global Services Institue (1997), Engagement Environment, Armonk NY, International Business Machines, Inc. , p. 1-23 - 1-27 Knutson, Joan (1999), From Making Sense to Making Cents: Measuring Project Management ROI - Part 1, PM Network, January 1999, Project Management Institute, p. 25-27 Knutson, Joan (1999), Making Sense to Making Cents: Measuring Project Management -Part 2, PM Network, February 1999, Project Management Institute, p. 23-24 Knutson, Joan (1999), A Portfolio Management System, PM Network, June 1999, Project Management Institute, p. 21-23 Kazmier, Leonard J. (1996), Business Statistics, Schaums Outlines, Third Edition, Chapters 17-19, New York, McGraw Hill, p. 304-351 Levine, Harvey A. (1999), Project Portfolio Management: A Song Without Words?, PM Network, July 1999, Project Management Institute, p. 25-27 Senge, Peter (1994), The Fifth Discipline Fieldbook, New York, NY, Doubleday, p. 122-123 Smith, Stephen & Barker, Jon (1999), Benefit-Cost Ratio: Selection Tool or Trap?, PM Network, May 19 1999, Project Management Institute, p. 23-26