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Project Portfolio Management Is Not a Collection of Projects
September 27, 2009 | Author: PM Hut | Filed under: Project Portfolio Management
Project Portfolio Management Is Not a Collection of Projects
By Vaughan Merlyn
When applied to IT, Project Portfolio Management proposes how the organization (assuming it is acting in a rational way towards its investments) uses diversification to optimize its IT investments. In this case, optimization may include balancing:
- Short term and long term investments.
- Low risk, low return against high risk, potentially higher return initiatives.
- Common and shared (i.e., IT infrastructure) against business unit specific investments.
- Investments by major business process.
- Creating new capability versus maintaining existing capability.
- Investing in IT process and capabilities (i.e., improving the “business of IT”) versus investing in IT capability for the business.
IT portfolio management is the primary means to elevate IT decision making and investment prioritization to a business issue.
In this context, IT portfolio management implies a top down decision making framework. It implies that:
- Senior executives have debated, considered and reached consensus about their IT investment portfolio strategy.
- This, in turn, implies that senior executives have considered and agreed to a business-IT strategy.
- They have wrestled with the thorny questions about “level of optimization” of IT investments – whether this should be a business unit or function (implying a conglomerate or holding company model) or the enterprise (implying a more integrated business model.
- If they balance by business process, that the major business processes have been defined, and their importance to business strategy execution determined.
- They are able to monitor the gaps between their actual IT investments by portfolio category, against their target, or “model” portfolio, and can make adjustments as necessary.
Project Portfolio Management Is Not a Collection of Projects
From time to time, I see consulting clients attempting to implement portfolio management from a collection of projects. Sometimes, this activity includes taking a huge list of several hundred (in one recent case, nearly a thousand!) to the business so they can prioritize the portfolio. This bottom-up approach is always doomed to failure. It is often the result of several years of “order taking” behavior by the IT organization, and is, in fact, the order taking equivalent, elevated to a different level. It effectively says:
We’ve taken orders from you for years, and now we have this huge list of projects. So, please take a look at them, and help us prioritize them, because we can’t do them all!
This cannot work, and ultimately, reinforces order taking behavior, and the sense that IT does know know what it’s doing, and does not deserve the trust of its business partners.
A Question of Business-IT Maturity
At very low maturity, by definition, the business executives will not have the wherewithal to engage in and answer the questions exemplified in the bullet points above, so implementing portfolio management is going to be virtually impossible. But, to get to higher maturity, these questions have to be understood, discussed and decided upon, so the IT leadership is best served educating the business till it is ready to engage meaningfully in these questions. At that point, they will be ready for IT portfolio management. Until then, be careful not to call bottom up collections of projects, “portfolios.” If you do, when you are finally ready to introduce portfolio management, the language, and the business discipline it connotes, will have been polluted.
Difference Between Program Management and Project Portfolio Management
“Programs” become the most meaningful intermediary between “projects” and the “enterprise IT portfolio” – a manageable and meaningful “unit of value-producing work” that business executives can get their heads around.
Vaughan Merlyn is a management consultant, researcher, and occasional author. His primary focus for the last 35 years or so has been and continues to be the use of information and information technology (IT) for business value creation. Vaughan is an Executive Vice President with nGenera. In that role, he participates in multi-company research projects, consult with Fortune 500 type companies, and provide Executive Education. His blog can be found at http://vaughanmerlyn.com/.
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1 person has left a comment
Vaughan,
Guess you’re saying a fool with a tool is still a fool, just a bit more dangerous. If Portfolio and Programmes are not used to put activities (projects) in context of the business goals, all we get is movement, but not progress.
One interesting side effect however of such a top down portfolio and programme approach is that it not only helps IT put their activities/projects in context, it also sensitizes top management to the fact that changing their strategy too often (like every year or even every quarter) only leads to sheer movement and no progress. I am not sure which of these two learning’s is more needed and/or more valuable.
Gregor Petri
Product Marketing Advisor, PPM & IT Service Mgmt, EMEA, CA