Wednesday, 19 September 2012 08:19

PPM Briefing Series #1: What is Project Portfolio Management (PPM)?

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Project Portfolio Management is a set of business practices that brings the world of projects into tight integration with other business operations. PPM brings projects into harmony with the strategies, resources and executive oversight of the enterprise. PPM provides the structure and processes for project portfolio governance.

I could leave it right there and you’d scratch your head and ask, “What does he mean?” Or you can drop everything and pick up my 500-page book for a complete dissertation. How about a compromise – a slightly expanded explanation for now with additional segments to follow?

It’s been about a decade since PPM emerged on the project scene and, thankfully, the business world is rapidly embracing this immensely valuable management concept. Still, many project and business managers grapple with understanding where project management (PM) and PPM differ and why these are two distinct (although closely aligned) business practices.

A critical mistake is to think that PPM is essentially the management of multiple projects, or enterprise project management. This is fundamentally wrong. PPM is the management of the project portfolio so as to maximize the contribution of projects to the overall welfare and success of the enterprise. This means that:

  • Projects must be aligned with the firm’s strategy and goals.
  • Projects must be consistent with the firm’s values and culture.
  • Projects must contribute (directly or indirectly) to a positive cash flow for the enterprise.
  • Projects must effectively utilize the firm’s resources – both people and other.
  • Projects must not only provide for current contributions to the firm’s health but must help to position the firm for future success.

This cannot be accomplished solely within the projects domain. To be fully effective, PPM requires the participation of several core components of the firm. Furthermore, it requires the integration of several systems within the organization. In a series of weekly blogs, we’ll look at each of these from both an organizational point of view and a systems point of view. We’ll intersperse these topics with other valuable tips regarding both project and portfolio management.

The Project Portfolio Life Span

Perhaps the strongest way to delineate the differences between project management and project portfolio management is to look at the true life span of projects within the PPM environment. We usually consider the life span of a project to be from authorization to delivery. In some models, we start earlier with a proposal.

With PPM, this life span is expanded on both ends. The project portfolio life span (PPLS) consists of the following phased components:

  1. Identification of needs and opportunities
  2. Selection of best combinations of projects (the portfolios).
  3. Planning and execution of the projects (project management).
  4. Product launch (acceptance and use of deliverables).
  5. Realization of benefits.

Looking at this model, you can see that the purview of the project office is concentrated on item 3. The expansion of the life span and scope to include all five items requires the involvement and leadership of the executive side of the organization and the development of a portfolio governance culture, processes and tools.

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Furthermore, the measurement of success does not stop with project delivery. A project is designed to deliver certain defined benefits. The true measure of success must extend to the evaluation of whether these benefits were, in fact, obtained.

We can subdivide PPM into two primary phases. The first part focuses on the prioritization and selection of projects for the portfolio. The second part deals with managing the project portfolio. These two components require different practices. However, while separate in nature, the two phases impact each other, so they must be integrated.

The concepts are simple, pragmatic and powerful. Understanding and executing these concepts will go a long way toward helping your firm achieve a desired future state.

Why Should You Care about PPM?

Knowing what PPM is may be worthwhile. But what really is important is to recognize why PPM is so essential to business success. Actually, I just said why. In project management, we aim for project success. In PPM, we aim for business success. “Aren’t they one and the same?” you might ask? Not in the slightest. A popular way of explaining the difference is that PM is doing projects right, while PPM is doing the right projects. I like that as a cute way of differentiating the two. But it goes way deeper than that. Frankly, project success does not necessarily translate to business success. Project success is measured in specific, project-centric ways. Bringing the project in on schedule and within budget. Delivering full scope and performance.  Maintaining a high level of quality. Satisfying the project stakeholders. These are some of the project metrics.

But how do we know that the project deliverables are really what the business needs? What if a particular project drained critical resources that could have been contributing to more “valuable” projects? Do we know if the project deliverables are in alignment with the firm’s tactical plans? Could we have had a better return on investment with a different project? In the traditional project environment, do we ask how the project helps the firm reach a desired future state? Do we compare the expected benefits among prospective projects? What kind of discipline do we maintain to discourage weak projects and focus on the stronger ones? What kind of metrics do we employ to do this?

If you’re thinking that there are weaknesses in how your organization chooses projects and wish there was a better way, there is an answer. Project portfolio management provides the structure and processes for evaluating, selecting and managing projects so that they contribute to the objectives and success of the firm. Simple, pragmatic tools are readily available to support these practices.

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Heather Champoux

Heather Champoux is currently the Director of Marketing for EPM Live. EPM Live is a global leader in Online Project, Portfolio and Work Management solutions. EPM Live’s award winning products have revolutionized the way organizations work today and continue to receive high accolades across the industry.

With over 14 years of experience in Project Management marketing, system design, implementation and system/process training, Heather specializes in aligning customer needs with technology. Heather received her PMP certification in January of 2005 from PMI Global. Prior to EPM Live, Heather was a lead Program Manager for First American Interactive.

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