Best practice project portfolio management

Citation

Hunt, R.A. and Killen, C.P. (2008), "Best practice project portfolio management", International Journal of Quality & Reliability Management, Vol. 25 No. 1. https://doi.org/10.1108/ijqrm.2008.04025aaa.001

Best practice project portfolio management

Project portfolio management is a decision process that oversees the resource allocation and ongoing decisions related to a strategically oriented portfolio of projects. Projects for the development or improvement of products, processes and services underpin the ability of organisations to meet customer needs, achieve their strategic goals and ensure sustainable success. However when the resources available for these activities are inadequate, the quality and reliability of the outcome suffers. Organisations rarely have enough resources to allocate to all activities that seem beneficial, and often spread their limited resources too thinly, undermining the success of all projects. Project portfolio management (PPM) processes aim to improve the success of organisational projects by allocating adequate resources to the most beneficial projects and by dynamically monitoring and adjusting the project portfolio and resource allocations as the environment changes.

Project portfolio management has emerged as an important field of management activity during the past two decades. Driven by the need to be both lean and agile in the face of an ever-quickening rate of change, organisations are becoming increasingly project-based. In support of this organisational “projectisation” trend, there has been a steady increase in the development of effective project management capabilities for “doing projects right”. PPM is now gaining momentum as it is recognised that organisational effectiveness also depends upon “doing the right projects”. PPM is an ongoing decision process that oversees the composition of the project portfolio from the evaluation of newly proposed projects through to the monitoring of existing projects so that the organisation can gain the maximum value from the project portfolio. The allocation of resources to projects is a major part of PPM and includes continual assessment of ongoing resource allocation. PPM processes provide a project portfolio-wide perspective for alignment of projects with strategy, maintaining a balance of project types and risks, and ensuring that the project portfolio fits with resource capability. This “portfolio view” is required for effective allocation of resources to newly proposed projects and to assess when it is best to accelerate, de-prioritise or even cancel existing projects.

IJQRM has dedicated this special issue to “Best Practice Project Portfolio Management” in recognition of the growing importance of this area to the ability of organisations to reliably deliver the quality demanded by stakeholders. “Best practices” are identified as the practices that are linked with improved business performance (Camp, 1998). Benchmarking studies have been widely used within PPM and related research areas in order to assist with the identification and adoption of “best practices” to create sustainable competitive advantage (Cooper et al., 2001; Karlof, 1995). This special issue aims to increase the understanding of “best practices” in PPM by presenting a range of PPM approaches applied in practice.

This special issue focuses primarily on PPM practices in manufacturing and technology development environments but also provides a perspective on the wide variety of industries and applications for PPM. PPM practices are used in a range of industries and the project portfolios can be configured at many levels within the organisation such as enterprise-wide, divisional or business unit levels. PPM is not a specific process or method, but rather an activity that tends to draw from a common pool of methods and tools. Research indicates that PPM processes are most effective when customised for each individual situation (Loch, 2000; McDonough and Spital, 2003; Phaal et al., 2006), however there are many common elements and readers will identify many consistent themes and success factors across the PPM applications in this special issue. These common PPM elements seem to transcend the industry type, portfolio level and project type and indicate that organisations may be able to learn from “best practice” PPM implementations in a range of industries or project environments.

Project portfolio management is a rapidly developing field for research and practice, and awareness and application of PPM practices is growing. Early PPM-related literature has traditionally focused on theoretical models and software-based optimisation techniques that have not been regularly applied in practice. There is also a growing body of PPM literature that presents examples of methods used in practice – highlighting developments and applications of one or more PPM methods or tools (Killen et al., 2007). PPM processes in practice often involve a variety of management-friendly tools and methods that can be combined as needed (Coldrick et al., 2005; Cooper et al., 2001). PPM “best practice” literature aims to improve understanding and guide management in selecting appropriate tools to achieve organisational objectives.

The seven papers presented in this special issue represent authors from eight different countries and report on a wide range of organisations and environments.

The papers have been selected to provide benefit to both novices and experts and to show the diversity in PPM methods and applications. Novices will obtain an overview of the methods, processes and main issues associated with PPM, and experienced PPM practitioners will appreciate the advances in PPM mechanisms and applications that are presented. This special issue contains two papers that provide a wide perspective on PPM processes followed by four papers focused on specific methods. The special issue is capped off with a paper focussing on how decisions are made at portfolio decision-making meetings.

The first paper in this special issue presents a comprehensive overview of the product development process and implementation of a PPM process in a Brazilian manufacturing firm with a strong quality culture. Paulo Augusto Cauchick Miguel from Sao Paulo University’s paper on “Portfolio management and new product development implementation: A case study in a manufacturing firm” includes a survey of the literature explaining the main PPM concepts and processes that are put forward in mainstream PPM literature. This section provides a good primer for those new to PPM who want to ramp up their understanding of the general methods and terminology. The case study also provides clear guidelines of a PPM implementation process including the links between the NPD process, the PPM process, and the established quality processes in the case study organisation.

The editors of this special issue, in collaboration with Professor Elko Kleinschmidt from McMaster University in Canada, outline an empirical study of PPM practices in the second paper. “Project portfolio management for product innovation” presents a “best practice” PPM benchmark that includes 60 Australian organisations from service product development environments as well as manufactured product development environments. The results of the study reinforce findings from earlier North American PPM research and extend the understanding of the links between PPM practices and new product success. The study is also one of the first to offer insights into PPM processes for new service development and reveals a strong degree of commonality between the PPM processes across a broad range of industries in manufacturing as well as service product development environments. This finding highlights the opportunities for cross-industry and cross-market learning from PPM “best practices”.

The next four papers in the special issue focus on developments related to specific methods that are often applied in a PPM process. These method-based papers focus on the integration of technology roadmapping within the PPM process, the use of real options financial analysis for project decision-making, the development and use of a portfolio-wide risk management process, and the use of a multi-criteria computer based model to assist with PPM decisions.

Technology roadmaps have been well documented as a tool to develop long-range plans for technology and product strategies, however their use within a PPM process is not as well understood. Sungjoo Lee, Sungryong Kang, Euisuk Park and Yongtae Park of Seoul National University report on their comprehensive development and application of a systemised method to integrate technology roadmaps into a PPM process. In “Applying technology roadmaps in project selection and planning” they present a three-phase method and detail its application for project selection and planning processes in a Korean government R&D program. The detailed case study outlines how the R&D strategy is developed and used to set priorities and manage coordination among projects.

Oliver Yu, from San Jose State University in California and author of the recent book “Technology Portfolio Planning and Management” (Yu, 2006), provides a concise overview of the use of real options financial analysis for assisting with technology investment decisions in his paper on “Application of real options analysis to technology portfolio planning: A case study”. Real options analysis is one of many financial methods that can be applied to assist with PPM decisions by providing the decision makers with staged alternatives for investing in new technologies. Real options analysis is particularly useful when resourcing and investment decisions are required when a technology is still in an early stage and outcomes are quite uncertain. While financial investors are more familiar with these types of methods, it can be difficult for technology developers to embrace the real options method. The case study presented provides an example where acceptance challenges were addressed and a real options analysis was shown to assist with the decision process.

Rolf Olsson of Mälardalen University, Sweden, uses his research and experience within a multi-national transport solutions company to propose a method to manage project portfolio risk. “Risk management in a multi-project environment – an approach to manage portfolio risks” addresses the need for a portfolio level view of risks. The proposed methodology aims to reduce the overall risk in the portfolio and to improve the management of risk within individual projects. It also provides an ability to identify portfolio level common risks and trends that may require action that is outside the scope of a single project.

In his paper on “Modelling resource allocation of R&D project portfolios using a multi-criteria decision making methodology”, Maged S. Morcos of the University of Nottingham, UK, presents a decision support system (DSS) that incorporates multiple criteria. The DSS is applied in a high-technology company and is shown to improve the decision optimisation ability of a group of managers. The implementation is outlined in a step-by-step fashion and shows how a DSS can be used to assist with portfolio decisions involving the evaluation of multiple criteria. Even with the simplified situation presented in this paper, the reader will be able to appreciate the large amount of data and the mathematical analysis that lends this problem to computer assistance. Although the best practice studies reported in the literature do not report much use of computer models (Liberatore and Titus, 1983; Martino, 1995), some studies indicate that usage is starting to increase, and it is generally thought that as these types of solutions improve and are used to “assist” rather than “make” decisions, the implementation of these methods will increase (Schmidt and Freeland, 1992). This paper will be useful for readers who are interested in developing an appreciation of the types of information and analysis that can be used in project selection scenarios through a DSS.

Finally, the paper by John K. Christiansen and Claus Varnes from the Copenhagen Business School in Denmark on “From models to practice: Decision making at portfolio meetings” provides a unique perspective on the PPM process. The paper uses observations of PPM decision-making meetings in a large multi-national plastics company using a framework from a sociological perspective. Christiansen and Varnes show that while processes and structures for PPM are regularly reported in the literature, the influence of human nature and the social environment is often overlooked. Their observations suggest that portfolio meetings may not follow the documented processes, but that they may serve other purposes that are not explicitly acknowledged. This final paper serves as a reminder that PPM processes, like all management processes, are people processes at the core. The effectiveness of PPM structures, methods and models will depend upon how they are understood, used and applied by the people involved.

Each of the seven papers on “best practice” PPM presented in this special issue offers insight in to one or more aspects of PPM practice that will guide managers looking to develop or improve PPM in their organisations. To achieve or sustain a competitive advantage requires managerial excellence on many levels. It is no longer enough to have excellent operational and project management processes. Managers must be able to make strategic decisions about which organisational activities will best deliver the desired organisational outcomes. Managers interested in quality and reliability will benefit from the PPM research and case examples presented in this special issue on “best practice PPM”.

Acknowledgements

This special issue would not be possible without the commitment of the members of the International Expert Editorial Board who have dedicated their time, knowledge and experience to the review of the submitted papers. Authors of both published and unpublished papers have benefited from the generous feedback and advice provided. The Guest Editors thank the members of the International Expert Editorial Board and acknowledge the significant contribution they have made.

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  Professor Lynn Crawford, Professor of Project Management, The Mirvac School of Sustainable Development, Bond University, Queensland, Australia, and Lille Graduate School of Management, Euralille, France.

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  Associate Professor Robert (Bob) Hunt, Joint Chairperson Director, Centre for Management Innovation and Technology, Macquarie Graduate School of Management, Sydney, Australia.

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  Professor Ernest Jordan, Professor of Management, Macquarie Graduate School of Management, Sydney, Australia.

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  Catherine Killen, Joint Chairperson Program Head – Innovation Management, Policy and Practice Group, Faculty of Engineering, University of Technology, Sydney.

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  Professor Elko Kleinschmidt, Professor of Marketing and International Business, Michael G. DeGroote School of Business, McMaster University, Hamilton, Ontario, Canada.

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  Professor Peter Morris, Professor of Construction and Project Management, University College, London, United Kingdom.

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  Professor Rae Weston, Professor of Management, Macquarie Graduate School of Management, Sydney, Australia.

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  R. Max Wideman P.Eng, FICE, FEIC, FCSCE, Fellow of the Project Management Institute, Vancouver, Canada.

Robert A. Hunt, Catherine P. KillenGuest Editors