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STRATEGICPROJECT

PORTFOLIOMANAGEMENT

Organizations that outperform do so because of

a combination of strong execution and great

strategy. Lack of either results in failure. Eff ective port-

folio management helps achieve outperformance, making

your strategy real through organizational change.

Practical and fi lled with expert advice, Strategic Project

Portfolio Management: Enabling a Productive Organization

presents a clear framework for your organization

to complete signifi cant strategic projects. Providing

executive-level guidance to build a powerful and effi cient

process from initial adoption to portfolio alignment, this

essential resource contains case studies from small to

multinational organizations, arming you with the insights

to ensure your strategic projects are given the resources

they need to deliver business impact. Th is important guide

introduces several key initiatives that will dramatically

improve your ability to execute eff ectively on a strategic

portfolio, including:

■ Setting bold goals for both the business, and

therefore the portfolio, and sharing these goals

repeatedly and broadly

■ How to go beyond project portfolio

management to a holistic work management

system

■ Sharing portfolio information broadly with as

many employees as possible

■ Why technology is the key to developing new

collaborative platforms and innovative work

management environments

■ A framework for assessing project portfolio

management competence within your

organization and driving momentum for

compelling improvements

■ Examining and cutting processes regularly

Portfolio management is a process, requiring the com-

bination of the right processes and the right technology

to support it. Filled with cases from best-in-class

organizations illustrating how results were achieved using

processes outlined in the book, Strategic Project Portfolio

Management: Enabling a Productive Organization off ers

the practical recommendations, guidance, and real-world

insights you need to immediately begin driving better

project management strategy.

S I M O N M O O R E is the Product Planner for

Microsoft’s Enterprise Project Management solution and

has engaged with project and portfolio executives from

Brazil to Japan to defi ne the most eff ective strategies to

completing projects on time, on budget, and within scope.

He has worked for Anheuser-Busch on new product

development, fi nancial portfolio analysis at Putnam

Investments, and regulation and compliance at the Bank

of England. He has served as a strategic consultant to fi rms

in the technology, retail, and fi nancial industries. He has

written for the UK’s Guardian newspaper and is a member

of the Project Management Institute. He has a BA

(Hons.) from Oxford University and a Master of Business

Administration from the Kellogg School of Management.

He also studied at Chulalongkorn University in Asia

and holds the Chartered Financial Analyst designation.

Simon was born in the UK and currently lives in

Seattle, USA.

“Project management has been around for years as a bottom-up process but

Simon now brings the concept to the executive suite. Strategic Project Portfolio

Management shows senior management how to shift to a return-on-investment

driven organization. Simon’s experience meeting executives while at Microsoft

makes him the ideal person to bring project portfolio management to management.”

—Chris Vandersluis, President, HMS Software

“Innovation and constant improvement are essential for every organization in

our fi ercely competitive world, making both project selection and project

execution strategic capabilities. Simon Moore shows us how project portfolio

management forms a holistic business process that informs executive decisions

and motivates project teams.”—Eric Verzuh, author, Th e Fast Forward MBA

in Project Management, Th ird Edition

“Simon Moore has laid out a complete overview of the world of project portfolio

management. Excellent reading for those who are looking for insight into how

businesses can benefi t from this continuously evolving discipline.”

—Rudi van den Berg, Partner Manager, Pcubed

“A great top-down book on the top of the mind issues that face project-driven

organizations today. Sharp and precisely written as a hub of knowledge and

hands-on practice manual for teams implementing or improving best practices

for strategic project portfolio management. When you are in for the deep dive,

you fi nd the references for further reading.”

—Magnus Holmlid, Senior Advisor Enterprise Project Management, Camako, Sweden

ISBN: 978-0-470-48195-0

P R A I S E F O R STRATEGIC PROJECT

PORTFOLIO MANAGEMENTSTRATEGICPROJECT

PORTFOLIOMANAGEMENT

SIMON MOORE

E N A B L I N G A P R O D U C T I V EO R G A N I Z A T I O N

(continued on back fl ap)

(continued from front fl ap)

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Strategic ProjectPortfolio Management

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ii


Strategic ProjectPortfolio Management

Enabling a ProductiveOrganization

Simon Moore

John Wiley & Sons, Inc.

iii


This book is printed on acid-free paper. ∞©

Copyright C© 2010 by Simon Moore. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any formor by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except aspermitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the priorwritten permission of the Publisher, or authorization through payment of the appropriate per-copy feeto the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax978-646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should beaddressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ07030, 201-748-6011, fax 201-748-6008, or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts inpreparing this book, they make no representations or warranties with respect to the accuracy orcompleteness of the contents of this book and specifically disclaim any implied warranties ofmerchantability or fitness for a particular purpose. No warranty may be created or extended by salesrepresentatives or written sales materials. The advice and strategies contained herein may not be suitablefor your situation. You should consult with a professional where appropriate. Neither the publisher norauthor shall be liable for any loss of profit or any other commercial damages, including but not limited tospecial, incidental, consequential, or other damages.

For general information on our other products and services, or technical support, please contact ourCustomer Care Department within the United States at 800-762-2974, outside the United States at317-572-3993 or fax 317-572-4002.

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print maynot be available in electronic books.

For more information about Wiley products, visit our Web site at http://www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Moore, Simon, 1978–Strategic project portfolio management : enabling a productive organization / Simon Moore.

p. cm. – (Microsoft executive leadership series ; 16)Includes index.Summary: “Lead change through strategic alignment of project and process performance Practical andfilled with expert advice, Strategic Project Portfolio Management: Enabling a Productive Organizationpresents a clear framework for your organization to complete impactful strategic projects. Providingexecutive-level guidance to build a powerful and efficient process from initial adoption to portfolioalignment, this essential resource contains case studies from small to global multinational organizations,arming you with the insights to ensure your strategic projects are given the resources they need to deliverbusiness impact. This important guide Shows executives how to align their projects and processes withtheir business strategy for compelling competitive advantage Provides cases from best in classorganizations, showing how they were able to achieve results by using processes outlined in the bookReveals how technology is the key to developing new collaborative platforms and innovative workmanagement environments that have not been possible until now Defines a framework for assessingproject portfolio management competence within your organization and driving momentum forcompelling improvements Explores how to go beyond project portfolio management to a holistic workmanagement system Strategic Project Portfolio Management: Enabling a Productive Organization offersthe practical recommendations, guidance, and real world insights you need to immediately begin drivingbetter project management strategy”—Provided by publisher.ISBN 978-0-470-48195-01. Portfolio management. 2. Strategic planning. I. Title.HG4529.5.M66 2010658.4′012–dc22 2009025056

Printed in the United States of America.

10 9 8 7 6 5 4 3 2 1

iv


Contents

Microsoft Series Foreword vii

Preface ix

Acknowledgments xiii

Introduction xv

Chapter 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Obtaining the Best Ideas

Chapter 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Selecting Impactful Projects

Chapter 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39The Importance of Planning

Chapter 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Improving Cost Performance

Chapter 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69Ten Things to Do

Chapter 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Best Practices

Chapter 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Ten Things to Avoid

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vi CONTENTS

Chapter 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105Communications

Chapter 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117Identifying Organizational Bottlenecks

Chapter 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .127People, the Key Element

Chapter 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141Toward Adaptive Project Management

Chapter 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .153The Future of Strategic Portfolio Management

Conclusion 167

Index 173


Microsoft Executive Leadership Series:Series Foreword

Today’s world requires lifelong learning. The Microsoft ExecutiveLeadership Series provides leaders with access to new ideas and per-spectives, intended to inspire and to challenge—ideas that will help

keep thoughts fresh and minds nimble. These ideas range from effectivestrategy to deploying an agile infrastructure. Information technology in-creasingly drives the evolution of business models, social norms, marketexpansion, even the very shape and nature of our institutions. Organiza-tions that succeed in the future will differentiate themselves effectively onhow well they use technology to navigate change, respond to challenges,and leverage new opportunities.

I talk nearly every day to executives and policy makers grappling withissues like globalization, workforce evolution, and the impact of tech-nology on people and processes. The idea for this series came from thoseconversations—we see the series as a way to distill what we’ve learnedas a company into actionable intelligence. The authors bring indepen-dent perspectives, expertise, and experience. We hope their insights willspark dialogues within organizations, among managers, and with policymakers about the critical relationship between people and technologyin the workplace of tomorrow.

I hope you enjoy this title in the Microsoft Executive LeadershipSeries and find it useful as you plan for the expected and unexpecteddevelopments ahead. It’s our privilege and our commitment to be partof that conversation.

DANIEL W. RASMUS

General Editor, Microsoft Executive Leadership Series

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Preface

THE REASON FOR THIS BOOK

This book exists to fill a gap in the current literature on project andportfolio management (PPM). Much has been written around theoryof PPM, and there are a number of more technical books on the nutsand bolts of PPM technology. This book ties the theory and technologytogether, primarily for an executive audience, with the goal of enablinga productive organization. Executives don’t need to understand all thegranular detail of the technology, but there is a need to understand thelatest thinking in PPM and how far both the discipline and the technologyhas moved beyond the simple Gantt chart. This book looks at the latestdevelopments in a dynamic field that is critical to organizational success.

The book also takes a real-world look at the challenges of PPM, usingcase studies throughout the chapters, and examines not just how PPMshould be done, but maps out ways to get there using a measured andpragmatic approach.

How the Book Is Organized

The first four chapters highlight the benefits of project portfolio man-agement. The first two chapters focus primarily on the high-level strate-gic perspective in terms of creation of business goals and alignmentof projects to them. Chapters three and Four emphasis benefits fromdisciplined planning and cost focus.

Chapters five, six, and seven together serve as a guide for best practiceimplementation.

Chapters eight, nine, and ten expand on the prior chapters to ex-plore the need for effective communications structures, people-centric

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x PREFACE

processes, together with appropriate use of workflow, and processoverall.

Chapter eleven takes a more theoretical look at project management,surveying the key perspectives.

Chapter twelve looks at future trends across project and portfoliomanagement, combining a business and technology perspective.

Case studies and call-outs on topics of interest are positioned in theappropriate chapters.

THE VALUE TO THE READER

The Executive

Executives in relatively large organizations are the primary audience forthis book. They will quickly be brought up to speed on the latest thinkingand benefits on project and portfolio management, from strategic goalsetting and alignment to the latest thinking on postmortem processes.The book shares insights from multiple disciplines, including psychol-ogy, to explore the most effective way to think about a project portfolioin an organization. They will understand how technology can be usedto support these efforts and magnify the benefits of a well-functioningorganization.

Case studies provide examples from different industries and geogra-phies to highlight the real-world implementation and best practicesaround the concepts discussed.

Key questions at the end of each chapter provide a mechanism forthe executive to tie the content in the chapter back to their organization,and references are provided for some of the more technical conceptsdiscussed.

The IT Professional

The IT Professional will learn more about the business context of projectportfolio technology and best practices for successful implementationfrom the numerous case studies. The range of the case studies provides


PREFACE xi

a way of thinking about how systems can be refined and tailored to theneeds of different groups and teams.

The final chapter discusses future changes in the project portfoliomanagement discipline, while the later chapters examine the link be-tween project portfolio management and other systems and tools.

The Project or Portfolio Manager

The book offers insight into the broader strategic context of project andportfolio management and ways to grow support and enthusiasm forboth the process and technology within the organization. Case stud-ies enable learning from other organizations, and the book contains anumber of tips and tricks that the project or portfolio manager will finduseful in their day-to-day role to align their work with the key goals ofthe business they support.


xii


Acknowledgments

This book is dedicated to Jamie Morris for her tremendous supportduring my writing of this book. I started on this book before we wereengaged, and by the time it goes to print, we should be married.Many thanks to Henry Moore, who provided all the illustrations.

Thanks especially to Joy Moore, Richard Moore, and Charles Moore forall their support.

Thanks to Julian Tydeman for writing Chapter 11.Thanks, particularly, to those who spent time reviewing the

manuscript, making numerous valuable suggestions: Lori Birtley,Magnus Holmlid, Rudi van den Berg, Denis Gaynor, Craig Kilford,James Butler, and the ever-resourceful Marc Gawley.

Thanks to everyone else who helped make this book possible throughtheir enthusiasm, perspectives, and support: Tim Burgard, StaceyRivera, Jan Shanahan, Sam Hickman, Juliana Aldous, Tom Tenazawa,Kris Tibbetts, Sam Guckenheimer, Hilary Long, Tad Haas, ChristophFiessinger, Scott Gordon, Lisa Snyder, Rex Foxford, Jamie Eddis, JillCampbell, Will Holmes, Anna Hatt, Gary Cooper, Sandeep Mangla,Lloyd Stanley, Richard Toledo, Geoff Russell, Doug McCutcheon, Stu-art Brown, Peter Grady, Pontus Pettersson, Doug Slater, Brian Nowak,Seth Patton, Ludovic Haduc, Keshav Puttaswamy, Alice Wignall, JamesHatt, Anthonie Wain, Oliver Mears, Hirotake Abe, Tatsuro Sako, StuartBrown, Ben Chamberlain, and James Brooks.

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xiv


Introduction

Organizations that outperform do so because of a combination ofstrong execution and great strategy. Lack of either results in failure.Effective portfolio management helps achieve outperformance,

making your strategy real through organizational change. Significantadvances in technology have made portfolio management an area wheretechnology can enable a truly productive organization.

Project management is a challenging discipline, but relatively well un-derstood. Realizing the full benefits of portfolio management is harder,partly because the technology has evolved in recent years so the oppor-tunities for advancing portfolio management are not well understood,but also because implementing a portfolio management process can be-come complex. To minimize this complexity, it is necessary to approachportfolio management in a well-phased, results-oriented, and inclusivemanner.

Portfolio management software is part of a larger business process,as is most enterprise software, and to be broadly successful, portfoliomanagement must reflect that broader process. No one expects softwarealone to create organizational change, but the challenge of introducingportfolio management within an organization is often underestimatedand oversimplified. Knowing where technology can assist, and what or-ganizational processes are required, is critical to portfolio managementsuccess. This is particularly true in the context of the rapid innovationrelated to portfolio management. Long term, technology and organiza-tional process must match. Yet there are situations where technology canserve as the catalyst for organizational process improvement.

A key area for improvement is proposal submission. Project ideas,often called project proposals, within organizations are frequently ad hocand lack formality. Lack of a well-thought-out process will reduce the

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xvi INTRODUCTION

number of proposals, or inputs, into the portfolio selection process.As with most processes, reducing the number of inputs can reduce thequality of the outputs. Having a limited list of ideas hampers any projectportfolio. In the extreme, if the number of ideas you have matchesthe number of projects you can complete, then the portfolio selectionprocess is obsolete. Without a list of ideas larger than you can do, youcannot make trade-offs between ideas. You would just implement allideas, and the quality of the portfolio will suffer.

There is no shortage of innovative talent within the organization.The challenge is to harness this talent effectively. It is efficient to harnessthis asset, which organizations already have but are not fully using.Harnessing innovative ideas is challenging, but, if done well, it can be arewarding part of everyone’s job.

A robust portfolio selection process is a valuable component of thisprocess. In order to achieve this, projects must be aligned with thestrategic goals of the business. Ad hoc selection processes will not yieldthe best outcome and will not manage resources effectively. Makingcritical changes to portfolio selection ensures that all projects targetresults consistent with the organization’s strategic direction.

The power of technology can support the project and portfolio man-agement process. Communication is key and has multiple benefits, in-cluding avoiding duplication of effort, better knowledge sharing, andfaster decision making and information dissemination. Workflow canunderpin project processes and reduce overhead. Workflow can also helpspread and entrench best practices within an organization. Technologycan drive transparency across the portfolio process. The importance ofa transparent organization goes beyond portfolio management. Trans-parency can drive broad acceptance of the portfolio management pro-cess. Ultimately, portfolio management software with proper training,adoption, and facilitation offers many opportunities for an organiza-tion to become more productive by focusing on the right objectives andexecuting them well.

The online resource associated with this book is www.strategic-ppm.com, which contains further detail on many of the topics discussed.

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C H A P T E R 1Obtaining the Best Ideas

Innovation is the central issue in economic prosperity.Michael Porter

THE COST OF WASTED IDEAS

In any organization, every employee possesses a unique viewpoint. Theseviewpoints create a tremendous opportunity. Under Toyota’s productionsystem, which is seen as world class, not utilizing these employee ideasis actually seen as a form of waste (Ohno, 1988). This waste is placed inthe same category as using more raw materials than are required, or theinefficiency of having to repeat a process due to a poor quality outcome.Thinking of failure to act on employee ideas as a form of waste helps todefine the opportunity for more effective portfolio management.

Employees have many ideas for improvement of the work that impactsthem. Some of these may be raised in the form of questions to themanager. Why do we do it this way? Some may occur over lunch, in

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2 STRATEGIC PROJECT PORTFOLIO MANAGEMENT

hallway conversations, or while the employee is performing routinetasks. Many of these improvements can be made by employees on theirown without the need for additional resources. Some of these ideasmight entail 20 minutes of work to implement; some might require a20-year effort. Some ideas might not merit any action when comparedwith other business options that meet the same need.

Although there is clearly no shortage of ideas within an organization,unfortunately, these ideas are seldom captured in most organizations,except in the few cases where a handful of employees are sufficientlyentrepreneurial to drive their own ideas through to implementation.This can happen in spite of the organization, rather than because of it.Organizations are effective at focusing employees on their daily tasks,roles, and responsibilities. Organizations are far less effective at capturingthe other output of that process: the ideas and observations that resultfrom it. It is important to remember that these ideas can be more valuablethan an employee’s routine work. Putting in an effective process forcapturing ideas provides an opportunity for organizations to leverage aresource they already have, already pay for, but fail to capture the fullbenefit of—namely, employee creativity.

To assume that the best ideas will somehow rise to the top, with-out formal means to capture them in the first place, is too optimistic.Figure 1.1 identifies the risks of such a process. This Darwinian view ofthe process, or of organizations, may work for a subset of ideas, but manyof the ideas lost along the way have significant merit and do not get im-plemented for other reasons, primarily because the junior employee hasno easy way to communicate an idea to the broader organization. Also,to borrow another idea from the natural sciences, rejected project ideasmay be useful in the future as the starting point for new and innovativeproject ideas. If they are not captured, this cross-pollinating betweendifferent ideas cannot occur. Organizations must drive innovation toremain competitive, yet they often fail to take advantage of the resourcesthey have to make that happen.

Historically, capturing, ranking, and processing these ideas in a sim-ple way across a broad network of employees would have been a majorundertaking. But today with simple, portal-based solutions combined

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