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									Project Portfolio Management
    Tools and Techniques
           February 2003

     Christian Rosenstock, PMP
     BNY Clearing Services LLC
                                           Agenda
                   Context and Portfolio Management
                       Top-Down
                       Bottom-Up
                       Blended
                   Categories of Metrics
                       Value / Cost Performance
                       Strategic Alignment
                       Continuous Improvement
                   Examples and Application


February 2003              Project Portfolio Management   2
                          Context and Portfolio
                             Management
                   Portfolio Management must be designed
                    to fit the context, the environment
                   Choose metrics that are meaningful
                       Product vs. Operations
                       Strategy
                       Consider who is making the decisions
                   Know the disposition of the decision
                    makers
                   Use what will work
                    (even if it is not the best)
February 2003              Project Portfolio Management        3
                                Context and Portfolio
                                   Management
                Three styles of Portfolio Management *
                 Top-Down
                  Start with Strategic Objectives / Budgets
                 Bottom-Up
                  Start with Ideas, From Anywhere
                 Blended




                * Source: Cooper, et al. Portfolio Management for New Products. 2001


February 2003                      Project Portfolio Management                        4
                        Context and Portfolio
                           Management
                   Top-Down




                   Bottom-Up




                   Blended


February 2003             Project Portfolio Management   5
                                Categories of Metrics

                    Value / Cost Performance
                     Spending and returns across portfolio *
                    Strategic Alignment
                     Scoring against stated strategic objectives
                    Continuous Improvement
                     Because Portfolio Management works at
                     all phases of the life cycle **

                * Source: Popper, Charles. “A Holistic Framework for IT Governance.” 2000
                ** Source: Ausura, William. “Pragmatic Portfolio Management.” 2002
February 2003                      Project Portfolio Management                             6
                                Categories of Metrics

                    Top Performers across multiple industries
                     use Strategy analytics the most
                    Poor Performers across multiple
                     industries use Financial analytics the most
                    Top Performers use a good blend of
                     portfolio analytics
                    78% of companies surveyed use Financial

                * Source: Cooper, et al. Portfolio Management for New Products. 2001


February 2003                      Project Portfolio Management                        7
                       Categories of Metrics

                Value / Cost Performance
                 Not always about ROI

                 Points out where the company is spending

                 Indicates returns that can be expected

                 Can be used to compare how spending

                  compares with company history or
                  competitors


February 2003           Project Portfolio Management    8
                                Categories of Metrics

                Strategic Alignment
                 Measures strategic fit of projects and

                  portfolios with stated strategic objectives
                 Requires subjective scoring

                 Scores should be assigned by governing

                  committee that makes go/kill decisions*


                * Source: Cooper, et al. Portfolio Management for New Products. 2001


February 2003                      Project Portfolio Management                        9
                                Categories of Metrics

                Continuous Improvement
                 Identifies level of “operational

                  excellence” in the management of the
                  portfolio*
                 Less focused on what projects to choose

                 More focused on managing the portfolio

                  and project processes

                * Source: Popper, Charles. “A Holistic Framework for IT Governance.” 2000


February 2003                      Project Portfolio Management                             10
                        Examples of Portfolio
                         Management Tools
                Objectives Matrix
                 Score each project against stated strategy

                 List Strategic Objectives in left column and
                  Projects in top row




February 2003             Project Portfolio Management           11
                       Examples of Portfolio
                        Management Tools
                Objectives Matrix
                 Row scores reflect the emphasis placed
                  on each strategic objective for proposed
                  portfolio
                 Column scores reflect how much a project
                  contributes to the strategy
                 Weighting can be applied to objectives to
                  make project scores more accurate, but it
                  will distort strategic scoring

February 2003           Project Portfolio Management    12
                          Examples of Portfolio
                           Management Tools
                External Impact Matrix
                 Makes use of bubble charts

                       Advantage: increased data can be shown
                       Disadvantage: are you ready for it?
                   Shows customer perception, as well as
                    competitive insulation
                   Works best in Bottom-Up environments
                    where lots of ideas need to be compared

February 2003              Project Portfolio Management      13
                Examples of Portfolio
                 Management Tools




February 2003    Project Portfolio Management   14
                Examples of Portfolio
                 Management Tools




February 2003    Project Portfolio Management   15
                          Examples of Portfolio
                           Management Tools
                Estimated Commercial Value (ECV)
                 A financial metric for projects that have a

                  commercial / marketable deliverable
                 Improves upon NPV

                       Incorporates Probability of Commercial
                        Success and of Technical Success
                       Also includes cost of launch and
                        remaining development costs
                   Not used for non-market projects
February 2003              Project Portfolio Management      16
                      Examples of Portfolio
                       Management Tools
                Estimated Commercial Value (ECV)
                ECV=[(NPV*Pcs-C)*Pts]-D
                 NPV=Net Present Value

                 Pcs=Probability of Commercial Success

                 C=Cost of Launch

                 Pts=Probability of Technical Success

                 D=Remaining Development Cost




February 2003           Project Portfolio Management   17
                       Examples of Portfolio
                        Management Tools
                Strategic Bucket Budgeting
                 A secondary layer of portfolio decision
                  making (usually behind a layer that
                  prioritizes projects in each bucket)
                 Helps determine what projects make the
                  cut
                 Works best in companies that organize
                  and budget by Business Unit or product
                  line and use Top-Down planning

February 2003           Project Portfolio Management    18
                      Examples of Portfolio
                       Management Tools
                Strategic Bucket Budgeting




February 2003           Project Portfolio Management   19
                                Examples of Portfolio
                                 Management Tools
                Effort by Strategic Category
                 A simple tool, easy to use

                 Display staff allocation to each strategic bucket

                 Use a pie chart

                 Technique used by AlliedSignal-Honeywell and

                  others*
                 Can be done in Excel so it is dynamic and useful

                  during planning sessions

                * Source: Cooper, et al. Portfolio Management for New Products. 2001


February 2003                      Project Portfolio Management                        20
                Examples of Portfolio
                 Management Tools




February 2003    Project Portfolio Management   21
                      Examples of Portfolio
                       Management Tools
                Internal vs. External Impact Matrix
                 Excellent comparison of internal and

                  external focus
                 Works well in blended environments

                  where the external ideas are Top-Down
                  and the internal are Bottom-Up




February 2003           Project Portfolio Management      22
                Examples of Portfolio
                 Management Tools




February 2003    Project Portfolio Management   23
                       Examples of Portfolio
                        Management Tools
                Mortality Rate Analysis
                 A tool for monitoring continuous
                  improvement of decision making
                 Indicates healthy funneling

                 Can be a starting point to “throw away”
                  cost analysis




February 2003           Project Portfolio Management    24
                      Examples of Portfolio
                       Management Tools
                Mortality Rate Analysis




February 2003           Project Portfolio Management   25
                      Examples of Portfolio
                       Management Tools
                Mortality Rate Analysis




February 2003           Project Portfolio Management   26
                       Examples of Portfolio
                        Management Tools
                Other Analytics
                 Portfolio Value vs.                  Launch Pipeline
                  Cost                                  Calendar
                 Capital Expenditure                  Market by
                  vs. Non-Capital                       Technology Newness
                 Effort Hours and ROI                  Risk vs. Innovation
                 Strategic Impact                     Minimum
                  Matrix                                Requirement
                 Risk vs. Return Chart
                                                        Checklist
                                                       And more . . .
February 2003            Project Portfolio Management                   27
                                        Wrap Up

                   What is most important is that you do it
                   Pick the analytics that fit your business
                    and company
                   Find what works / is accepted, and use it
                    consistently




February 2003             Project Portfolio Management     28
                               The End



                      Questions?




February 2003   Project Portfolio Management   29

								
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