White paper Project portfolio management

Transcription

1 White paper Project portfolio management The right projects the right way, with the right pay-off - Projects & Change Right project Right way Right pay-off

2 1 Contents Page 1 Introduction 2 2 Our vision on project portfolio management 3 3 The process flow 5 4 The business case 7 5 Implementing & improving PPM 10 6 Cases: some of our expertise 13 7 Our portfolio management team 15 There is nothing quite so useless, as doing with great efficiency, something that should not be done at all Peter F. Drucker.

3 The right projects the right way, with the right pay-off - Projects & Change 2 1 Introduction Changes are managed most effectively and efficiently in the form of programs or project. People say: change is the only constant. The environment is constantly in motion: clients demand better service, competitors introduce new products, and governments design new compliancy rules. Organisations will need to improve in order to stay ahead or at least retain their current position. In addition, a company s ambitions will refrain it from not changing at all. A good sound organisational strategy therefore contains both operational goals and change goals. In other words: an organisation sets targets for business-as-usual and separate targets for the changes to be made. Constant changes to regular operations are crucial to stay in business (continuity) and to stay on top (improvement and innovation). A second key element of organisations nowadays to be in control. Not only of their daily business, their risks and their finances, but also of the vast amount of projects, programmes and other changes. Programs managers and project managers will ensure changes are delivered in time, at the right cost, at calculated risks and those they are of the right quality. For short: they make sure that programs and projects are done right. Project Portfolio Managers will ensure the correct initiatives are selected in the project portfolio to maximise the chance of realising the company s ambitions. For short: they make sure that the right programs and projects are done. Projects & Change advises and supports organisations in the set-up, professionalization and management of their projects, programmes and entire project portfolio s. A team of project professionals act as project managers, advisors or project support to help organisations realise their ambitions through change. Our knowledge and experience with methodologies such as IPMA, PMBOK, Prince2, MoP and P3O provide merely as a basis for a customised, pragmatic approach, tailored to our client s needs. We have experience in various industries, such as healthcare, utilities, telecommunications and financial services. Our services focus on: Project Portfolio Management (PPM): a process of subsequent activities which ensures that the right projects and programs are executed the right way and that the intended benefits are realised. Project Control and Project Management Offices (PMO s): an organisational entity which supports individual projects and/or entire project portfolios by providing services, professionalising people and processes and providing management with their required information. Change Management (CM): a dynamic process, enabling organisations to successfully move from the current state to a new status quo. This white paper focusses on Project Portfolio Management and describes our vision, approach and experience on this topic.

4 The right projects the right way, with the right pay-off - Projects & Change 3 2 Our vision on project portfolio management But every organisation struggles with the fact that it is extremely complex to: decide which changes are the right ones to realise; make sure that programs and projects are done right and; manage benefits realisation. And that is where project portfolio management (PPM) comes in. Under the heading of this relatively new management discipline, much knowledge has been gathered on how to do the right programs and projects in the right way and with the right pay-off. And over the past decade large organisations all around the world have been putting that knowledge to the test, with success. In this whitepaper we will freely share some of our PPM knowledge and experience with you. Project portfolio management (PPM) is a process of subsequent activities which ensures that the right projects and programs are executed the right way and that the intended benefits are realized. The input for the PPM process is information on the external environment of the organization, such as market information and regulations, and information about the organization itself, e.g. strategic, tactical and operational plans. In the process flow three main steps may be distinguished: 1 composing the portfolio; making choices on what to do; 2 planning the portfolio: deciding on when to do the programs, projects, and related activities; 3 adjusting the portfolio: making alterations during the portfolio execution.

5 The right projects the right way, with the right pay-off - Projects & Change 4 The output of the PPM process is -in broad outlines- various forms of enriched data; information and knowledge on status; progress and composition of the project portfolio, which in turn serves as input for other organizational processes. Coordination is needed to control execution and performance of the process. Support enables the process to run smoothly. This process, like all organisational processes, needs be under permanent development.

6 The right projects the right way, with the right pay-off - Projects & Change 5 3 The process flow Funnel The process flow of PPM can be compared to a funnel, as pictured below. Many ideas for changes can be collected based on ambitions, market opportunities, regulatory changes, etcetera, but transforming all those ideas into actual programmes and projects is not realistic. Working agile/scrum based may enable you to start (far) more projects and end them more quickly, but you are going to need a funnel anyway. But granted, a more flexible one. Strategic alignment For starters, programmes and projects in which an organisation is going to invest, need to be strategically aligned. Or in other words: they need to contribute to realising the strategy of the organisation or else they need not be not considered at all. An organisation needs to ask itself the question: based on our strategy, do we really want or need these programmes and projects? Viable & feasible Next, programme and project initiatives need to be screened carefully on viability and feasibility. In other words: if we want this programme or project, taking into account our strategy and risks, can this be done realistically? And: If this programme or project could be realised, can we do this within our budgetary, human resource and change capacity constraints? Controlled execution Furthermore, some ideas look good at first, but along the way things often turn out not to be all that we expected. The execution of programmes and projects needs to be monitored and adjustments need to be made: Priorities will change. Programmes and projects will be stopped or hurried along, investment budgets will be higher or lower, etcetera.

7 The right projects the right way, with the right pay-off - Projects & Change 6 Managing the benefits The light at the end of the funnel is that projects deliver capabilities and that the business as usual can benefit from those. Tracking the actually realised benefits can be helpful for knowing where an organisation stands with the realisation of its strategy. It also produces highly useful knowledge that may be used for improving or innovating project portfolio, programme and project processes and, often forgotten, the processes on the receiving end, the business-as-usual.

8 The right projects the right way, with the right pay-off - Projects & Change 7 4 The business case It depends Let s get down to business. How much does PPM cost and what is the return on investment (ROI)? Obviously, the exact answer to this question is different for every organisation. Implementing PPM and managing the project portfolio in a large, complex company will cost more than in a small organisation. The returns also depend on many different variables, e.g. the number of resources involved in programmes and projects, and their strategic importance. So the question how much PPM costs and its ROI for a specific organisation cannot be answered beforehand. What we can do, and will do below, is give you some facts to help you compose a business case for your organisation. Readers note: Don t stop reading after the costs parts, because the good news is: is it worth the investment, not just significantly but substantially. Costs Based on our own experience and what we hear in the market, an organisation may implement PPM in 100 days. This does not mean that the PPM process is running perfectly smooth, but in about three months most organisations will be able to have PPM up and running. If an organisation decides to do this without any outside help and without using project (portfolio) management applications, then it only will cost time of people already on the pay-roll. If an organisation chooses to get outside help, the consultancy fees need to be added to these costs. For the first few months we would not recommend using IT tools other than Excel of Access, but if organisations choose to do otherwise costs for installation and licences have to be taken into account. Once an organization has the PPM process into place as a rule of thumb regarding the costs 3 per cent to 5 per cent of the total annual budget for programs and projects can be used. ROI Various studies have shown that PPM can contribute double digit percentages in cost savings on programs and projects and that PPM can significantly increase returns. High level, consider how much an average organisation could profit of: doing the right projects (and not starting projects that shouldn t be done at all); doing the programmes and projects the right way (and not doing programmes and project in many different ways); doing them with the right pay-off (and not just any or no pay-off).

9 The right projects the right way, with the right pay-off - Projects & Change 8 And more in detail, consider how much most organisations can win by: stopping programmes and project when they turn out to be e.g. less successful than expected; upscaling projects when they turn out to be more successful than expected; assisting project managers with lessons learned from numerous projects; better insight into the projects overlap, dependencies and constraints; more efficient resource utilization; enhanced transparency, accountability and corporate governance; a better understanding between the business as usual and the programmes and projects. And even more concrete are the numbers by Forrester and Gartner that dr. Shan Rajegopal, one of the leading authorities on innovation, PPM and benefits management, quotes in Portfolio Management (2012): 1-5 per cent reduction in annual project costs 1-5 per cent reduction in annual resource costs per cent reduction in project cost overruns per cent reduction in project- and portfolio-related operational costs 5-8 per cent reduction in lifecycle investment costs per cent reduction in application maintenance costs Dr. Shan Rajegopal also quotes the following benefits from a recent IDC Survey (2011) of organisations that had invested and been successfully using project portfolio management: effective use of budget: cost per project reduced by 37 per cent; delivery of projects with real business value: redundant projects dropped by 78 per cent; effective use of staff resources: IT staff productivity increased by 14 per cent; improved project success: project failure rate dropped by 59 per cent; return on PPM investment: payback occurred in 7.4 months. And even more positive numbers are brought to the table by Mike Menard, Co-Founder of the GenSight Group (a Fortune 500 PPM consultancy firm and PPM-system vendor). In A Fish in Your Ear: The New Discipline of Project Portfolio Management (2012) he names amongst others the following benefits of PPM: Just six months following their implementation of a PPM process, a division of Johnson & Johnson saved 7.5 million dollars by eliminating poorly performing projects from their portfolio. Two years is a great payback on any venture. Johnson & Johnson achieved a payback less than one month on the investment made in implementing their PPM capability. Following their first global project portfolio analysis, Natura Cosmetics discovered the poorestperforming 30 per cent of their projects were consuming 27 per cent of the company s research and development resources. They offered virtually no increase in sales and profitability. They cancelled those plans and are now reallocating resources to their higher-performing projects. Another global corporation s initial PPM analysis revealed that 55 per cent of their supply-chain projects were creating 98 per cent of the portfolio value. Said another way, 45 per cent of their portfolio of projects were contributing only a shocking 2 per cent of value. They eliminated over 40 per cent of this portfolio and went on to accelerate annual sales growth by 24 per cent.

10 The right projects the right way, with the right pay-off - Projects & Change 9 Concluding The only conclusion can be that PPM is worth the investment for a lot of organisations. About 75 per cent of all organisations already have taken steps into the right direction and claim to practice some form of PPM. Though, to reap the full benefits of PPM the process cannot be taken lightly by process owners and managers, should be implemented in its entirety, and be under constant development, i.e. be improved and innovated.

11 The right projects the right way, with the right pay-off - Projects & Change 10 5 Implementing & improving PPM In about a quarter of all organisations PPM still is absent. In probably 80 per cent of those cases PPM need to be implemented, because these organisations are no different than other organisations. They too need to make sure that they do the right things in the right way and with the right pay-off. Most companies already have put some PPM mechanisms in place, but most are also still are unable to produce benefits as presented in the previous chapter. The might have to take their process maturity to a higher level, e.g. from CMMI lever 3 to level 4, or more specific improvements on subprocesses may be necessary. For the initial implementation of PPM as well as for the improvement of already existing PPM process, or parts thereof, we use the same approach in broad outlines. This approach is described below, using only the term improvement because constantly writing improvement and implementation will not make the text any better or easier to read. Besides, every company has some form of PPM. Somewhere, somehow, someone is deciding on which project start and stop. Improve this (chaotic) process and PPM is implemented. 5D cycle For improving PPM, we use the 5D cycle. The model is based on Demming s PDCA cycle, but the 5D cycle puts more emphasis on getting support for the improvement (Dedicate) and on getting the improvement to stick (Defend). Every step in the process can best be illustrated by the core questions that have to be answered in that phase. The core questions are: 1 Discover: Where is room for improvement? Or in other words: What is exactly the problem? Why does this problem need to be tackled? What (root) causes can be identified? Who is involved? Who needs to be involved? 2 Design: What solutions are possible? What is the best solution? How can this solution be elaborated/ tailored? Who has to be involved? 3 Dedicate: Who needs to give feedback on the designed solution? Who has the final say on the design? Who decides on starting implementation (Do)?

12 The right projects the right way, with the right pay-off - Projects & Change 11 4 Do: How is the solution introduced in the standing organisation? How is the solution (lifecycle) managed after introduction? 5 Defend: How to ensure that people keep working with the solution? What is done to tackle remaining resistance to the solution? And back to: 1 Discover: Does this solution actually solve the problem? Has resistance to the solution died down? Are new problems caused by this solution? And so on. Always start by discovering Every improvement endeavour should start by discovering what is still covered, namely the real problem(s), the cause(s), the ambition(s) driving the improvement effort, et cetera. The uncovered information will obviously be helpful in the next steps of the process, because e.g. how can you design a good solution if you do not exactly understand the problem? On top of that, taking time to discover what is really going on helps in another way: improving a situation or solving a problem starts the moment you start analysing it. Very eloquently, the Enterprise Portfolio Management Council states that, Conversations are the seeds of change. And discovering a problem, or in other words: finding out where room for improvement exists, starts with conversations. The discoverer goes out into an organisation and starts talking to people about the (perceived) problem. That is when things already start to change. This effect is known as the Hawthorne effect. Design to fit The Design phase is the moment to involve everyone that needs to be involved; not just those who have been involved in the previous phase. This is obviously important because usually two know more than one. This is also important because when people are truly involved in the design process chances are increased substantially that the end product will have their support. This is common (change management) knowledge, but unfortunately it is not common practice. Still, a lot of solutions designed in ivory towers strand somewhere further down the 5D-cycle. Dedication to the solution Dedication to a solution or improvement basically demands two things: Involvement and discipline. As stated previously under Design, it is important that all stakeholders are involved. Preferably, they are already involved in the discovery phase, but it is essential that everyone is involved in the design phase. All stakeholders need to be able to influence the design, so they can make sure their stakes will be taken into account. This does not mean that their stakes or interests will prevail, but at least they will know that they have been acknowledged. In the dedication phase, involvement also goes one step further: Everyone has to commit to the chosen and designed solution. All stakeholders need to formally decide, in the right forums, that they dedicate themselves to implementing the solution. And, just as important, some disciplinary measures must be put in place by the top of the organisation. If a solution is only endorsed by the bottom of an organisation, chances are that nothing will actually get done. Do what need to be done Once the dedication is there, things can get done. Often it is wise to act according to a (project) plan, but we always work under the motto: A good plan, violently executed now, is better than a

13 The right projects the right way, with the right pay-off - Projects & Change 12 perfect plan next week. (George S. Patton US general ( )) So we don t try to plan every detail. Not rigidity but agility creates results. Defend so changes endure From the beginning of the 5D cycle onwards, it is absolutely crucial to start thinking about how the improvement can be made to endure. In too many organisations improvements disappear as fast as they have been introduced, e.g. because the initiator or executive sponsor leaves. The Japanese have an appropriate proverb: Fasten your helmet after the battle. With this they mean that it might seem as if the battle is won, but more often than not it isn t. When an improvement is fresh out of the scaffolding, the time comes when those who have not fully accepted the new solution will start resisting. In other words: Remember to defend improvements to make them stick.

14 The right projects the right way, with the right pay-off - Projects & Change 13 6 Cases: some of our expertise Case 1 Situation The largest academic medical centre in The Netherlands, with over employees is transforming. The Dutch healthcare system is being transformed rapidly, leaving the medical centre with a great number of changes and improvement initiatives. In addition, a large IT-transformation and new housing projects were initiated. Task To manage their project portfolio, a project governance structure needed to be implemented, including a central PMO to support all projects and programs. The team designed the governance structure, the relevant processes and tools. In a later stage, a proof-of- concept for one of the lead PPM-solutions was supported. Action We made inventory of the projects which were running at that time, or would be starting shortly. We designed the project governance structure together with the key stakeholders, to align with the regular governance already in place. By using workshops, we defined project processes and tools, based on the organizations best practices but optimized with external examples. Based on the governance and processes, the POC was done, concluding the selected tool would be a good match. Result Due to internal restructuring and new management, the implementation of project portfolio management was put on hold. The PMO was implemented, but only with a limited scope of projects. Case 2 Situation A leading insurance company based in the Netherlands needs to be more in control. It provides its customers with Health, Life and Non-life insurance. The company serves about half of all Dutch households. Senior management needed to get a tighter grip on costs and benefits of projects and programs. Task The job was to provide the board of the devisions Pensions, and subsequently the board of the holding, with strategic, tactical and operational information on and advice with regards to their project portfolio.

15 The right projects the right way, with the right pay-off - Projects & Change 14 Action We set up the information processes for gathering progress information on programs and projects, developed project portfolio reports and designed the governance processes surrounding the project portfolio. Key success factors were that I made sure to involve all stakeholders (e.g. project managers, information managers, resource managers, Finance & Control) and that I based my solutions on sound theory but tailored them to be practical and pragmatic. Result The company got a project portfolio management framework that enabled the board to effectively and efficiently manage their project portfolio. Case 3 Situation One of the largest telecom providers in The Netherlands needs to transform. In an increasingly fast changing market there was a strong need to innovate and improve services. Furthermore, the many good ideas and project proposals did not find their way to management. Task Create visibility in the (innovation) project funnel and ensure that senior management is enabled to make timely decisions on the overall commercial roadmap. By improving the maturity of project ideas the intention was to reduce the IT development time and strongly enhance the go to market process, first time right. Action In order to achieve the desired result both structuring the content as well as (re-)structuring the process took place. By creating a market place for innovation and project ideas both virtually and offline (several alignment meetings) more understanding was created on the several demands and needs in the organisation. Secondly, restructuring the existing IT demand process into an market insights driven innovation process made sure coherent and timely decisions were possible. Result Clear decisions on which project ideas were to be executed and most importantly which ideas were not to be pursuit. Furthermore, by allowing input from throughout the company in the commercial innovation process, broader support and understanding was created in the execution of the company strategy.

16 The right projects the right way, with the right pay-off - Projects & Change 15 7 Our portfolio management team Maarten van Weeghel Associate Partner T +31 (0) E maarten.van.weeghel@conquaestor.nl Alexander Wierstra Senior Consultant T +31 (0) E alexander.wierstra@conquaestor.nl John van Rouwendaal Consultant T +31 (0) E john.van.rouwendaal@conquaestor.nl Maarten is thought leader Projects & Change in the Dutch office and brings over 15 years of experience in project and portfolio management. He has assisted clients in many different industries, varying from healthcare to banking. His role in an engagement will be to serve as your primary relationship contact and he will responsible for the process implementation. Alexander is an experienced portfolio and project management consultant. His expertise lies in implementing portfolio management and PMO s in both IT as well as commercial areas. His role in an engagement will be to ensure that your project portfolio can be directly linked to your strategy, by translating your instinct for growth in results through executing the right project. John is a general management consultant and highly specialized in project portfolio management. He has helped many different companies with various PPM challenges and regularly publishes articles on the topic. John is the chairman of the Dutch professional association for project portfolio managers (BVPPM). His role in an engagement will be to make sure you benefit maximally from PPM.

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