PROJECT PORTFOLIO MANAGEMENT: THE ISSUES, CHALLENGES, BUSINESS OPPORTUNITIES AND FUTURE TRENDS

Transcription

1 PROJECT PORTFOLIO MANAGEMENT: THE ISSUES, CHALLENGES, BUSINESS OPPORTUNITIES AND FUTURE TRENDS INTRODUCTION Berkshire Consultancy Ltd, brought together a round table of senior managers from FTSE 100 companies. The roundtable followed three key themes: 1. Issues and challenges for companies seeking to implement PPM 2. Ways of fine tuning PPM practices to make a lasting business impact 3. PPM trends in the next five years Below is a summary of the debate with some key statistics, case histories and insights into this growing area. KEY STATISTICS 50% of global 2000 companies have adopted some form of PPM implementation yet less that 10% of the companies execution drove the portfolio value up (some by as much as 30%) while others became just another failed project* Companies implementing PPM processes and tools see a 10-15% cost reduction and the ability to free up capital for new investments** *Meta group quarterly snapshot, January 2004 **Garner PPM show, June 2005 CHALLENGES Customers Projects are often driven and defined by customers who set the milestones, schedules etc. this leads to difficulty in defining what a project is internally as each case may be different. In some industries such as defence and rail there tends to be a monopolistic customer which will dictate the kind of projects. Project timescales reflect product lifecycles and can be up to 40 years long. Here the companies using PPM as a planning tool can be affected by customer prioritisation The other end of the spectrum is a three to four month project timescale e.g. mobile sector or financial markets. Here companies using PPM process perceive the product lifecycle is too short to use the process. However, for both long and short term projects there is a perceived PPM challenge but in reality this can be addressed. 1

2 Cultural workforce There is a big brother perspective. PPM makes it difficult to hide mistakes and the workforce hasn t accepted PPM as a valuable process. Cultural management Management need to take ownership of PPM and need a strong capability to sell its benefits to board level. Currently senior management are not buying into the process because they may get exposed. If a PPM process is in place politics and manipulation around pet projects becomes much more difficult. They ve heard more failure stories than success success is found more within the IT sector and not yet enterprise wide. Background of senior management is key. For example, a large firm of accountants may like imprecision because it means individuals can t be held responsible for failing projects. PPM brings a level of detail that may create a fear factor amongst some senior managers. Cultural hurdles are the biggest road block to implementing PPM. There is an underestimation at senior level as to how big these barriers are. Knowledge There is a lack of knowledge from consultants in this area, organisations implementing PPM are looking for a confidence boost from consultants There is too much reliance on consultants to solve the problem. Implementation of PPM is a change management process which requires senior executives to champion the change. PPM has been advocated by software consultants, but often they are not equipped to address issues around change management. The consultancy market for PPM tends to use a bus load of consultants for large software deployment and this is a dead end. Some PPM vendors design at a very high level of maturity (e.g. level four of five) but the majority of companies are below level three. OPPORTUNITIES Domain based approach One large insurance firm said that it implemented PPM practices in a phased approach and that it now finds senior management are utilising the resulting data and including it in their reports to the board. Examples of successful approaches come from incremental implementation. This allows cultural issues to be solved on a domain level and for the success to be sold upwards throughout the 2

3 organisation. Best practice examples can be converted into quantifiable results that management can see the value of. A lot of companies are concerned because they perceive PPM as a large systems software deployment. The domain based approach is now challenging large systems deployment. Addressing change Creating a change board has been used successfully in financial services and insurance businesses. This empowers project managers to own projects, weed out inefficiencies and duplication and provide a significant contribution to the organisations financial health. Change management needs to be represented at board level. Risk and compliance are represented, why not change? One large insurer set up a change programme in 2000 which helped it immediately address cultural issues. From this a corporate vision was agreed. Resource management justified buying the PPM tools needed and now the company can review projects as a true portfolio. It has created a mini revolution and is now being looked at as a best practice case to roll out across the group. Last year the change team was asked to cut a certain percentage from IT projects which turned out to be a time consuming process. This year the team could immediately react because projects are accurately tracked and forecast through PPM. Management issues Management need to review all existing projects in relation to strategy and if they are not contributing to strategy, drop them. Benefits management is important. In order to demonstrate that PPM is much more than an accounting tool organisations need to make the business case for the benefits that PPM can bring. It needs to be part of the metrics that senior management use to measure the business. Bespoke systems and tailoring create problems and also allow vendors to make more revenue because they sell components. A much sounder approach would be to let the PPM tool dictate how projects are defined and tracked rather than fitting the tool to the project. The rigour of data that PPM can provide is beginning to break down walls at board level. The process itself gives more openness of the authorisation process and less ambiguity in work authorisation. The next step is to get full engagement. Success of PPM has to mean something to the individuals who are making decisions for the business. PPM needs to move into an area where businesses set goals around it. The PPM process ensures companies spend scarce resource on the work of most value. Gain acceptance from senior management in terms of converting PPM outcomes into stakeholder value. PPM is getting popular as a way to 3

4 manage business investment in the same was financial portfolio management has been popular in the past. CASE HISTORIES Examples of where portfolio project management would have diverted a crisis PPM can be done at a macro or micro level. The two examples below are of the macro level. The essence is that PPM would have enabled the prioritisation of decisions in relation to strategic objectives. The value of PPM is that the process is scaleable to suit either micro or macro level approaches - scalability is key because it helps inform the right decisions. 1. The UK ship building industry order book will soon cease to exist because the MOD commissioned one large order for all the ships it requires. Managing the project as a portfolio could have sustained the industry and kept ship builders in their jobs. 2. London City Airport can only be serviced by a single plane, the BEA 146, and may close because the plane is no longer in production. Airbus is in trials to fly its A318 to City Airport but no passenger flights have been scheduled. Project Portfolio Management would have highlighted this planning oversight. SUMMARY CONSENSUS Cultural hurdles need to be addressed, senior buy in sought. Take a domain based approach and scale PPM up through the organisation. Putting the business case forward and managing cultural change Process and tools must work hand in hand with accountability, stakeholder value and motivation being key factors. Companies are moving towards a project-based approach where projects make strategies happen. As a result companies have strategic spend. The outcome of projects will have a strategic impact on the organisation. The capacity for PPM to manage the strategic spend and impact will provide competitive advantage in the market place. As a result PPM will become an enterprise-wide responsibility. 4

5 BIOGRAPHY SHAN RAJEGOPAL is a practitioner, academic and consultant with over twenty year's industrial experience covering clients in various sectors. He has held senior positions in culturally diverse organizations in Asia, North America and Europe and now works for Berkshire Consultancy Limited conducting project portfolio assessments and implementation. His main focus in project portfolio management is bridging the gap between strategy and effective execution. Rajegopal co-authored the book Sun Tzu and the Project Battleground published by Palgrave Macmillan in