INCREASING THE STRATEGIC VALUE OF PPM THE KEY TO BUSINESS-DRIVEN PPM SUCCESS BUSINESS-DRIVEN WHITE PAPER SERIES

INCREASING THE STRATEGIC VALUE OF PPM THE KEY TO BUSINESS-DRIVEN PPM SUCCESS BUSINESS-DRIVEN WHITE PAPER SERIES

Introduction Every organization has strategic business objectives but those that successfully use PPM (Project and Portfolio Management) to achieve those objectives are rare. More often than not, PPM is applied to tactical aspects of project execution and falls short of reaching its full business and strategic potential. In fact, up to 80% of enterprises will fail to achieve the true value of ongoing IT portfolio management based on a failure to factor in organizational needs, values, culture and capabilities into the discipline s roll out and execution. 1 Traditional PPM defines success as on time/on budget project delivery at the expense of critical business outcomes, like increasing customer satisfaction or being first to market. Part of the reason can be attributed to PPM tools that do a poor job of supporting top down, business oriented objectives. But a big bang approach, as compared to an incremental method, also contributes by suppressing widespread user adoption. An all or nothing model also delays the achievement of value and puts the deployment at risk. As a result, the history of PPM is littered with failed implementations that never fulfilled the promise to generate business value, execute against strategy or establish competitive advantage. Today, organizations are increasingly turning to PPM to drive strategy and change. By applying a business driven approach to PPM, Project Management Offices (PMO) can ensure their activity is aligned with the strategic objectives of the business and maintain relevance in the dynamic economic and competitive landscape. A Business-Driven Approach to PPM What do we mean by business driven? PPM is business driven when portfolio investment is closely aligned with corporate performance goals when resources are allocated to projects that are strategic to the business and when governance processes and tools are focused on helping team members work more productively, rather than imposing undue administrative overhead. A businessdriven approach recognizes that PPM challenges are not limited to IT. It facilitates better results in any project intensive area whether that s supporting a PMO, accelerating new product introductions, driving performance improvement initiatives or running IT more efficiently by: Aligning Portfolios with Business Priorities for an investment strategy that targets performance goals, reflects corporate objectives, seizes new business opportunities 1 Key Issues for Program and Portfolio Management Gartner March 2011 PowerSteering Software. 866-390-9088. www.powersteeringsoftware.com 2

and ultimately achieves competitive advantage. Allocating Resources Strategically to ensure that programs are vetted for return, strategic direction and capacity before resources are deployed. This gives executives the flexibility to adapt to internal and external change, manage tradeoffs and maximize portfolio value. Encouraging Adoption and Productivity so that cultural resistance and poor change management do not become obstacles to success. Making business outcomes an integral part of the project portfolio allows you to quantify the business value of PPM for senior management and track achievement of performance goals across the organization. In this way, the PMO becomes a strategic business partner and trusted resource to internal and external constituents alike Transform Your PMO from Tactical to Strategic PMOs are moving away from a bureaucratic project management orientation grounded in excessive time tracking and granular task management and evolving to more strategic and flexible approaches that adapt to changing delivery models across the organization not just in IT. Instead of striving to achieve an arbitrary level of a one size fits all maturity model, a business driven PMO augments capabilities over time in a manner unique to that organization. It is important to recognize that sustained PPM effectiveness is impacted by many different factors which we ll attempt to address. The importance of PMO executive sponsorship at the highest levels of the organization cannot be over emphasized. Where the PMO reports to matters. According to a recent Forrester Research report, there is a direct correlation between perceived value and proximity to the business. For example, only 40% of respondents indicated either significant or moderate value when the PMO reported to IT, compared to 55% when reporting into the Line of Business. Granted it may not be practical to make reorganizational decisions on the fly, but there are countless ways to ensure your PMO is business driven, consistently delivering value and perceived as strategic to your organization. Identifying metrics that are meaningful in terms of business outcomes is another distinguishing characteristic of the business driven PMO. Metrics are generally quantifiable business results like savings, revenue impact, increased customer retention, acquisition or expansion numbers or maybe accelerating time to market of new product launches. These examples are in contrast to the cost oriented, taskcentric approach of the traditional PMO, where measures tie solely to project PowerSteering Software. 866-390-9088. www.powersteeringsoftware.com 3

execution (status, cycle time, milestones). Keep in mind that the level of overhead that complex, task oriented systems impose can create an adoption backlash. The most successful programs avoid big bang deployments that wind up increasing risk and compromising user adoption and instead turn their attention to time to value and rapidly demonstrable business benefit. Traditional Tactical Cost-Oriented Task-Centric Big Bang Project Execution Compliance IT PMP Business-Driven Strategic Results-Oriented Portfolio-Centric Time to Value Project Selection Adoption Business User Align Portfolios with Business Priorities The greatest benefit to be gained from strategy driven PPM comes from the most controllable variables; selecting projects and managing the portfolio. After all, if you are working on the wrong projects, there is little point in improving efficiency you just get the wrong result faster! For an IT PMO to be business driven, it must evolve beyond simply tracking project status, time and costs in favor of business alignment, governance and benefits realization. With the focus on optimizing the strategic and financial value of the overall portfolio, it becomes clear that the truly critical processes are those concerned with: a) Prioritizing what gets into the portfolio b) Weighing new requests vs. in flight work, and c) Assessing the results and challenges of the portfolio on an ongoing basis. A continuous discipline of reviewing new and ongoing initiatives makes it clear which projects to keep and which to kill because they are no longer aligned with business priorities. PowerSteering Software. 866-390-9088. www.powersteeringsoftware.com 4

Consider this example of a leading financial services firm that implemented a topdown, strategy focused, portfolio management methodology. Each month business leaders met to review a list of prospective projects, scored and ranked on multiple dimensions, including strategic alignment, risk and business value, so they could make objective decisions about where to invest the portfolio. No longer were projects approved arbitrarily. Pet projects have disappeared. This PMO is in lockstep with the business, enjoys executive sponsorship and is focused on the right success factors: strategy and value. It s not surprising that the metrics tracked by the PMO are a good indicator as to whether it is tactical or business driven in nature. If you re attempting to measure project contribution to the organization s key performance indicators, incorporating some form of strategic alignment score in your portfolio investment selection process, and tracking forecasted and realized benefits at the portfolio level using financial metrics that your CFO would sign off on, chances are you re headed in the direction of business driven PPM. PMOs must continuously justify their value to garner sustained support for their structure and the processes needed to do project planning and delivery. By selecting the appropriate goals and publishing them, the PMO can demonstrate that the organization is reaching portfolio objectives 2 Measure What Matters and Keep it Simple Business driven PPM focuses on measuring what is important to the achievement of strategic objectives as well as the progress against project milestones. Execution level data tracks day to day performance and is operations oriented, whereas the strategy level metrics measure alignment with key business goals of the organization as a whole. The latter should be revisited frequently, identifying successes and failures, as well as market and competitive considerations that may not surface in daily operations. The best way to generate meaningful reports is to involve the senior team and ask what information they need to measure program effectiveness. Ask questions about which projects are the right ones, are we well prepared for change and what is the risk exposure. Always tie performance to the bottom line. If you drive your reporting from the core data that is critical to senior sponsors, it is likely that they will recognize the value in PPM and support your efforts. To this point, reports need to be quick to configure and easy to adapt as the demands of the business and external circumstances change. 2 Are You Ready to Transform Your PMO? Forrester Research, April 2011. PowerSteering Software. 866-390-9088. www.powersteeringsoftware.com 5

To identify the metrics that support business priorities, you will need to determine how the attainment of each strategic goal will be measured. One such metric is something we refer to as primary business value. For example, success can be defined in terms of savings, revenue generation, headcount reduction, an improvement in customer satisfaction, a decrease in process cycle time or whatever is key to your business. You will also want to estimate the expected cost of successfully executing the strategic goal. Here are some real world examples of business objectives that companies target to measure their portfolio success: Increase the number of new products launched by 25% Identify and eliminate redundant, non strategic projects to meet a 30% budget cut Improve patient care while reducing cost of delivery by 10% Decrease sourcing expenses by 24% Align process improvement portfolio with patient safety goals All too often, the rationale for why a project was selected in the first place is buried with the business case and never revisited. The projections need to become living, breathing criteria that are constantly examined to ensure the PMO is focused on the projects with the greatest return. This point goes back to the why PPM questions discussed earlier. Doing the right projects for the right reasons and killing off those that drift off the mark can make the difference between PPM success or failure for your organization. Finally, keep in mind that too much information can be counterproductive every bit of data you ask for and don t use can become the nail in the coffin of your PMO effort. Recognize that tracking metrics is all well and good, but is useless if the data is not used to make good decisions. Improve User Adoption and Productivity Research shows that the critical points of failure for PPM implementations are ease of use and adoption by the user community. Change management consistently ranks as the biggest hurdle to PPM and PMO success, according to research by analyst firms Gartner, Forrester and IDC. Yet many PPM software tools require a year or more to deploy and impose granular time tracking on unwilling users that impedes, rather than improves, team productivity. As a result, this adds to the cultural resistance facing the processes and tools championed by the PMO. PowerSteering Software. 866-390-9088. www.powersteeringsoftware.com 6

Demonstrating value quickly to users and management will grease the skids for PPM adoption across the enterprise and the sustained delivery of business value will support long term adoption. To get up and running quickly, we suggest you start by addressing existing processes that can generate results within weeks, add best practices in a phased roll out, and tweak methods and phases as you go. It doesn t have to be a multi year, bet the organization effort and many of our customers have had success with this crawl, walk, run approach. At Ingersoll Rand the CIO likes to call this the Potato Chip System. If users like it, they ll come back for more and won t be able to resist. Implementation Support Must Drive Business Benefits It is important to find the right tools to support business driven PPM for your organization and to make sure that they help, not hinder, the process. Software should mirror your governance process and drive standards and consistency that benefit every part of your company. More often than not, PPM software primarily designed for IT fails to meet the needs of business users. It tends to be too complex, too difficult to use and too hard to implement without demanding a major time and cost investment. Today s delivery models are changing and SaaS (Software as a Service) applications have been embraced by the market and are now available, or are being added, to many PPM vendor offerings. Cloud and SaaS applications allow the target environment to invest incrementally and readily add users as PPM expands into different functions and business lines while mitigating the risk and cost associated with on premise systems. Consider Applying a Business-Driven PPM Approach Sound portfolio investment decisions have always been steeped in business driven objectives: increasing competitiveness, profitability, or revenue growth. But what s new is that PPM tools have evolved to support these good practices throughout an organization. The benefits of PPM are no longer confined to IT but extend to many areas in the organization including new product development, performance improvement initiatives, customer retention and more. Business driven PPM enables a complementary approach and a way of thinking that is rapidly infiltrating the DNA of the successful PMO. PowerSteering Software. 866-390-9088. www.powersteeringsoftware.com 7

The imperative to show PMO value quickly cannot be over stated. In the Forrester 2011 report, Are You Ready to Transform Your PMO? all of the PMO leaders interviewed about the reasons behind their success held their positions less than four years, and most less than two. To garner executive support, the PMO needs tools that facilitate rapid adoption and demonstrate meaningful and quick results in the language of the business. With a top down approach to portfolio management, business driven PPM tools should allow you to identify the highestvalue initiatives that reflect corporate objectives and replicate these successful projects across the enterprise. PowerSteering Software. 866-390-9088. www.powersteeringsoftware.com 8

ABOUT POWERSTEERING SOFTWARE PowerSteering Software is the leader in business-driven project & portfolio management (PPM) solutions for managing IT Governance, New Product Development, Performance Improvement, and other Business PMO initiatives. Its easy-to-use software provides executives at BayCare, Johnson Controls, Merck, PolyOne, Shaw Industries, UK National Health Service, US Department of Defense, and over 140 other customers with executive visibility, strategy alignment, and team productivity to drive strategy and accelerate results across the organization. PowerSteering was rated Strong Positive in the "MarketScope for Project and Portfolio Management Applications" published by Gartner, Inc.