A Portfolio Approach to Programme Management & Project Design

Author Martin Davies P5 The Power of Projects PO Box 116, Bedford, MK43 8ZH, UK Abstract This paper introduces a projects portfolio approach to programme management. It builds on established work to provide a framework for linking strategic plans to the programme of projects required to ensure successful strategic implementation. Projects are classified based on their contribution to the strategic plan. This in turn provides a clear foundation for: business benefits management, project selection, project design and project execution. The projects portfolio framework can be readily tailored to meet the needs of individual organisations and absorbed within established project management procedures. Further research is required to assess the effectiveness of the projects portfolio and assess the compatibility of these ideas with current guidance on programme management. 1. Introduction 1.1 Balancing Art and Science in the Project Management Process Many people would accept that there is as much art as science in successful project management. While skilled, motivated and well managed people, combined with effective project management tools and techniques, form an essential core on their own they are insufficient to guarantee success. There remains much art in knowing how to successfully combine and tailor these different ingredients to the meet the challenges of a particular project. All projects are not created equal! The products and other assets generated by an individual project will make different kinds of contribution to achieving an overall strategic plan and, as a consequence, the project itself will give rise to different kinds of management challenges during execution. Being able to discern these challenges prior to project initiation, such that the project design and execution anticipates and responds to them, provides a powerful catalyst for ensuring project success. 1.2 Implementing Successful Strategies: The Cycle of Projects A cycle of projects exists created by the gap between the current organisational position and desired strategic position which in turn generates projects to close the strategic gap. Different organisational needs and demands arising from elements of the strategic plan are translated into projects which, when delivered, satisfy those needs and demands. As the desired strategic position evolves so new organisational needs and demands are generated and the project cycle continues with new projects being generated and delivered. This dynamic cycle drives a process by which a programme of projects is generated and maintained. The programme itself exists at different levels corresponding to those of the strategic plan combining the various elements of functional strategies (e.g. human resources, sales and marketing, operations, customer support, procurement, information systems, finance etc.) required to realise the overall organisational strategic plan. The challenge of programme management is to understand, co-ordinate and manage the complex web of inter-relationships, constraints and dependencies between these different projects. Tel: +44(0)1234 405470 Fax: +44(0)1234 405870 e-mail: martin@p5.co.uk

time

Strategic Gap t0

Strategic Gap t1

Current Strategic Position

Desired Strategic Position

Future Strategic Demand

Project Cycle t0

Project Cycle t1

Figure 1: The Cycle of Projects

An examination of the project cycle in Figure 1 reveals two critical success factors:

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1) and, 2)

identifying and specifying the correct projects to close a strategic gap (more simply doing the right projects) realising the organisational and business benefits from those projects needed to close a strategic gap (more simply doing the right projects well)

The distinction between 1) and 2) may seem trivial however, taken together, these two factors reflect the essence of successful programme management. In effect 1) encompasses a set of concerns related to the demand for projects while 2) is concerned with factors related to supply i.e. issues about how the products and other assets of a project are generated. Experience suggests that many of the problems encountered in the performance of projects (i.e. supply side related problems) stem from a lack of understanding about the nature of the demand for those projects (i.e. ineffective demand management). In short a detailed understanding about the nature of the demand for a particular project is critical to the success in the supply of that project. Such a view is supported by the accepted knowledge highlighting the critical importance of the project definition lifecycle phase and offers an alternative interpretation about why this phase is so important. If the distinction between demand and supply side concerns is accepted then bridging these two areas represents a vital concern for effective programme management. Classifying different projects within a programme using a portfolio based on their business contribution provides a start point for linking demand side and supply side project management. Without this classification the danger exists that the wrong projects will be selected as part of a programme and projects may fail to realise those organisational benefits that justified their inclusion within the programme in the first place. 2. The Projects Portfolio 2.1 Defining Different Project Contributions The Projects Portfolio provides a classification of projects based on their business contribution. Four different types of contribution are identified: Strategic, Key Operational, High Potential and Support. Key Operational projects deliver assets on which an organisation High Potential Strategic will be critically dependent for the performance of its day-to-day operations and that all organisations engaged in a similar industry will employ. For example for a supermarket retailer the store Projects delivering Projects delivering assets critical to assets which may be replenishment, distribution and checkout counter assets might fall achieving the crucial to the future into this category. They are distinguished from Strategic projects in organisational strategy organisational strategy that a Strategic project will be delivering an asset which is unique to an organisation and directly linked to a strategic criteria on which the organisation has chosen to compete. For a supermarket Projects delivering Projects delivering retailer an example of a Strategic asset might be some kind of assets on which the assets which are unique category management scheme that allows it to maximise organisation will be valuable but not crucial profitability for a given range of products. By agreeing with a critically dependent to organisational project sponsor to classify a project as either Key Operational or success Strategic we begin to say something about the business benefits we Key Operational Support expect to realise, the balance of priorities in shaping the project design to deliver it, and the challenges we expect to encounter during project execution. It is also important to recognise the Figure 2: The Projects Portfolio changing nature of this classification. An asset that will be Strategic for an organisation over the next year may well then become Key Operational as all similar organisations adopt the same idea and it becomes a standard way of doing business (supermarket loyalty cards are a good example of this process whereby the classification of an asset can change over a relatively short period of time) and hence the need to appreciate the dynamics of the project cycle as part of any approach to programme management. Support projects are those which provide assets which are valuable but not essential to an organisation. Examples abound from car parking, landscaping, canteens, facilities management, career development to many financial accounting activities. Note however that such a classification is unique to a particular organisation. What may be Support for one could well be Key Operational for another. For example a project to deliver an internal career development capability may be a Support project for one organisation where such a facility is nice to have but not essential whereas for another it becomes critically dependent if the staff concerned are highly specialised, in short supply and apt to leave if such a capability does not exist! So any classification on the Projects Portfolio is particular to an individual organisation, strategic environment and instant in time. High Potential projects represent those concerned with delivering assets of an uncertain value. Examples of projects falling into this category could be of a research and development type alternatively testing out innovative ideas that may have future Strategic potential. Again by classifying a project to this category we are acknowledging the nature of the project and the way we will need to manage it in order to be successful. Self
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evidently the way we go about managing a High Potential project will be very different to the kind of approach we adopt for a Key Operational project. 2.2 Appreciating Project Benefit Drivers By classifying projects on the portfolio we create a start point for asking questions about the benefits drivers for a project. Figure 3 depicts the benefits drivers for each of the project types defined within the portfolio. A project classified as Key Operational concerns the creation, replacement, extension or improvement of assets critical to the dayto-day performance of the organisation. As a consequence the benefit drivers for projects in this category are concerned with business effectiveness. They are about achieving the required standards of performance to meet the criteria for effective day-today operations. The benefits targeted for a project of this type will tend to involve some form of process rationalisation and/or integration.
Strategic
Business Innovation and Change Business Process Structuring

High Potential
Creating Opportunities for Business Change (Proving the potential benefits)

Business Effectiveness Process Rationalisation and Integration

Business Efficiency Process Elimination and Cost Reduction

Key Operational

Support

In contrast to Key Operational, a Support project concerns investment in an asset that is valuable but not critical to business Figure 3: Project Benefit Drivers success. If investments are to be made in this category then the only justification for doing so has to be some form of tangible business efficiency gain which in turn is likely to involve achieving some or other process elimination or reduction in cost. If I classify a project to this type then I must be able to speak convincingly about the efficiency benefits that will be gained. If I cannot do so then there can be no justification for including such a project as part of the overall programme. How many projects might you abandon or de-list if you applied this criteria to the Support projects within your own programme!? It can now be seen how the Projects Portfolio begins to provide a practical framework for guiding programme management decisions. For example given limited resources if Im faced with choosing between investing in a Key Operational or a Support project then clearly the Key Operational project will take precedence. The efficiency benefits of the Support project can be harvested at some future time when resources allow; by contrast the Key Operational deficit hurts today and must be remedied. Strategic projects involve the creation of assets directly linked to one or other strategic criteria on which the organisation has chosen to differentiate its performance. Projects of this type involve the creation of some kind of unique capability directly linked to the strategic plan. As a consequence these will often involve creating assets that fundamentally change the way the organisation conducts business. The business benefits targeted for this type of project will be about business innovation and change and are likely to involve the restructuring of key business processes. If I classify a project to this type then while I may not be able quantify the benefits sought in fiscal terms I should at least be able to describe qualitatively the kind of business benefits that are to be realised (e.g. improved customer satisfaction or loyalty for a customer support project, or creation and satisfaction of a new market need for a novel product). Again classifying a project as Strategic will help focus management attention on characterising precisely what innovative benefits are sought and what project activities will be necessary to realise them. In contrast to Strategic projects, High Potential projects have an uncertain strategic value. The business benefits sought for projects of this type cannot be defined at the outset. High Potential projects are about creating future opportunities for business change. The task for such projects is to quantify and prove the potential business benefits. In essence they are about research and development for business innovation and as a consequence they need to be managed accordingly.

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3. Programme Management & Project Design Using the Projects Portfolio 3.1 Screening Programmes Using the Projects Portfolio The discussion above reveals how the portfolio can be used to screen projects included as part of an overall programme. It provides a practical framework for linking the demand side of the organisational strategic planning process to the supply side project management activities central to successful strategic implementation. Two basic directions are revealed: one concerns activities involved with gaining advantage while the other centres on avoiding disadvantage. If Im about to take a decision on investing in a Key Operational project then by definition I must be seeking to avoid some disadvantage with respect to other similar organisations. If I cant explain what this disadvantage is, or articulate the associated benefits sought, then there can be no justification for including it within the programme. I will feel the consequence of any Key Operational strategic gaps or project failures in the short term as my organisation falls behind similar ones in basic core areas of capability. In a similar way if I fail to maintain an effective programme of investment in Support projects I will suffer disadvantage as my organisation falls behind relatively in efficiency terms however, unlike the Key Operational area, the effects of failure in the Support area will only be felt in the longer term. Projects classified as Strategic and High Potential are about gaining advantage and an ability to articulate these advantages in meaningful business terms, directly linked to the strategic plan, forms the only basis for screening projects into the programme in these categories. It is noteworthy that a number of organisations using the Projects Portfolio for the first time discover that existing projects classified strategic are in fact Support or Key Operational in terms of the Project Portfolio, while other projects assessed as a lower priority are in fact Strategic in terms of their business significance. 3.2 Balancing Time, Cost and Quality Once the Projects Portfolio has been used to classify and position a family of projects it can then be used as a framework to guide decisions about project design and execution. The idea here is to recognise that different projects make different kinds of business contribution and as a consequence raise different issues, and need to be managed differently if they are to be delivered successfully. One of the classic set of trade-offs governing any decisions about project design are those between project: time, quality and cost. Recognition of the appropriate balance to be struck between these criteria at an early stage of project design is one of the more important critical success factors during project execution. As Figure 4 demonstrates, here again the Projects Portfolio can help by highlighting the changing priority of time, quality and cost criteria for different project types.
Strategic High Potential

Time
Quality
Cost

(R&D Projects)

Time

Time

Quality
Cost

Quality

Cost
Support

Key Operational

Figure 4: Time, Quality & Cost in the Projects Portfolio

If a project is truly Strategic then the overriding concern must be to realise the associated benefits quickly. The quality of any solution, while important, will take second place to decisions influencing how quickly the project will be completed while considerations of cost will be of the lowest priority. For a Strategic project the end will justify the means. The danger of taking to too long is that any potential strategic advantage will be eroded alternatively that another organisation will exploit the opportunity first. In the case of a Key Operational project the balance of priorities changes to quality. If the organisation will be critically dependent on the resulting assets then it is vital the project realises the required performance for quality. By a similar token if the organisation is suffering a Key Operational disadvantage it will be important to complete the project quickly so time becomes the second most important factor. For Support projects cost becomes the primary consideration. If the benefit drivers are all about efficiency then any failure to give priority to whole lifecycle cost considerations will erode the very benefits sought. Finally in the case of High Potential projects the nature of the project itself precludes any meaningful trade-off between time, quality and cost factors.

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3.3 Project Design Used in this way, the Projects Portfolio provides the beginnings of practical guide to the project design process. In conjunction with a recognition of the criteria for different project types, see Figure 5, the project manager is able to make informed decisions about the type of project management lifecycle organisation and solution to adopt.
Strategic
Business change Speed Business Integration Differentiation

High Potential
R&D Evaluate business idea Business prototype Identify benefits and way to proceed

Quality, reliability Performance Maintainability Integration Risk avoidance

Efficiency Low lifetime cost Internal

Key Operational

Support

Figure 5 Project Criteria 4. Future Development and Conclusions The projects portfolio offers a practical framework and guide for programme management. It provides a focus for communication between business managers concerned with creating strategic plans and those managers delivering projects. It achieves this by linking the demand for individual projects through to the overall programme for their supply. Agreement on the classification of a project provides a practical start point for benefits management, investment appraisal, risk management and project design. While an appreciation of the projects portfolio reveals how different project lifecycles will be more or less appropriate for each type of project. A project methodology suitable for a key operational project will be inappropriate for a high potential project and may result in failure for a strategic project and unnecessary costs and delays for a support project. To succeed organisations require a capability to deliver project solutions for each type identified in the portfolio. A dogmatic insistence in adopting a uniform approach to all projects will result in project failures and ineffective programme management. The projects portfolio helps managers marshal an understanding of the art in tailoring and designing effective project solutions that will help promote project success. Further research is required to assess the effectiveness of the projects portfolio in longitudinal studies across the complete strategic planning cycle. And additional work is required to assess the compatibility of the projects portfolio framework with current guidance and practice on co-ordinating and managing multiple projects. 5. References The work discussed in this paper extends ideas developed in the field of strategic information systems planning to the challenge of business programme management in a multi-project environment. For an authoritative insight to the background to these ideas reference should be made to the work of John Ward (Ward 1995; Ward, Griffiths, and Whitmore 1990). A further paper (Burke and Davies 1993) discusses the application of these ideas to a case study in the offshore oil industry. Burke, G. and M. Davies. 1993. The One Page Information Systems Strategy. In British Academy of Management. Ward, J. 1995. Principles of Information Systems Management . London: Routledge. Ward, J., P. Griffiths, and P. Whitmore. 1990. Strategic Planning for Information Systems . Chichester: John Wiley & Sons Inc.

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