project portfolio management

Article - What is a Successful Project?

Over my close to twenty years of project management consulting and training experience I have been involved in this discussion on more times than I care to remember. Some people claimed that as long as the project was completed on-time, on-budget and delivered a full scope promised, it should be considered a success.

Others claim that it is OK to be somewhat late and over budget, but deliver a great quality product. And yet there is another group of professionals that claims that – of course, within reason – budget and timeline are not that important as long as the project realizes the truly great idea behind it.

Let us try to analyze each one of the “project success” ingredients. Let us assume that we have a project at hand that has been completed on-time, on budget and delivered a full scope of excellent quality. Does this automatically imply that this was a successful project?

In order to assess this question, we would need to take a look at a couple of examples. Imagine that a real estate development company in 2014 commissioned a project manager and requested him to build a luxury condominium building near a local lake. The project manager has successfully completed the project on-time, on-budget and delivered the full scope requested. Having said that, shortly after the construction was finished, the executives discovered that due to a number of factors (including economic and demographic ones) they would be able to sell only 10% of the units built.

Can this project be considered a success? Most likely all of the readers will agree that it was not, since the company failed on the portfolio management end of the spectrum (i.e. selecting the projects with the highest possible business value).

How to Prioritize Projects? – Part 2

Now that we have examined the pros and cons of the purely financial approach to portfolio let us turn our attention to a more balanced approach called the “scoring model”.

The essence of the scoring model approach is to come up with several variables that the executives consider important when assessing the value of their future projects. This is usually done during the project portfolio workshop where the instructor explains the theory behind the scoring approach, provides several examples of the scoring models developed by other companies and then asks the executives present to engage in a brainstorming exercise. The fundamental nature of this exercise is to generate as many relevant criteria as possible and record them on the whiteboard or a flipchart. These criteria may include, for example:

  • Strategic alignment
  • Market attractiveness
  • Fit to existing supply chain
  • Time to break-even
  • NPV/ROI/IRR
  • Product and competitive advantage
  • Leverage of core competencies
  • Technical Feasibility
  • Risks, etc.

Once the discussion is over, the facilitator hands the red marker to the first person in the room and announces the following rules:

How to Prioritize Projects? – Part 1

One of the most popular questions that frequently comes up in the conversations with senior and executive management of various companies is the one that appears in the title line of this article.

NOTE: This question, by the way, usually implies that the company has already taken a great leap forward and realized that it was impossible to accomplish all of their desired projects in a given period of time.

There are many different approaches to this task, but the most popular ones are the financial methods and the scoring models. Let us look first at the financial methodology. In a nutshell, it implies choosing some kind of a financial criterion – be it a return on investment, a net present value, an internal rate of return or some other formula – and calculating a value for each project. Once the ROI (or any other financial measure) for each project has been calculated, the projects are ranked according to their ROIs in the descending order.

Let us look at an example of how it may happen. We have a company that wants to implement 10 projects and has 200 man-months in their resource pool (roughly speaking 20 people working together for one year including the adjustments for the vacation time, sick days, etc.)

The list of projects together with their expected ROIs is presented in Table 1:

Table 1

Project

Estimated ROI

Project A

21%

Project B

5%

Project C

12%

Project D

3%

Project E

Jamal’s Musings – “My Projects are Constantly Late, Over Budget and Deliver Low-Quality Products. What Can I Do?”

I get asked this question all the time. My consulting engagements start with it. My trainings – whether public or on-site – start with it. Sometimes, I even hear it during casual conversations with my friends. Usually this inquiry is followed by the following statement, “Well, you are the project management expert! Care to share your opinion on the subject?”

In reality the answer to this question is not that simple and exists in a two-dimensional space, so to speak.

First, if the company is experiencing these problems, there is a good chance that their project management processes are deficient. The word “deficient” in this context can mean a number of things: lack of proper methodology and templates, absence of experienced project managers or insufficient executive buy-in for project management just to name a few. Any combination of these factors severely limits the ability of the organization to scope, estimate, schedule and control their endeavors potentially leading to missed deadlines, overrun budgets and poor quality products and services.

But there is also an additional dimension to this problem called the strategic resourcing. The question that needs to be answered in order to solve the strategic resourcing predicament is very simple:

 

“Do you have too many projects in the pipeline and too few resources at your disposal? And if the answer is yes, then which projects are you going to cut or how many resources are you going to add to your pool?”

 

Let me demonstrate this concept using a seeming unrelated example.

 

Let us assume that you are a student in one of my project management courses. You are an A+ scholar that knows everything there is to know about project management. To make a long story short, there is no question I can ask that you would be unable to answer.

Let us further assume that the average number of questions on a two-hour final exam for this type course is five. How well would you realistically expect to do on the two-hour exam if I were to decide to include a hundred questions of the same size and complexity on the final test? 

Jamal's Musings – What is Strategic Portfolio Alignment?

The definition of portfolio’s strategic alignment is fairly simple and straightforward: all of your projects must in one form or another assist the implementation of your company’s strategy. A very simple statement that at times is very difficult to explain. In order to do that, let us examine several examples of the project alignment and non-alignment.

At one point of time the executives of Société Bic (commonly referred to just as Bic), a French disposable consumer products company known for their razors, lighters, ballpoint pens and magnets made a very interesting decision. The company decided to enter … the ladies underwear market by designing, producing and selling among other things ladies pantyhose. Needless to say the company failed miserably with this project since the consumers were unable to see any link between Bic’s other products and underwear, because of course there was no link at all.

Although, as the urban saying goes “hindsight is 20/20” let us nevertheless try to assess this initiative from the strategic alignment perspective. Here is a list of potential questions one could direct at the Bic executives who proposed to add this project to the company portfolio:

  • We manufacture disposable products made from plastic. What the heck do we know about ladies underwear?
  • All of our production facilities are built based on the injection-molded plastic technology? Where will we get the equipment to manufacture underwear?
  • People, especially females, perceive us as producers of cheap disposable lighters and pen? Would they be interested in purchasing our lingerie products?
  • What about the distribution channels? Retail outlets that trade disposable razors, pens and lighters usually do not sell underwear. Does this mean we will have to acquire a brand new group of retail channels?

It is obvious that none of the answers to the above questions were very encouraging had they been asked at the time of project initiation. Indeed, there was little or no alignment between the proposed endeavor and the overall company strategy.

Jamal’s Musings – What is Portfolio Balance?

An interesting conversation clearly demonstrating the value of the portfolio balancing happened once when I was teaching my Project Portfolio Management Masterclass in the Gulf region. Among other attendees there were two high-ranking representatives of one of the largest construction companies: an owner (and a CEO) and his general manager. The following exchange took place between us:

CEO: This portfolio balancing theory is great but I can hardly imagine how it would apply to my business. We are basically very similar to a professional services company. People come to me and say, “Build me this!” What am I going to reply to them? “Sorry, your project does not fit into our portfolio balance model?”

Me: Well, let me finish the module on balancing the portfolios and we will have a chance to chat about this topic at the end.

CEO: (staring at Burj Khalifa visible through our conference room window) Wait a second! I think I get it! I am fairly old and close to retiring in a couple of years. Your presentation made me think; what kind of legacy am I going to pass on to my son, who will take over our business? Right now our entire portfolio consists of very low-risk, low reward projects. We basically build shoebox types of buildings with a very low margin of profit. I would like to have that (points to Burj Khalifa) on our company brochures!

GM: Forget about Burj Khalifa, we have conducted some calculations and if we get into HVAC business, our margins will go up from 5% to 25-30%. And if we somehow manage to get into the energy management business, we can raise our profit margins to 50-75%. Too bad we don’t have any internal expertise at our company.

CEO: Why don’t we hire several specialists in the HVAC and energy management and start a couple of projects from those domains next year? These projects will represent maybe 5% of our total portfolio, but this share will grow with time.

Video - Jamal Moustafaev - How To Deliver Exceptional Project Results? presentation at BCTIA

Yet another one of my project portfolio management presentations. This time at the British Columbia Technology Industry Association.

Part 1

Part 2

Part 3

Part 4

Executive Summary

  • The “Virgin Lands” fiasco
  • Some tough questions from today’s executives
  • Do companies need help?
    • Some industry statistics
  • How to deliver good projects?
    • The “typewriter example”
    • The “final exam gone very wrong example”
    • The “Caribbean house example”
  • Detailed view of project and portfolio management
  • What do companies need to deliver exceptional project results?
  • Exercises
     

Download the PDF version of the presentation here.

 

Training - Project Portfolio Management Masterclass

Course Overview

Why do companies like Apple, Microsoft, Procter & Gamble and Johnson & Johnson manage to deliver successful products to the markets year after year? And why do the majority of other organizations can’t replicate their success no matter how hard they try? This workshop is dedicated to the complicated and somewhat enigmatic topic of delivering successful products and services to the marketplace by selecting the best projects for implementation, proper assessment of the company’s throughput capacity and having a good grasp on project management.

Why You Should Attend?

Recent studies indicate that only 32% of our projects can be considered successful, while 44% are challenged (i.e. grossly over the budget and/or late) and 24% are outright failures (i.e. cancelled by the customers before they are even completed). Further research shows that the lion’s share of this lack of success can be attributed to poor requirements elicitation, insufficient planning and inadequate project control.

This course will demonstrate to the participants how to perform these tasks properly and efficiently by teaching them skills, tools, techniques and economic principles that transcend various company structures, environments and project management philosophies.

Who Should Attend?

Senior executives, project management and marketing professionals including:

  • CEOs, COOs, CTOs, CIOs etc.
  • Vice-presidents
  • Project and program managers
  • Functional department directors and managers
  • Sales and Marketing people
  • Account executives
  • Directors of PMO
  • Directors of Project Management,
  • Portfolio Managers, etc.

Course Outline

  • Introduction to Project Portfolio Management
  • Maximizing Portfolio Value
  • Balancing the Project Mix
  • Linking Portfolio to Strategy
  • Implementing Project Portfolio Management

To download a full course brochure, please click here.

 

Podcast - "AEC Business" interview with Jamal Moustafaev

Yet another interview I gave to the AEC Business in 2013

 

About the Author

Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East.  Read Jamal’s Blog @ www.thinktankconsulting.ca

Jamal is an author of two very popular books: Delivering Exceptional Project Results: A Practical Guide to Project Selection, Scoping, Estimation and Management and Project Scope Management: A Practical Guide to Requirements for Engineering, Product, Construction, IT and Enterprise Projects.

Podcast - "Project Management Podcast" interview with Jamal Moustafaev

PM Podcast Interview

There is an old PM saying that goes like this: Projects don’t fail at the end... they fail at the beginning. But when exactly is “the beginning”? Is it scope definition? The kick off meeting? The creation of the charter? For me it is even earlier than that. Listen to the interview I gave to my friend Cornelius Fichtner on his website "PM Podcast".

Interview Transcript

Female voice: The Project Management Podcast’s feature Interview: Today with Jamal Moustafaev, author, speaker and portfolio management expert.

Cornelius Fichtner: Hello Jamal, welcome back to The Project Management Podcast™.

Jamal Moustafaev: Hi, Cornelius! How are you doing?

Cornelius Fichtner: Very well, thank you! So we want to talk about your book: “Delivering Exceptional Project Results – A Practical Guide to Project Selection, Scoping, Estimation and Management.” But before we even go to that, what do you love about portfolio management? What made you write the book?

Jamal Moustafaev: Well, I don’t know if this is the love thing. But I can share some of the information that I share on the pages right at the beginning pages of my book, some statistical data that was gathered by researchers and scientists in the field of project and portfolio management. With your permission, I’ll share it with you and your listeners.