The concept of project portfolio management has been around for almost 20 years. However, although many companies strictly follow most PPM processes, they struggle to achieve business objectives because they are not able to link strategic objectives with the different initiatives they have in place. And this is where comes in. It’s not just a buzzword or a trend, but an evolution of traditional portfolio management to ensure that business remains competitive.
In this post, we will analyze the foundations of Strategic Portfolio Management framework and how it can help companies to achieve overarching goals.
Why PPM evolved to Project Portfolio Management
Project Portfolio Management (PPM) has provided organizations with the necessary mechanisms to manage their project portfolios within the defined deadlines and budgets. However, the dynamics of today’s companies are not the same as they were 20 years ago. And that has translated into new management and governance challenges that are not solved by the traditional Portfolio Management processes. For example:
- Increasing complexity: business must deal today with more complex projects and initiatives, and need to make sure that their limited resources are invested in projects that truly drive value.
- Alignment with strategy: while PPM is a successful framework to handle multiple projects, it does not provide a link between business goals, strategy execution and project outcomes. This makes it harder for companies to determine which portfolios provide the most value for business.
- Adaptability to change: As companies operate in an increasingly dynamic environment, strategic objectives may become obsolete over time. So, organizations need to have a framework in place that allows them to adapt quickly to these changing circumstances and ensure that their project portfolios are constantly aligned with objectives.
- Continuous value delivery: while the focus of PPM is project and program execution and goals alignment, organizations need to put all their energy into those value streams that provide the most ROI to the business strategy to remain competitive in their markets.
Components of the Strategic Portfolio Management process
Strategic Portfolio Management is the framework that enables organizations to meet the above challenges. But what’s next, how can I ensure that Strategic Planning and execution always remain aligned? Understanding its core process is crucial for successful implementation. Here are the key steps:
- Business strategy definition: let’s start with the basics. Before you can align your portfolios with business objectives, first you need to define the strategy. This should encompass your vision, mission, and long-term goals. Then, project portfolio management should be a direct reflection of this overarching strategy.
- Portfolio prioritization: you are well aware that not all your portfolios bring the same benefits to the business. So, you will need to carefully prioritize your projects, products, programs and portfolios based on their importance to achieving your strategic objectives. You’ll need to consider not only their alignment with strategy, but also other factors such as ROI, risks, schedules or resources required. It’s all about making the right decision. And the strategy will be your guide to making the right choices.
- Resource allocation: once you have prioritized all your project and product portfolios, it’s time to allocate resources. You will need to ensure that the most critical portfolios have the necessary manpower, funding, and technology to succeed. Allocating your key resources to your ‘top’ initiatives is key to achieve your strategic goals.
- Continuous improvement: your Strategic Portfolio Management processes will evolve as your business objectives change. Therefore, you must continually monitor and evaluate the performance of each portfolio and make the necessary adjustments to ensure that it remains in sync with your business strategy.
Benefits of Strategic Portfolio Management
There are several reasons why organizations should incorporate Strategic Portfolio Management framework into their Governance and Planning processes. Here we will highlight 5 of them:
- Enhanced Decision-Making: Informed decisions are the cornerstone of business success. With Strategic Portfolio Management, you equip your organization with the data and insights needed to enhance your decision-making processes and drastically reduce your margin for error.
- Adaptability: in the face of rapidly changing market dynamics, being adaptive is crucial for business success. Strategic Portfolio Management provides a framework with which you can quickly pivot and reprioritize projects or reallocate resources, funds or schedules when needed.
- Efficient Resource Management: Coping with resource constraints in an environment where organizations have to manage a higher volume of demand is the bane of every company. With this framework, you ensure that your resources are used efficiently and with a strategic focus, resulting in cost savings and higher ROI.
- Stakeholder alignment: a unified vision is essential to your company’s success. And Strategic Portfolio Management will make it easier to manage stakeholder expectations, as it fosters a sense of unity in pursuing strategic objectives across the entire company.
- Competitive edge: by incorporating a structured approach to strategic planning and execution, you ensured that all your Portfolio Management processes stay aligned with business goals all the time. It will allow your business to stay ahead of the head, outperform competitors and meet your goals consistently.
In conclusion, Strategic Portfolio Management is your best asset for business success. It’s a framework that will put to work all your PPM processes (demand selection and prioritization, resource management, financial management, etc.) at the service of the achievement of strategic objectives.
Sounds easy, doesn’t it? Well, the road to business success has just begun. Should your company wish to implement this framework, you should know that you will need the help of a PPM platform with Strategic Portfolio Management capabilities. Would you like to know more? Visit Triskell Software website to get more information.