Clean your Project Portfolio
Kjetil Kraemer
SmartHome | IoT | Data | Medical devices | Strategy & Execution | Digital Transformation | Innovation | Customer focus
Just around the corner seasons will shift towards more mild weather, grass will start to grow again and the sun will warm us while gardening, in other words Spring is getting close and it's time for Spring-Cleaning, in this case your Project Portfolio.
Many companies are in the process of revisiting their strategies and resulting budgets, which means there's no better time to look carefully at your Project Portfolio and pipeline of ideas/proposals.
It's an important exercise to clean out your portfolio every now and then to ensure the projects you're executing are all still going to generate a healthy ROI, that customers are still interested in getting the new products or services and ensuring that everything still supports your core strategy.
There are many aspects of executing projects and having an optimal mix of Projects in your portfolio, but in this article we will touch on three of them: Re-ensuring Business cases are still positive, strategic mix of projects remains healthy and allocation of resources is sufficient to ensure required progress.
Ensure the Business Cases are positive
In the illustration above which shows the typical Stage-Gate life-cycle of projects, a Funnel was added to make it clear what Portfolio Governance is all about, only the healthiest Projects should make it all the way to the finish line (i.e. Release).
Often there will be many ideas or project proposals competing for limited resources, which means it is necessary to focus attention and resources on the ones that are most valuable, matches the strategy better or otherwise supports the objectives of the company.
Spring cleaning should be to go over every existing Business Case and re-align expectations on ROI versus the actual cost burn-rate to date, and other key indicators of progress and results.
Carefully consider discontinuing projects which have burned through too much cash without demonstrating results to justify its continued execution. This is of course always a delicate balance, as there may be many reasons for budgets slipping, but it's an extremely important task to weed out unhealthy projects now and then.
(Tip: the illustration might also inspire you to depict your active portfolio to show stakeholders and executives what you're working on, the state of projects and what the immediate pipeline looks like, not to mention the most recent successful results.)
The Active Portfolio should match the Strategy
The mix of projects in the portfolio should match the Strategic direction of the company. A very simple yet effective way to achieve an optimal mix is to use the Strategic Buckets Principle.
If you think of the key motivation for your projects it will often fall in three (or more) categories, in this case we look at the simplest form of bucketing, to make it easy:
1. Support
One category for support activities which can normally not be avoided. This category is about operational activities required to maintain business, or fixing defects required to keep customers happy.
2. Top Line
This category is for projects which results in new products being developed, new services being made and generally to hold projects which impact the Top Line or revenue growth.
3. Bottom Line
The last category of projects is for internal efficiency improvement projects, making new tools for your own staff to be more effective, digitize existing manual processes, etc. In other words projects which affect the Bottom Line or Earnings.
(Notice: In some companies there may be other categories/buckets, like e.g. "Research" for very tech or research heavy industries like Pharma, Medico, Aerotech, etc.)
What you want to ensure is that the distribution of projects, funds and FTE's between these three categories or Buckets, remains optimal in order to support your strategy.
This means if your strategy is to maintain existing market shares and focus on cost optimization by improving efficiency of operations, your Bottom Line Bucket should contain a larger percentage of available funds and active projects.
While if your strategy is to grow by capturing new markets, win new customers and introduce new products through innovation and development, your Top Line bucket should hold the bigger share of projects.
In other words the mix or distribution should be suitable for your strategic intent. If it is not you should seek to adjust it and Spring Cleaning is a perfect time to look at which type or category of projects are just about to enter your portfolio.
Resource Bottlenecks
The last Spring Cleaning exercise we will touch on in this piece will be Resource Bottlenecks. If you look at the illustration above, it shows layers of resources typically required to execute projects, and a reverse-funnel indicating possible bottlenecks.
First you need Project Owners or sponsors, often senior mgmt. with various interests like e.g. your COO will be sponsoring internal improvement projects, while your CTO might be sponsoring new product development aso.
Next you need Project Mgrs. or in smaller or medium companies maybe some other roles or employees who manages projects. This is many times the first bottleneck as most project mgrs. can only execute successfully on a number of projects at the same time.
Depending on the complexity the number of concurrent projects may be 3-6 per project mgr., which means in the example above if your portfolio contains 30 or more projects, your PM's/PO's might already have difficulties ensuring progress on all of them.
Therefore if you see many of your projects in "yellow" or "red" it may be a sign of too many per mgr. and you should see if any of your mgrs. seem overburdened.
The next type of resource is called "key project contributors", which are often some senior employees, other managers, specialists, etc., with key experience or knowledge often required to participate in projects or even contribute hands-on themselves.
This type of resource you should try to identify, as they already have their daily operational tasks and may not be allocated to project work as such in your typical matrix organisation, which means if you need them for projects their time and bandwidth is already shared.
In the example their capacity for project work besides their operational tasks is at most 1-2 projects at a time, making it a max of around 40 projects. If there are signs of resource issues on active projects, check to see if this is the reason and key contributors are over-allocated.
In case there are indeed resource related lack of progress, you can put some projects on hold or otherwise postpone them, while allocating their resources to projects in need. This way you can again balance resources to obtain the desired momentum.
"Normally it's better to optimally execute a few projects than to have little or no progress on many projects"
Remember that low progress also burns cash and demotivates employees.
Enjoy your Spring Cleaning and make sure to involve senior management!
Please share your experiences with this approach or other approaches as I would gladly accept other tips and trick from all of you. Thanks in advance!
Software Engineer | front end developer
9 个月keep soaring Dr.
Head of License Sales and Service at MAN Energy Solutions | 20+ years of experience working in diverse roles in leading companies
8 年Good one Kjetil. I have seen you execute this approach in real-life. It works!!!