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Chapter 10

Balancing Portfolios

© David O’Sullivan

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Reflections Explain new product development. What are the main sources of funding for

new product development? List the ways in which new product

innovations can be protected. What are the key features of a market

launch plan? What is the commercialization of new

products? What are the main traits of an

entrepreneur?

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Activities

[Discussion of selected student ‘Activities’ from previous chapter]

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Learning Targets Explain the main ideas behind project portfolio

management Describe four key strategies used in portfolio

management Name a number of tools that can be used for portfolio

management Explain the use of bubble diagrams as a means of

evaluating portfolios Understand the difference between the portfolio

dominant and project dominant approaches Discuss why organizations often have a mix of low-

risk and high-risk projects

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Portfolio Approaches Portfolio management is about

continuously choosing, managing, and adapting the mix of projects to match resource availability and contribute to organizational goals

Key approaches include: Maximizing the value of a portfolio Creating the right mix of projects Maximizing alignment with goals Optimizing resources

Portfolio and Project Management

Portfolio Management

Project Management

TeamsIndividualsTeamsSkillsLearningReview

GoalsStatementsRequirementsStrategiesMeasures

ResultsStatus ScorecardTrends

InnovationsStimuliCreationsProblemsIdeas

ProjectsSpecificationRankingSchedulesDeployment

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Maximising Value

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Creating the Right Mix

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Right Mix > Quadrants

Pearls- Low risk and high reward projects.

Oysters Risky projects with potential of high reward

Bread and Butter Often small, simple projects – high likelihood of

success, but low reward. White Elephants

Low probability and low reward projects. One third of all projects and about 25% of spending are White Elephant.

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Right Mix > Types of Bubble Diagrams

Risk Vs. Reward Technical Newness Vs. Market Newness Ease Vs. Attractiveness Strength Vs. Attractiveness Cost Vs. Timing Strategy Vs. Benefit Cost Vs. Benefit Etc. etc.

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Right Mix > Examples

Risk

Reward

High

High

Low

Low

Uncertainties

Risk-Reward

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Actions“Expenditure of your effort”(what are your major current and planned activities?)

Goals“Objective of your effort”(what do you want to achieve in the future?)

Results

Relationship

Results“Outcome of your effort”

(what is the current status of your ‘goals’ and ‘actions’)

(which goals have no actions? which actions have no goals?)

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Scope Matrix

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Maximizing Alignment With Goals

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Optimizing Resources

Optimizing resources is the process of balancing the

Funding Worker hours Skill

requirements of the project portfolio with the resources available over a period of time

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Portfolio Resource Loading

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Portfolio Budgeting Budgeting is an important mechanism

for controlling and reviewing the progress of an innovation plan

Allocated budget will determine the overall investment in terms of resources and commitment

Common budgeting methods Top-down budgeting Bottom-up budgeting

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Balancing the Portfolio Maximizing contribution based solely on

financial methods can lead to short-term, low-risk projects.

A solely strategically aligned portfolio, may not yield any short-term benefits necessary to maintain momentum.

Too rigid pursuit of the screening process can result in behavior such as: Abandoning the more radical of proposed

innovations Focusing too heavily on a particular technology Concentrating too much on existing markets

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Dominant Assessment Approaches

Gates dominant Focus on reviewing each stage gate within the

individual projects in the portfolio Suitable where portfolios are static

Portfolio dominant Favors a portfolio view over an in-depth review

of individual projects Suitable in fast, dynamic organizations where

projects are changing regularly and where the business environment is fluid

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Classification of Projects

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Summary Explain the main ideas behind project portfolio

management Describe four key strategies used in portfolio

management Name a number of tools that can be used for portfolio

management Explain the use of bubble diagrams as a means of

evaluating portfolios Understand the difference between the portfolio

dominant and project dominant approaches Discuss why organizations often have a mix of low-

risk and high-risk projects

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Activities

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