Summary

Is Your Project Portfolio a Strategic Powerhouse or a Cost Center?

In the latest PM Cowboy Podcast episode, "P21: The Importance of Project Portfolio Management & Strategic Planning," Mark, the PM Cowboy, welcomes Marosa, a seasoned consultant, to delve into the often-misunderstood world of Project Portfolio Management (PPM). Are you ready to transform your project portfolio from a collection of individual projects into a strategically aligned engine for growth?

The Gap Between Strategy and Execution

Marosa kicks things off by highlighting a critical issue: many executives lack a clear understanding of their company's current value chain. They may know what they sell, but not how value is truly created. This disconnect makes it nearly impossible to effectively plan for the future. As Marosa states, "Most of the companies do not even know how they are working today."

Mark echoes this sentiment, noting that only a small percentage of companies truly understand and implement PPM to its full potential. This results in a significant loss of synergy and impact.

Defining Project Portfolio Management

So, what exactly is Project Portfolio Management? Marosa offers two definitions:

• Formal Definition: Optimizing company resources to achieve strategic goals.
• Personal Definition: Understanding where the company wants to go, developing a strategy, and then building a portfolio to achieve those strategic goals.

Mark adds the Project Management Institute's (PMI) perspective: individual projects become programs when coordinated, and the sum of all projects and programs constitutes the portfolio.

The Three Portfolios Every Leader Needs to Understand

Executives need to be aware of how three types of portfolio interact:

• Financial Portfolio: How the company's overall value changes over time.
• Product Portfolio: The mix of products and services offered and their market position.
• Project Portfolio: The projects and programs undertaken to develop new products, improve processes, and achieve strategic objectives. This acts as the bridge between financial investment and product development.

The Missing Link: Strategic Vision and Leadership

The podcast emphasizes the importance of strategic vision. Marosa defines the core function of an executive as having a "Clear Vision...where the company should be in a defined period of time." However, both Mark and Marosa agree that very few executives truly possess this quality. They attribute this to a cultural issue where executives are often rewarded for short-term financial gains rather than long-term strategic development.

The discussion highlights the difference between managers and visionaries. While good managers are essential for execution, visionaries are needed to chart the course for the future. Unfortunately, many executives are trained as administrators rather than leaders.

Balance Scorecard: A Tool for Strategic Alignment

Marosa advocates for using the balanced scorecard as a framework for strategic planning. The balanced scorecard provides a holistic view of the organization, considering four key perspectives:

• Financial: How do we look to shareholders?
• Customer: How do customers see us?
• Internal Processes: What must we excel at?
• Learning and Growth: How can we continue to improve and create value?

By aligning projects and programs with these four perspectives, organizations can ensure that their portfolio is truly driving strategic objectives. However, Marosa cautions that the balanced scorecard is often misunderstood and misused, leading to its bad reputation. Many companies overcomplicate it, fail to understand its underlying principles, or are afraid of the transparency it creates.

The Importance of Knowing Your Value Chain

Before developing a strategy, it's crucial to understand your company's current value chain. This involves identifying how value is created at each stage of the business. Marosa emphasizes that many executives lack a deep understanding of their value chain, making it difficult to plan for the future. Understanding the value chain also helps to identify which functions are truly critical to the business and which are less essential.

Actionable Steps for Project Management Leaders

So, what can project management leaders do to improve their organization's PPM capabilities?

• Assess Your Current State: Conduct a thorough analysis of your company's value chain and identify areas for improvement.
• Develop a Strategic Vision: Work with executives to create a clear and compelling vision for the future.
• Align Your Portfolio: Ensure that all projects and programs are aligned with the strategic vision and contribute to the organization's objectives.
• Embrace Transparency: Use the balanced scorecard or a similar framework to track progress and communicate results to stakeholders.
• Foster a Culture of Leadership: Encourage executives to embrace their role as visionaries and leaders, not just administrators.

Conclusion: Project Portfolio Management is the Cornerstone of Strategic Success

Project Portfolio Management is not just about managing projects; it's about aligning resources, driving strategic objectives, and creating long-term value. By embracing PPM and developing a clear strategic vision, organizations can unlock their full potential and achieve sustainable competitive advantage. As Mark and Marosa demonstrate, PPM is an essential tool for any project management leader looking to make a real impact on their organization's success.