Keys to Successful Project Portfolio Management
Although examples of successfully managed project portfolios are numerous, few researchers have investigated the key reasons why some companies appear to be better at managing this challenging process than others. Brown and Eisenhardt (1997) recently undertook at study of six firms in the computer industry, all involved in multiple project development activities. They determined that successfully managed project portfolios are usually the result of three factors, such as:
- Limited structure and communication freedom. Successful multiple-project environments cannot effectively operate when they are constrained by restrictive layers of hierarchy, bureaucracy, rules, narrow communication channels, and rigid development processes. In fact, successful portfolios emerge from an environment of flexibility and open communication. The more personnel can build on improving existing product lines through improvisation and freedom to experiment, the more innovative new project ideas emerge.
- Low-cost environmental scanning devices. Many firms devote considerable time and money toward developing their attempt at the “home run.” They put all their eggs in one project basket and aim to take the marketplace by storm, often without having spent sufficient time analyzing future opportunities or noting the direction of commercial development. On the other hand, successful project portfolio strategies involve making a number of low-cost “probes” into the future, through creating a number of experimental project prototypes to market testing and creating strategic alliances with potential partners. The successful firms do not rely on home runs and narrowly-concentrated efforts; they are constantly building numerous new projects to test for acceptance prior to full-scale development. RubberMaid, Inc., for example, routinely brings dozens and dozens of new product ideas to the market, samples the commercial response, and uses this information to make corrections to potential winners while deleting those ideas that did not measure up.
- Linking present and future through time-paced transition. Successful portfolio management requires a rhythm, or sense of timing, as firms transition from one project development to the next. Successful firms routinely develop long lead times and proactive planning aimed at affecting the smoothest possible sequencing from one project to its follow-on upgrade. This transition is not done is a “herky-jerky” fashion; it is the result of creating and maintaining a seamless rhythm to innovation.
Additionally, Edgett and Cooper (2001) argue for the primacy of linking project portfolio thinking to the organizations strategic goals. When projects do not support the corporate mission, vision, or goals, they support a “disconnect” between the operational staff and a firm’s top management. The best way to evaluate a firm’s portfolio of projects lies in assessing them as a holistic body, aimed collectively at accomplishing the organization’s strategic goals.