Project Portfolio Management (PPM) is the centralized management of processes, methods and technologies to analyze and manage current projects or proposed requirements based on economic and organizational factors such as expected benefits and/or constraints due to scarce resources. The goals of PPM are to determine the optimal mix of resources for delivering and planning activities to best achieve an organization's operational and financial goals by taking into account constraints imposed by strategic goals, customers, or real-world external factors. A well-managed project portfolio not only reduces inefficiencies and risks, and therefore costs, but is also a driver for increasing project management capabilities by improving the underlying processes as a result of allover governance.
While the classic PPM still distinguishes three phases (identification, authorization and execution), only two are included in a rolling portfolio environment as the first two phases are combined into a single one, Demand and Supply Management. This eliminates a tollgate that normally represents the budget in classic portfolio management. In addition to the actual core PPM phases, I also include the operation of the project products and the circle closes. From the operation comes new demand into the cycle.
Strategic portfolio management: determining the alignment of portfolios at the strategic level. Define the objectives to be achieved, the benefits to be derived and how these are to be measured. Prioritization of the use of resources in multiple portfolios.
Operational portfolio management: The aim here is to translate the strategic specifications and framework conditions into real projects, in particular new requirements.
- Authorizing new project dfemand
Execution of projects: To ensure that projects deliver the value they have promised, their progress is closely monitored. This is done both internally (status reporting) and financially (cost/budget comparison).
Operation of the project results: The project results provide their benefits during operation. This phase is limited in time and at the end of the project's life it creates new project demand (renewal, extension, replacement or elimination of the solution).
The portfolio management processes are supported by further processes
Communication: Many things in portfolio management must be coordinated with stakeholders and communicated transparently. The target groups and content of the communication differ in the three PPM phases. While the demand management phase is primarily about project content, the subsequent phases involve KPIs.
Change Control is the formal process to ensure that changes to the magic triangle of the project are controlled and coordinated. This reduces unnecessary changes and provides stakeholders with clarity about the consequences. The changes have an impact on the project portfolio and on the added value of the portfolio delivery deliverables.
Resource management: The management of scarce resources is one of the most important secondary processes in the portfolio management cycle. As soon as project requests are received (demand management), it must be ensured that sufficient resources are available. Well managed resources are considerably reducing the project risk and thus represents an increase in value.
Risk management: Portfolio risk management deals with risk at the macro level. As mentioned above, project resources are an example of this.
Financial management: Project management is closely linked to financial excellence, as is portfolio management. It is absolutely crucial that spending and forecasting trends are well controlled. This means that the portfolio manager must have a deep understanding of accounting practices and controlling.