Managing projects with strategic portfolio management
Project portfolio management (PPM) basically involves managing several projects and programs together. The aim is to align them with the company’s strategic goals. This approach serves as a tool for better overview and control. PPM is designed to ensure that projects are coordinated and resources are used efficiently. They must be consistent with the overall corporate strategy. This gives companies a clear overview of their priorities and activities. The project portfolio is a central source of information for making informed decisions about the allocation of resources, helping to forecast performance and calculate existing risks. Effective implementation ensures that the overarching corporate goals are strategically implemented in a selected group of projects, so that both the progress and success of each individual project serve the greater good.
This approach enables organizations to derive actionable results from complex business decisions that are necessary to achieve operational excellence. Strategic PPM allows companies to adapt quickly to market changes while maximizing operational efficiency and expanding their competitive advantage. With a holistic approach that combines planning, budgeting, portfolio management, and hybrid implementation, companies can clearly align their teams with common goals. This creates a transparent link between idea and result—and each individual contribution specifically contributes to the successful implementation of the company’s strategy. This approach supports business agility, shortens time to market, and frees up capacity. At the same time, confidence in strategic investments increases, especially since company management always has access to accurate and up-to-date information.
Designing a successful strategic project portfolio management process
Project portfolios consist of different programs, processes, operations, and projects that are grouped according to their strategic importance for a company and its goals. However, even if these projects are strategically aligned, it can be difficult and complex to examine them as a group. PPM helps to optimize this process by creating a unified overview of all projects. This approach helps companies prioritize upcoming projects and organize them in a way that achieves the best possible business results. The process to be initiated ensures alignment between corporate strategy and actual implementation, as it enables informed decision-making regarding the prioritization of planned projects, resource allocation, and risk management. The PPM process comprises the following steps:
First step: Defining strategic terms and objectives
This project-based management method is an important tool for ensuring that the projects undertaken make a positive contribution to a company’s economic success. To do this, the term “success” must first be defined. At the same time, all of the company’s strategic objectives must be clearly described and metrics for evaluating the projects must be established. Although these can be very diverse, they are generally based either on financial goals or on long-term evaluation criteria such as strategic orientation, technical feasibility, or market attractiveness. If success and value are not clearly defined, project selection is based on unspecific criteria. The result is a portfolio that is completely unbalanced in terms of risk and return as well as strategic relevance.
Step two: Managing existing project ideas
Once the strategic goals have been set and success and value defined, the foundation has been laid for developing project portfolios. To do this, all potential project ideas must first be collected. Valuable insights can be gained from customer feedback as well as feedback from employees and managers. Strategic planning and compliance and regulatory requirements are also valuable sources of information. The project portfolio must then be supplemented with ongoing projects so that these can be evaluated and either classified as promising and pursued further or discontinued. To do this, it is necessary to collect all data and evaluate it later using the criteria defined in step 1. Estimates regarding dependencies and resources that are essential for project implementation must also be taken into account.
Step Three: Prioritizing upcoming projects
This step involves determining which combination of projects represents the greatest overall value for the portfolio. To do this, a diagram should be created based on the defined evaluation criteria, in which potential projects are compared and sorted by priority. For example, the ranking can be determined based on the estimated financial value, with projects sorted from highest to lowest value. Once the ranking has been created, the allocation of available resources can begin. If there are not enough resources for all projects, those projects that do not offer sufficient value to justify the use of resources must be eliminated. The current project portfolio must be thoroughly reviewed on an ongoing basis, as prioritization only helps to lay the groundwork and generate sufficient data for informed decision-making.
Step four: Validating the projects under consideration
In the first steps of the PPM, estimates are made of costs and the necessary resources with the aim of developing a rough estimate of the project value and the expected project return. This fourth step is now about validating the estimates that have been made. The project manager contributes the specific figures for this. However, it is important to consider not only the figures but also possible bottlenecks, available skills, existing dependencies, and other factors, especially as these could affect the smooth implementation of a project. Unpredictable deviations from the project plan can undoubtedly never be completely ruled out, but a close look at feasibility, including all details, ensures that only projects with the best chances of success are included in the project portfolio to be created.
Step Five: Measure, monitor, and manage
This process refines the portfolio and validates the individual projects in an appropriate manner. Now it’s time to put the project portfolio into practice. Performance measurement should begin immediately after a project is launched. Projects that have been started should be monitored continuously. At the same time, ongoing management must be ensured to guarantee that the set goals are achieved. In this final step, the project manager and the Project Management Office (PMO) must work closely together. There must also be close coordination with the portfolio manager in order to collect relevant performance data, allocate or reallocate resources, and initiate further reviews. The responsible stakeholders mentioned above must also be able to make changes to the portfolio throughout the duration of the project.
Im modernen PPM kommt immer häufiger Künstliche Intelligenz (KI) zum Einsatz. Die KI hilft gleich in mehrfacher Hinsicht, beispielsweise, um zeitintensive Routineaufgaben – wie in der Projektplanung, Fortschrittsverfolgung oder Berichterstellung – zu automatisieren. KI-Algorithmen können durch ihre Fähigkeit, große Datenmengen zu analysieren, Muster erkennen und Vorhersagen treffen. So lassen sich Projekte besser priorisieren, Risiken werden zeitnah erkennbar und die Zuweisung der Ressourcen wird optimiert. Das Risikomanagement profitiert vor allem davon, dass mögliche Risiken frühzeitig erkannt und schnell Gegenmaßnahmen ergriffen werden können. Die KI kann Analysen und Berichte in Echtzeit erstellen, wodurch sowohl der Fortschritt als auch Planabweichungen dokumentiert werden. Analysen historischer Daten bezüglich des Einsatzes von Personal, Budget und Zeit helfen, Ressourcen gezielt zu nutzen. Engpässe und Überlastungen sind somit Vergangenheit.
The primary objectives of project portfolio management
PPM pursues objectives in various categories that are intended to contribute to improved strategic alignment, optimized resource utilization, and ultimately to the success of the company. These are the most important objectives:
- To ensure the strategic alignment of the company, it makes sense, for example, to plan and prioritize projects in such a way that they are best aligned with the company’s strategic goals and deliver optimal benefits. In this way, multiple projects can pursue common goals. Relevant resources—primarily personnel, time, and money—are allocated to the projects that have the greatest chance of success.
- Bottlenecks can be reduced through forward-looking, careful planning and coordination of projects. Since investments must be continuously monitored and controlled to ensure that projects do not exceed their budget limits, both good cost efficiency and maximum cost-benefit ratios can be achieved.
- Risk and conflict management is optimized because PPM assesses risks at the portfolio level to reduce critical dependencies and risks and avoid excessive burdens. Early detection of potential target or resource conflicts allows them to be resolved in a timely manner.
- PPM provides companies with a comprehensive overview of all current and planned projects, enabling data-driven decision-making. Additional transparency and control are achieved through continuous monitoring of project status, ensuring completion within the set budget and time frame.
- PPM identifies strategically important projects, enabling the company to strengthen its market position. At the same time, project feasibility reviews ensure that investments are only made in strategically important projects. This means that fewer resources are invested in unprofitable or unrealistic projects.
- PPM enables a company to operate more flexibly and adaptably. This allows them to respond more quickly to changes in the market or corporate strategy by adjusting priorities. In addition, continuous improvement is pursued, as the portfolio is continuously evaluated and optimized to enable more effective work.
Properly implemented PPM plays a role in better positioning the company as a whole by optimizing the use of resources, minimizing existing risks, and consistently pursuing strategic goals.
What are the advantages of project portfolio management?
PPM offers a variety of strategic, operational, and financial advantages. It provides company-wide insights into priorities across portfolios, initiatives, projects, and products. By obtaining real-time data from a central source, progress toward achieving corporate goals can be tracked in detail. The dynamic planning and financing functions also enable flexible responsiveness to changing or new requirements from the market or from your own clientele. In addition, PPM optimizes cross-departmental collaboration within your own company by significantly improving the communication of schedules, the identification of risks, and the management of dependencies.
The professional implementation of project portfolio management in a company creates a reliable system that offers the following advantages:
- With the help of PPM, the risks of a new project can be mitigated before it even begins, especially since this approach takes all elements into account from the outset.
- PPM uses all potential projects when presenting costs and determining actual expenses. This means that those responsible are aware of the financial burdens of a project from the very beginning.
- PPM provides targeted support for resource management by identifying all the resources required for implementation. This enables companies to determine whether the successful implementation of a project is feasible.
- PPM promotes joint decision-making by providing qualified data. The data-driven PPM decision-making tactics enable all team members to work together effectively.
- With the help of PPM, both project participants and managers obtain a transparent and comprehensible project value. At the same time, projects are prioritized, which has been proven to result in an increasing success rate during implementation.
In addition to the advantages mentioned above, companies benefit from increased profitability, shorter project durations, and reduced project risks.
The challenges associated with project portfolio management
When used correctly, PPM offers many advantages, but it also presents challenges. One of the biggest challenges is undoubtedly the efficient allocation and use of limited resources. Ensuring efficient resource allocation can be difficult, especially with large project portfolios, so that none of the ongoing projects fall victim to resource shortages.
Since projects are often interdependent or overlap, this also makes management more difficult. However, with the help of PPM, companies can take these dependencies into account and optimize coordination between projects. A third factor is changes in the overall corporate strategy. If a company’s strategic goals change, this can result in ongoing projects being adjusted or even shut down. This leads to additional complications.
Recommended best practices for implementation
PPM is divided into many sub-disciplines, the implementation of which varies from company to company. For example, some companies focus on optimal resource management, while others want to use PPM to create lasting transparency in project work. Companies should consider the following list of best practices when using PPM:
Formulation of measurable strategic goals
Setting goals is one of the most important tasks for a company’s decision-makers. Clear guidelines must also be formulated to measure how well initiated projects contribute to achieving the company’s goals. When it comes to implementation, it is important that decision-makers—especially when resources are scarce—keep all relevant company goals in mind and assign them in such a way that projects can be prioritized.
Establishment of a flexible, clearly structured process
The aim is to collect project initiatives. Anyone who has a good idea for a project, initiative, or plan should be able to contribute it. The existing ideas should then be transferred to a defined process that is comprehensible to everyone. To this end, it is important that employees know what information is relevant for evaluating their ideas in the context of the corporate strategy.
Dedicated preparation of relevant information
Once the strategic goals have been defined and an open, transparent process has been established that encourages employees to get involved, the ideas that come in need to be prepared in such a way that they can be quickly evaluated. A special department or individual should oversee the entire process. Their task is to use the information to prepare all new ideas and put them in a preliminary order.
Don’t lose sight of ongoing projects
Once a project has made it into the portfolio and been allocated the necessary resources, it is important to monitor its development. This allows you to identify early on whether a project is missing its target. To this end, a feedback loop should be established to ensure that a problematic individual project does not have a negative impact on the overall portfolio. The same department or individual who was responsible for gathering information should also be responsible for this.
View PPM as an ongoing, iterative process
As markets are subject to ever faster change and product life cycles are becoming shorter and shorter, companies must be able to accelerate their responsiveness. PPM should therefore be viewed as an ongoing process in which both the company’s goals for the market and PPM are adapted to the company’s changing goals. This allows the project portfolio to be gradually realigned and optimized.
The use of PPM software is particularly useful in the areas of information gathering and the provision of business information at management level. It helps to ensure that the information used is always up to date and relevant, so that decisions are based on high-quality data. In addition, PPM software can be used to find out who is working on what and for how long, so that resources can be allocated and redistributed accordingly. Effective PPM software is also capable of tracking relevant status indicators (e.g., return on investment) and identifying negative patterns. PPM software also provides transparency and work data that companies can use not only to identify risks, but also to quantify them and test solutions based on portfolio data.
PPM as a bridge between project management and corporate strategy
In order to exploit the full potential of PPM, it is important for companies implementing it to anchor it in the company in the long term, promote acceptance among stakeholders, and carry out continuous improvement based on experience. PPM thus combines effective project management with the current corporate strategy.
PPM contributes significantly to the business success of companies and organizations, especially as it ensures that all projects are in line with the overarching goals. This creates sustainable added value. The interaction between PPM and corporate strategy thus becomes a decisive success factor for a future-oriented organization.
