In 2014 we have seen confirmation that portfolio management (PFM) is a process and a discipline in itself, and not an add-on to Project and Program Management (PM). Although a lot of important knowhow and best practices are gathered under headings such as P3M (Project, Program, Portfolio Management), the implicit grouping of these topics has always had its downside. Much like many people ease over the major differences between Marketing and Sales by talking about, well, Marketing & Sales.
By automatically grouping Project and Portfolio Management, it is easy to lose sight of the inherent differences.
|Project Management||Portfolio Management|
|Tactical, task oriented||Strategic, flow oriented|
|Short-term feedback: deliverables||Long-term feedback: business impact|
|Clear and focused project goal||Holistic, inherent multiple goals|
|Management of risks||Embracement of uncertainty|
|Task workflows||Decision flows|
|Many relevant details||Big picture, limited set of relevant details|
|Tools fit project-specific way of working||Tools support portfolio level common language|
With the market introduction of FLIGHTMAP 1.0 back in 2010, we were early to recognize this. In June 2012, Gartner’s Magic Quadrant for Cloud-based PPM reports two types of customer needs: Execution-level PPM and Portfolio-level PPM. In that same year, Forrester started talking about the division of “above the line” and “below the line” solutions in its Project/Program Portfolio Management Q4 2012 report. Gradually this introduced more and more recognition of the difference in information and IT needs in portfolio management.
Unbundling of PFM confirmed
Now, in 2014 we have had the first year in which we were involved in more customer requests for a separate portfolio management solution than for an integrated PPM one. This pattern is partly driven by the real difference in requirements for corporate portfolio management, and partly due to a much more practical approach to IT deployment. The need to improve PFM is pressing, and the expected value is high enough that there is no patience to wait for an organization-wide implementations of a single project management tool. In times where the type of projects and their tool requirements vary from M&A to new agile app development, and project teams want to be lean, such deployment meets a lot of obstacles… (“one size does not fit all”).
Anyway, it does not seem to make sense to improve the execution of projects first and then to assess whether they were a good idea to pursue. We call this the unbundling of PFM. Of course, information about project execution is important for portfolio management decisions, so the unbundling does not imply total separation. With a solid information exchange, up to 40-50% of the typical portfolio management information needs can be met with data from operational project management. In terms of architecture, it should be possible to collect this from different types and instances of operational systems. Our FLIGHTHUB implements this approach to connect FLIGHTMAP to other sources of information.
What’s next for PFM?
With PFM established as a discipline in itself, where will this PFM space go from here? At the brink of a New Year, let me suggest the next steps I see:
- More focus on strategy side: We expect to see more attention for the gap between high-level strategy and portfolio management. In fact, improving portfolio management drives the need for strategic clarity. Development of new KPI-s, guidance for the right portfolio balance, and linking portfolio management and business planning. A specific topic here is how to deal with business model innovation. With a lot of organizations having some experience at the level of individual offerings, we see questions arising how to deal with this at the portfolio level (where synergies, risks, common assets etc. are concerned. As an example, many product companies are embracing a more service oriented business model across the portfolio (servitization).
- Portfolios in ecosystems: With a growing part of the portfolio being somehow connected to the outside world, which degrees of freedom remain for portfolio decisions, and how should they be addressed? Projects with multiple partners cannot just be stopped, external funding creates commitments as well, and pulling the plug from contributions to an ecosystem can have reputation impact as well.
- Strategic finance: With the increase of company’s value coming from its portfolio (its intangibles and its pipeline), the third main trend will be to further merge strategic investment and valuation expertise in the portfolio management process.
What do you think?