Companies need to work very hard to survive in the fierce business world. Every day, companies look at their competitors to understand the future trends and take action beforehand. They constantly try to innovate by taking into account their budgets and the risks of their actions. At the same time, market conditions change fast, so companies need to adapt accordingly to stay one step ahead of the competition. To reach their goals, organizations need to analyze the market, then they need to define effective strategies.
To implement organizational strategies, companies can use Project Portfolio Management. In fact, Project Portfolio Management helps companies select the most valuable projects according to the strategic objectives that they have set. To be as effective as possible and reach their objectives, they need to connect organizational strategies to their projects and programs.
In order to understand corporate functions, it is important to understand the meaning of the term strategy. The word ‘strategy’ comes from the ancient Greek word ‘strategos,’ which means ‘the art of the general.’ The term “strategos” was used in the military field, and it was about defining a plan to win battles and defeat enemies.
Strategies in business are more about understanding the competition and preparing a plan to beat market rivals. In general, strategy can be seen as the direction of an organization over the long-term. In fact, the right strategies can help companies that operate in challenging environments achieve several advantages and, most importantly, fulfill the needs of the customers.
Organizational strategy is made of several decisions that make the goals and objectives of a company attainable. In addition, each strategy can include projects that are connected to one another. These related or unrelated projects can be used to create one or more project portfolios. To implement their strategies, companies need to select the most valuable projects and programs according to the strategic objectives that they have set. When companies select programs and projects, they should take into consideration all the risks from the organizational level to the project level.
Project Portfolio Management (PPM)
Initially, the concept of a portfolio was used by financial investors who intended to buy stocks. To create a portfolio of investments, investors must analyze all assets, investments, and debts. Afterward, they need to define their short-term and long-term financial goals. To create a risk-return profile, they have to decide the degree of risk and volatility they are willing to take and the type of returns they want to produce.
Project Portfolio Management (PPM) can provide a way to implement organizational strategies. Companies that want to reach their goals and stay ahead of the competition need to connect organizational strategy to projects and programs. They start by declaring their vision and mission, and then they define their strategic objectives accordingly. Basically, projects and programs represent the outputs of the strategic objectives.
Successful organizations constantly use project portfolios to implement their strategies. It could also happen that several projects can be common among different strategies. PPM helps create balanced portfolios in terms of risk, project type, business unit, and so on. Once projects have been ranked within portfolios, they can be selected.
There are many aspects that should be taken into consideration while creating a new project portfolio, such as maximizing the benefits delivered to stakeholders, creating a perfect balance in terms of duration, risk, market, technology, product, and project type, and finally meeting the strategic objectives of the organization (Cooper). In addition, to select the projects that best align with strategic objectives to form the portfolios, it is important to consider restrictions on budget and other resources in organizations. In fact, Cooper states that strategic objectives are achieved by deciding the amount of budget that should be allocated in different portfolio hierarchy.
Keep in mind
Companies need to work very hard to survive in the competitive business world. To reach their goals, organizations need to define effective strategies. To implement organizational strategies, companies can use Project Portfolio Management. PPM helps companies create balanced portfolios in terms of duration, risk, market, technology, product, and project type.
Francesco Pecoraro, PMP, PSM, PSPO, SSYB, SSGB, SSBB, CL, CC is the founder of francescopecoraro.com where he shares useful and practical information about project management, program management, project portfolio management, and agile methodology. Francesco has extensive experience as a project, program and portfolio manager, project management officer (PMO), digital transformation and strategic consultant. He is also considered a communication, public speaking, and leadership expert. Francesco writes about project methodologies, program, and portfolio management.