Portfolio Selection

Challenge

Executives are under increasing pressure to justify costs and expenditures in the context of business goals and objectives. However, determining which projects should be included in the project portfolio and which initiatives would best support the organization’s business strategy can be a complex, haphazard and cumbersome undertaking. In addition, executives must identify priority levels to determine which initiatives will maximize budget and resource utilization.

Organizations are searching for tools to determine the percentage of resources that should be allocated to current versus new projects.  Executives must identify which resources should be allocated to each project and communicate these decisions to the rest of the organization.

Solution

Using the Microsoft Enterprise Project Management (EPM) Solution, organizations are easily able to prioritize, optimize and select the optimal project portfolio.

Define and Prioritize Business Drivers

Executives can communicate the business strategy by defining actionable, mutually exclusive, and measurable business drivers that support the organization’s objectives.  Once the business drivers are articulated, executives can prioritize the business drivers using Microsoft® Office Project Portfolio Server 2007.  This business driver prioritization is the first step in the portfolio selection process.

Prioritize Proposed Projects

In parallel, each business case previously developed in the demand management phase is evaluated for alignment with the organization's business drivers.  In Microsoft Office Project Portfolio Server 2007, a project can be related to one or more business drivers and each relationship can be evaluated on a standardized scale from extreme to low or no impact.  A strategic value score is derived for each project based on the extent it impacts each of the business drivers. . A variety of online tours of Microsoft Office Project Portfolio Server 2007 are available by selecting the “Take an EPM Tour” button on the menu bar on the right.

Optimize the Portfolio against Multiple Constraints

Using the ‘what if analysis’ capabilities in the Microsoft Office Project Portfolio Server 2007, several optimization scenarios can be generated under varying budgetary and resource constraints to enable project portfolio selection.  The optimization algorithms helps analysts identify the project portfolio that delivers the greatest value (e.g. strategic value), while considering all inter-project dependencies.  Analysts can also generate other optimization scenarios considering the financial value of projects such as Net Present Value or earnings before interest and taxes.

Executive teams can also assess the strategic and financial impact of “forcing in” regulatory projects and pet projects into the portfolio as part of the portfolio selection process.

Provide Insight into Critical Portfolio Issues

Analysts can utilize the advanced portfolio analytics (e.g. Efficient Frontier Modeling) in Microsoft Office Project Portfolio Server 2007 to assess the causes of inefficient portfolios by identifying constraints prohibiting the portfolio from reaching the Efficient Frontier.

Prioritize and Optimize at the Program and Cross-business Level

The complexity of the analysis and portfolio optimization can reside in the budget and resource allocation at the project level and the program level.  Microsoft Office Project Portfolio Server 2007 helps analysts run prioritization and optimization analyses at both the project and program level during the portfolio selection process.  This analysis helps executives identify the optimal set of projects within a program, and within the overall context of the portfolio. 

Refine Using Scenario Planning

Once executives agree on the various optimization scenarios, and their constraints, they are able to review and compare the scenarios in a customized Decision Dashboard.  An additional sensitivity analysis can be conducted to provide an understanding and measurements of a proposed portfolio's value under various scenarios. Intelligence and visibility across the portfolio unleashes hidden business investment opportunities during the portfolio selection process.

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