Portfolio Optimization Techniques & Practices

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2 Portfolio Optimization Techniques & Practices Speaker: Tony Castronovo, PMP Company: UMT Consulting Website: Welcome to the PMI Houston Conference & Expo and Annual Job Fair 2014 Please set your cell phone/pager to silent mode Q&A will be taken at the close of this presentation There will be time at the end of this presentation for you to take a few moments to complete the session survey. We value your feedback which allows us to improve this annual event. 2

3 About the Speaker

4 About UMT With PPM Experts 25 years of experience Visionary in Integrated IT Portfolio Analysis Applications Cool Vendor in Gartner s Cool Vendor Report 2012 Winner of Microsoft Partner of the Year

5 About UMT IT Governance and Management (IT G&M) Comprehensive EPM Resource / Demand Management APM PMO PM Training Innovation Process Management / New Product Development (NPD) Comprehensive EPM Capacity Planning / Resource Management PM CoE / CoP Program / Corporate PMO Project / Program Management Reporting and Dashboard Resource Management PMO Services Process Improvement Initiatives Portfolio Selection and Management Project / Program Management Resource Management PM Training Consulting Services Enterprise Project and Portfolio Management Enterprise Application Portfolio Management and Analytics Project and Portfolio Financial Management Consulting New Product Development (NPD) Portfolio Management Program Management Office (PMO) Product Offerings UMT 360 Financials Portfolios UMT Training Institute Managing Projects with Microsoft Project 2013 and 2010 Training Microsoft Portfolio Server Training

6 Recent Clients

7 Regional Focus with Global Presence Canada Sweden Global Clients UMT UMT Russia UMT UMT UMT UMT France Poland UMT China Philippines UMT UMT UMT UMT Brazil Spain India Malaysia Indonesia Australia Colombia Project Management Singapore

8 Agenda

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10 Prioritization & Optimization Fundamentals Key Terms Association of the everyday work we do to the goals and vision of the organization Strategic Alignment Prioritization Method of determining value, usually through a series of questions/criteria with associated weights Limitations on resources required to reach full value Constraints Optimization Method for maximizing value within given constraints

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12 Prioritization & Optimization Fundamentals Efficient Frontier & Modern Portfolio Theory Efficient Frontier: the leftmost collection of solution sets that satisfies the constraints and yielding the greatest strategic value for that specific $ threshold

13 Prioritization & Optimization Fundamentals Value Determination: Strategic Business Driver Alignment o Scoring

14 Prioritization & Optimization Fundamentals Value Determination: Strategic Business Driver Alignment Scoring 40% 20% 15% 15% 10%

15 Prioritization & Optimization Fundamentals Value Determination: Common Question Framework Scoring EXAMPLE:

16 Prioritization & Optimization Fundamentals Not a Budgetary Exercise Apply Prioritize constraints the portfolio of work Group 1 Portfolio Project 1 Project 2 Project 3 Project 4 Project 5 Prioritized Group 1 Portfolio Project 2 Project 1 Project 3 Project 5 Project 4 Value: 35% 20% 20% 15% 10% 100% Value: Derived from scoring methodology Budget: $800K Cost: $100K $400K $300K $200K $200K $1.2MM Optimization $500K $800K $100K

17 Prioritization & Optimization Fundamentals Financial Constraints Apply Constraints Maximize Value Optimization Prioritized Group 1 Portfolio Project 2 Project 1 Project 3 Project 5 Project 4 Budget: $800K Cost $100K $400K $300K $200K $200K Value 35% 20% 20% 15% 10% 100% VALUE% 0% 80% 75% COST Cumulative Cost & Value

18 Prioritization & Optimization Fundamentals Portfolio Blending Group 1 Portfolio Project 2 Project 1 Project 3 Company Portfolio: Project 1 Project 2 Project 3 Project 1 Project 2 Project 3 Group 2 Portfolio Project 3 Project 1 Project 2 Group Value: 20% 35% 20% 15% 5% 65% 10% 30% 17% 217% Apply Normalization Relative Value: 9% 16% 9% 7% 2% 30% 5% 14% 8% 100% Prioritized Company Portfolio: Project 3 Project 2 Project 1 Project 3 Project 1 Project 2 Group 3 Portfolio Value: 30% 16% 14% 9% 9% 8% 7% 5% 2% 100% Optimization

19 Prioritization & Optimization Fundamentals Maximizing Value Prioritized Company Portfolio Project 3 Project 2 Project 1 Project 3 Project 1 Project 2 Apply our constraints Optimize Value 30% 16% 14% 9% 9% 8% 7% 5% 2% 100% Budget: $1.5MM Cost: $550K $200K $100K $200K $100K $100K $300K $200K $250K $2.0MM 100% VALUE% 0% $1.15MM $1.45MM $1.25MM $750K $850K $950K $550K 78% 91% 86% 46% 60% 69% 30% COST 91% Cumulative Cost & Value

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21 Process Best Practices 2-Step Prioritization Method For Diverse Organizations Group Level Priorities (40%) CXO Priorities (60%)

22 Process Best Practices Governance Workflow

23 Process Best Practices Creative Optimization

24 Process Best Practices Rebalance the Portfolio

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26 Tools Microsoft Project Server 2 1. Cost Constraints Compare Scenarios 3. Selected / Unselected Projects Force-in / Forceout Projects 5. Efficient Frontier

27 Tools UMT 360

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29 Overcoming BCM Obstacles

30 Overcoming BCM Obstacles

31 Overcoming BCM Obstacles Tips & Suggestions Engage Leaders and Portfolio Owners in Process Design Choose a method and stay the course Fair isn t always what s best evangilize broader thinking Minimize the debates It won t be perfect the first time! Agile process design is a must

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33 Conclusions Portfolio Optimization = Best Bang for the Buck! Prioritization methods are crucial Governance workflows drive accountability & data quality Proven tools are necessary to enforce and automate the process Portfolio Management processes are major change initiatives

34 Q & A Please step up to the floor microphone to ask a question 34

35 Contact Information Tony Castronovo, PMP, MCTS UMT Consulting Group Thank You 35

36 Closing thoughts Thank you for attending this session. We hope you found this presentation added value to your knowledge of Project Management. Take a few moments to complete the Session Survey. We appreciate and value your feedback. Hand in your completed survey to Registration, you will receive a free raffle ticket for one of the drawings to be held in the Vendor Expo (see Conference Program Guide for details). 36