Beyond financial value: managing uncertainty and change to enhance strategic portfolio decisions

Transcription

1 Beyond financial value: managing uncertainty and change to enhance strategic portfolio decisions Prof. Miia Martinsuo Tampere, Finland UTS Sydney 31 October, 2017

2 Tampere University of Technology, Center for Research on Operations, Projects and Services (CROPS) Companies / organizations Networks of companies / organizations Repetitiveness / continuity Uniqueness / discontinuity Production and operations management Services, service management, service business Organizing, managing and developing value creating processes Supply chain and network management Projects, project management, project business

3 Beyond financial value in strategic portfolio decisions 1 Doing the right projects makes a difference 2 Why structured portfolio management methods are not enough 3 Leading towards optimized portfolios

4 How can you consider strategic value to achieve portfolio balance, strategic fit and value maximization? Strategic value Value through innovation Value through efficiency Value through performance Value through re-sale/use Idea / Need Project sales and marketing Project Project control Use Services, support of use Disposal, recycling Costs Project deliverable; Project price Benefits; Use costs is specified already very early in the project

5 Drivers of strategic value (example) External Political drivers: sustainability, national policies, laws, standards Local business and market features and conditions: culture, tempo, distances Customer s activities and experiences Competitors actions Internal Technical and service capabilities Sales process Local agents (both sales and delivery capabilities) Solution scope Trusted subcontractors Reputation The various stakeholders interests need to be negotiated not just for the single project, but with the purpose of optimizing the portfolio Martinsuo & Killen 2017

6 Typical strategic criteria for alignment / balance / maximization Alternative futures for value creation in the portfolio Reaching goals Technical / product impact Business impact Customer impact Social impact / knowledge sharing and learning Environmental impact Portfolio-level criteria, assessments and evaluations may drive completely different alternative futures

7 1 Doing the right projects makes a difference 2 Why structured portfolio management methods are not enough 3 Leading towards optimized portfolios

8 Structured idea to project portfolio management Strategy Opportunity screening Goals, methods, resources Strategy renewal Project proposals Project evaluation Describing and balancing the portfolio Portfolio decisions Impact on projects; project decisions on Dye & Pennypacker 1999, modified (decision) gates

9 Sources of uncertainties affecting project portfolios External context (realized uncertainty) Macro-environmental developments Customers needs and actions Developing markets Environmental and safety regulations Competitors actions Organizational context (realized uncertainty) Organizational complexity Portfolio autonomy Managers competences Single project changes (realized uncertainty) Customer requirements Delays Learning The use of project portfolio routines Project portfolio management in practice Martinsuo et al

10 Managers interpret and negotiate the uncertain portfolio environment in making decisions Business level R&D directors Business controllers Portfolio selection domain Product managers Project level Project managers Reaching goals impact Achieving business Korhonen et al

11 Project portfolio leadership requires sensitivity to the context, stakeholders interests and situational demands Observing others Situation, context Project portfolio management as a system of rules and norms Portfolio leader s interpretation and negotiation: Applying the rules and norms and making decisions that fit with the situation and context Practice and success of project portfolio management Learning Christiansen & Varnes

12 1 Doing the right projects makes a difference 2 Why structured portfolio management methods are not enough 3 Leading towards optimized portfolios

13 Need for new approaches to project portfolio management Portfolio management as structural (re)configuration Portfolio management as a rational decision process Portfolio management as entrepreneurial capability markets Portfolio management as negotiation and bargaining Martinsuo

14 Leading the optimal project portfolio calls for good bundling and interface practices Parent organization Project portfolio / program External business environment

15 Summary: Key messages 1. Finding the right projects requires looking outside and defining and negotiating carefully what is of strategic value 2. In an uncertain environment, effective portfolio management requires managers sensemaking - interpretation and negotiation - to make adjustments and also tough decisions 3. We need good practices for steering and integrating, to make the complex portfolio and the multi-level decision process feasible

16 References Artto, K., Martinsuo, M., Dietrich, P. and Kujala, J. (2008) Project strategy strategy types and their contents in innovation projects. International Journal of Managing Projects in Business 1 (1) Christiansen, J.K. and Varnes, C. (2008) From models to practice: decision making at portfolio meetings. International Journal of Quality and Reliability Management 25 (1), Dye, L. and Pennypacker, J. (Eds.) (1999) Project Portfolio Management. Selecting and Prioritizing Projects for Competitive Advantage. Center for Business Practices, USA. Korhonen, T., Laine, T. and Martinsuo, M. (2014) Management control of project portfolio uncertainty: A managerial role perspective. Project Management Journal 45 (1) Martinsuo, M. (2013) Project portfolio management in practice and in context. International Journal of Project Management 31 (6) Martinsuo, M. and Killen, C.P. (2014) Value management in project portfolios: identifying and assessing strategic value. Project Management Journal 45 (5) Martinsuo, M. and Killen, C. (2017) Decision making on strategic value at the front end of system delivery projects. Paper presented at EUROMA European Operations Management Association Conference, 3-5 July, 2017, Edinburgh, U.K. Martinsuo, M., Korhonen, T. and Laine, T. (2014) Identifying, framing and managing uncertainties in project portfolios. International Journal of Project Management 32 (5) Martinsuo, M. Suomala, P. and Kanniainen, J. (2013) Evaluating the organizational impact of product development projects. International Journal of Managing Projects in Business 6 (1) Müller, R., Martinsuo, M. and Blomquist, T. (2008) Project portfolio control and portfolio management performance in different contexts. Project Management Journal 39 (3)

17 Program integration in multiproject change programs Doctoral candidate Lauri Vuorinen Tampere University of Technology Tampere, Finland Based on the article Vuorinen, L. & Martinsuo, M. (in review) Program integration in multi-project change programs: agency in integration practice.

18 Programs as vehicles for organizational change Projects A multi-project change program Projects managed in a coordinated way to reach benefits not reachable by managing the projects separately Organization s change objective Doctoral candidate Lauri Vuorinen

19 Program integration: why and how? Why program integration? Division of work between subsystems: 1) organization and program, 2) projects of the program need for achieving unity of effort and ensuring alignment between the subsystems What is program integration? Three interfaces for program integration 1. Program-to-organization integration 2. Project-to-project integration 3. (intra-project integration) (Source: Turkulainen et al. 2015) The practice of program integration Integration mechanisms Roles and actors in pursuing program integration Doctoral candidate Lauri Vuorinen

20 Integration tasks and mechanisms: program integration in practice Program-to-parent integration Integration tasks: 1. Creating and communicating a change vision 2. Supervising a program s progress 3. Exchanging information in the program-parent interface Example integration mechanisms: 1. Documents, meetings and workshops clarifying and defining the change vision communicating the change vision 2. Steering group meetings 3. Representativeness Program s internal integration Integration tasks: 1. Coordinating work in a multi-project change program 2. Coordinating and supporting individual projects and project managers Example integration mechanisms: 1. Centralized program meetings (for program and project managers) 2. Discussions, formal and informal between project managers between program manager and project managers Doctoral candidate Lauri Vuorinen

21 Actors in program integration: program manager in change programs The traditional program manager : Planning Control Coordination The role can be wider: Championing or visionary (change vision) A support person and discussant for the individual project managers An authority towards and a representative in the eyes of the external environment The need to tailor program management between and within change programs. Doctoral candidate Lauri Vuorinen