Project Portfolio Management is a Killer Not a Killer App.
The only provider of Delivery and Value Assurance™ services announced the completion of their two-year study of deployed Project Portfolio Management solutions, finding some surprising pitfalls and longer-term costs and risks.
San Francisco, CA (PRWEB) November 17, 2004
Bit Economics today announced the completion of an in-depth study of Project Portfolio Management (PPM), the results of which are being compiled into a book to be published in 2005. Several of the findings are of notable importance and worth sharing immediately with companies seeking to improve their project investment capabilities.
The study centered on deployed PPM solutions that were at least one year old, with special emphasis on measured effectiveness in both delivery and value assurance. The study incorporated surveys, interviews, workshops, and extended first-hand observation.
The types of projects overseen by a PPM capability ranged from process improvement, software deployments and organizational redesign efforts, to mergers and acquisitions, outsourcing, and market expansion initiatives. There was a broad sampling from both IT and Business.
Results showed a clear disconnect between the project/portfolio management office (PMO) and broader business representatives in terms of the value seen from mainstream PPM efforts. From a business standpoint, it had thus far yielded elusive benefits and required large startup costs. The most common criticism was that the PPM capability needed significant infrastructure and internal resources to yield the proper level of compliance with onerous project tracking and oversight techniques. Central PMOs were predictably more upbeat on accomplishments they had seen to date.
Some results were not directly attributable to PPM itself but rather to basic process management disciplines or simply osmoses. As an example, inventorying of projects and programs, a first step in deploying PPM solutions, netted a 1-3% cost reduction benefit in the first year but was “baked in” to the PPM value proposition ever after.
In terms of delivery assurance, surprising risks and pitfalls surfaced in the way almost all PPM solutions were implemented and executed. All PPM solutions in the study followed the same basic model. Various types of PPM software were implemented for the purpose of inventorying projects and aggregating status reports. The aggregation of status reports was the most damaging aspect to these deployments since they require three things to succeed: compliance, timeliness and truthfulness. That is, every project manager has to regularly provide an on time and accurate status report. In most companies, we found these three success factor were mutually exclusive; you could get higher compliance, but only at cost to timeliness or truthfulness.
The study found that in a typical organization, having several hundred projects underway, there was an average of three individuals reporting status per initiative investment. A majority of these status reports were poor reflections of the true situation, since they were usually a duplication of a previous submission with minor cosmetic changes. Besides, over 60% of senior managers mistrust status reports to such a degree that automating and centralizing them did not impart any new value. However, the inherent risks associated with aggregating status reports are surprisingly severe. The same ill-informed decisions were now made faster and had intensified domino effects.
In terms of value assurance, none of the studied PPM deployments had an effective approach to structuring and aligning corporate objectives and project investments. The best example was a company that identified and even quantified a hierarchy of enterprise and business area objectives but proposed investments self-reported their estimated alignment with them as simply “H,” “M,” or “L.” None required ongoing proof of quantifiable contribution to objectives, nor did any of them measure actual contributions post-implementation or hold business areas accountable for results.
Overall, the study found that every deployment violated a number of best practices in delivery and value assurance that support risk minimization, relationship optimization, and returns maximization. Existing PPM services in most organizations are little more than aggregated and centralized project status reporting capabilities with no additional value added. Unfortunately, with typical year one costs as high as a million dollars or more, this represents business as usual.
About Bit Economics:
Bit Economics (www. BitEconomics. com) is an exclusive software and advisory services group that works alongside senior executives and their teams to develop value-based initiative investment management capabilities. We work with both IT and business organizations in managing and evaluating risk, managing initiative relationships, as well as returns analysis. Our clients to date have ranged from multi-national corporations to venture firms and startups. We have worked in the following sectors: Healthcare, High Tech, Consumer Goods, Energy and Financial Institutions.
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