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Certificate Series Recap – Project Portfolio Management Masterclass, Session 2

The speakers for today’s transcribed session are Dr. Shan Rajegopal and Rich Weller of Pcubed who will be designated as [Dr. SR] and [RW] respectively to indicate the speaker in question. There is also a brief interjection from Kirk who is the organizer for these sessions.


[RW]- This slide I’d like to talk about is kind of an agenda slide, high level agenda of the topics. Last week, we covered of the topics, number 1 and number 2 there. We went through Understanding Portfolio Management and Its Value to Companies. We talked about Preparing to Position and Sell Portfolio Management. And today we’re going to move into items 3 and 4: Deploying Portfolio Management: Investment Optimization and then Managing the Complexity of that.

So with that, I think I’d like to hand it over to you, Dr. Shan, to kind of pick up from where we left off last week. Maybe you could give us a quick introduction in case there’s some folks on the call that weren’t with us last week.


[Dr. SR]- Thank you Rich. So these are the Objectives we set forth earlier, in the last session on this slide. So I want to go through that—but basically, as Rich highlighted, we will move onto the third part of the agenda—that is to Deploy Portfolio Management from an Investment Optimization perspective.

If you recall, in my last session, I have actually identified the Triple Constraint: in the Triple Constraint, you realize what is the management expectation work and it is [inaudible] in one side is the investment value. So the investment value is how do you want to manage your investment; specifically, via the cut—so that you are able to optimize the investment. So in the investment optimization, what we look at is your portfolio planning and prioritization that we are going to look at.


Implementation of Portfolio Management

Now, in coming into the deployment, I just wanted to share some studies that has been done in terms of implementing portfolio management. In Meta Data Study a couple of years ago, on 50 percent of Global 2000 companies adopted some form of Portfolio implementation—and what was interesting on the study was 6 percent of the companies that implemented portfolios successfully—I think it drove their portfolio value up by as much as 30 percent while other attempts became just another failed project.


Now this was very interesting for me among two points of view: one, that the [inaudible] sometimes ago, companies that were just more than welcome [inaudible] to implement successfully and they lose over the value is very hard. And why is it that many are implementing successfully?


Increase Portfolio Value Achieved by

Both Gardner and Forester did studies to highlight how this portfolio value was achieved, based on those studies. One was from a cost avoidance—that means from stopping the funding of high risk, poorly aligned, low projected return projects. The other is Increase of about 5 to 40 percent in projected return from the IRR (Internal Revenue [?] Return), the NPV and the EBIT of the project portfolio for the same budget that funded the high value projects and eliminating the high cost, low return projects.

So again, what this shows is that organizations—when they start looking at portfolio from a strategic level, from top down level, they can actually increase the value proposition of a portfolio in a phenomenal manner.

The improvement in resource utilization has been, more or less, from a technical viewpoint and which has given [inaudible] savings between 5 to 15 percent because you are better able to deploy your resources more effectively and reschedule and optimize well. It is critical because resource planning and scheduling optimization helps in the achievability of your projects.

So one end is the investment view, where we look at, where we are planning and prioritizing which project should go in first and then the resource side is how you get it done.

Now, in the early days there was quite a bit of failures. Why were there failures?



Common Reasons for Failure

Some of the common reasons for failure was—the top two reasons, one was the lack of serious—they called it buy-in on alignment strategy or strategic fit—so you must have a senior executive as a champion in supporting portfolio implementation because it is at senior levels of recommendation in terms of selecting projects and funding projects. So if you do not have the right buy-in, it’s an issue. Secondly is the lack of managing the implementation as a change project—in my book on portfolio management on the corporate vision, I have actually devoted one more chapter on managing the deployment as a change project. This is fundamental because if you start thinking portfolios are a once in a year kind of affair and it’s not part of a process of business as usual, it can be problem. On top of that, because it provides visibility and accountability, people will be—what do you call—creating hindrance in respect to making it success. So you need to ensure that the right amount of coaching, mentoring and know-how are transferred and manage this whole implementation as a change project. These were the top two reasons.

The others are lack of agreement on success measures—again, sometimes we recommend very strongly to go for a high value, low cost deployment approach rather than a big [inaudible] deployment and making sure that those are well seen by the [inaudible] on the company wide basis. A lack in capturing benefits—there’s another reason to—because again, benefits capturing in terms of how much value the portfolio provides—that is important on the front end, making sure the measurement criteria are right and follow up the deployment, one with value that comes out of the deployment because you will be investing quite a bit of money in getting the tool, getting the process in place, managing as a change project—so what is the value proposition for that. Finally, business cases only seen as an approval hurdle and not real—this applies to quite a lot of organizations. Most people are pulling in business case but don’t really understand that this is something that can be measured and tracked and need to be implemented successfully.


So this is a couple of reasons why failure occurs and as we go through, you start to realize we will actually try to tackle the amount of issues in terms of getting a stakeholder to buy-in, managing as a change project, getting agreement as part of the process in terms of the way we take the steps in moving forward.


How Many Have Seen Shed Snake Skin?

How many have seen snake skin be shedded and do you know why snakes shed their skins? This is a rhetorical question and of course some of you will know is because the reason the skin needs to go. But I think the other part of the reason that is more significant is if they don’t shed their skin, they will suffocate and I think that is more important to me the way I look at it. What I mean by that is, “In today’s context, knowledge is no longer just about learning new things, it is the ability to learn, unlearn and to re-learn.”

So a lot of us comes with our own background of education and where we were with our current organization, our past organization, different cultures, different way of thinking and different way of looking at things. So when we form up as a team in deploying portfolio, you start to realize that each of us are carrying our own perception and perceived value in how to go about getting it done—and sometimes that can be a hindrance in the way we deploy the portfolio.


So the recommendation here is that you need to start from a clean slate and identify: these are the steps we are going to do, this is how we are going to get it done, we are going to avoid this, this and we will have this, this. In order to do this, we need to discuss some of our old practices, unlearn that and then do the relearning on the way that we want to move forward.


Introduction to the Pcubed Portfolio Maturity Model

And as a first step, I strongly recommend that you should actually look at where you are as an organization in the maturity of your portfolio. We have done quite a lot of portfolio maturity assessments; this is a—provides you, kind of a, high level overview of what the 5 Levels of Maturity from initial to optimized. And this is quite standard terms used across both maturity levels but we have actually tailored the questions directly towards portfolio capability and it covers the pipeline demand management, the optimization work we do, the benefits and the portfolio delivery performance. So it covers the 4 A Core Capabilities. And within the—it cuts across the People, Process, Tools and Governance. So this is where we look across all the four areas—across the 4 Analysis Criteria.

And we have a set of questions that we can look at: What is the purpose of you in wanting to do this maturity level?   The purpose is to make sure that where you are, in relation to other companies—so it’s a good benchmark, a good indicator in terms of best practice or good practice when you are looking at. The way we are doing something at one point or another—you may be doing process, certain ways of using tool—but it’s important for you to kind of benchmark where you are in relation to where good, most practices lie.


What it does is that it also, in the first instant, help you to jump-start—so what you look at is where is the least amount of effort that is needed to get the maximum high-value in terms, where you can have immediate improvement. And that is a really good sign. What I mean by this is that sometimes you can go from, right through the whole process in one lot because you may not have the funding for example; you may have a smaller budget to work with. So by you doing a benchmarking helps with the target where you are—for example, demand management could be one of your capabilities that you need a minimum amount of [inaudible] with more value in terms of [inaudible] or it could be prioritization stage or it could be respect to the benefits tracking or it could be respect to resource. So you can actually be selective to understand where you are in relation to the processes. And then maybe zoom in, and it can show value to your organization and this—in its own right, can [inaudible] more internally to [inaudible]. So ultimately, we would like you to go from one end to the other in terms of successfully completing.

[RW]- Dr. Shan?

[Dr. SR]- Yep.

[RW]- This is Rich. We’ve got a question coming in here. In looking at the 5 Levels of Maturity there, the question is, “How long does it take an organization to move through that maturity model that you’re showing there?”

[Dr. SR]- First, we need to know which maturity you are in, number one. I don’t expect companies to go up to the five levels, to be honest. It depends on certain areas where you want to focus your energies on, maybe where you capabilities built are. So I would recommend is that, it doesn’t take how long for you to go from 1 to 5—my view would be is that, if you are in 1, 1.5, I can move up to 3, for example. That is good enough.

So to go to 3, I would have to go to 2, which means I have to get this done, this done and this is the value proposition I get. And if I go up to 2.5, I need to get this done and this done but it may not be viable because you need to get this tool in place or this is a bigger funding needed. So you can actually plan out, within yourself, and make—what do you call—a fact judgment in terms of how do you move forward in terms of the maturity level and what other things that you want to be in place in the journey that you are moving towards.

So again, there is no fixed time scale the way I would look at it but it’s how you, as a team, the portfolio team together with the sponsorship team in the way you are looking at it and how you want to move forward—in the next kind of value that you are looking for.

Does that answer the question?

[RW]- I believe so. And we’ve got a couple more questions on this slide. We’re wondering if you can expound a little bit more on each of the four core capabilities.

[Dr. SR]- Four. Ok. Right, in the four core capabilities, what you are looking at is: is this in pipeline, is this in demand management—there are a series of questions in demand management: for example, you can ask is that how are demand generated, for example—are demands all in business case or a certain amount in business case—how do you categorize those demand that are coming in, are all people aware of what are the projects coming in and demand are in line with—what do you call—the drivers and the categories you are looking at.

So you’ll have a series of questions to understand where the process is and how the demand are coming in, in this case the pipeline to look at.

We also have [inaudible] for new projects and then the in-pipe project. We’re looking at the things requested: how in-pipe project and the value coming in—how are you measuring the in-pipe project, are you looking into this guarantee or are you looking into the value proposition, asking a value proposition question.

Certain data optimization—we again, we look at how optimization is done, how is investment decision based, on what kind of criteria are you using, how are those criteria linked to your strategies. So those would be a set of questions that goes into the core capabilities.

Same thing with the benefits management, again there are a series of questions in terms of that, ask questions: what level of benefits enables you to identify what kind of benefits plan you will have in place, what are the models you are looking at…

Delivery performance and portfolio performance, again a set of questions in terms of what kind of dash buttons are you using, how are you tracking it and so forth.

So for each of those stages, there are certain level of questions that actually tackle whether you are at ad-hoc stage, are you at keep trying stage or are you at organized stage. And that set of questions will help you to see where you are.

I have done portfolio assessments for automotive industry, across oil and gas—you can see sometimes in certain tools, they will be pretty well organized—some of them with investment tool but in terms of process, they are not. In some cases, the demand is very poor whereas the optimization is pretty good.

So you can have, not necessarily, all of those capabilities in line but it could be some of them are in level 1, some in level 2 or some in level 3.

[RW]- And I think we’ve got one last question on this slide. And the question is, “How does an organization go about determining which maturity level they should target?”

[Dr. SR]- Haha. That is a good question, actually, to be honest. Several years ago, when I was in Walt, Walt Dis—portfolio work, there was a way that we were looking at—how does organization look at, in terms of where they should be targeting their level. We came up with an interesting approach—maybe [inaudible]—is that what we did was, what is the purpose that organization wants to move into portfolio [inaudible].

Based on that question, let’s take an example—if they are looking into what huge amount of savings can we get out of—let’s take an IT department, a CIO as if they—I had the challenge of presenting this visibility and a cut in my budget, and on top of that I need to know whether the projects that are coming in are in line with my strategy. So again, when you understand that, then it’s easier for us to do a calculation—so what we have come up with, a very simple—what do you call it—Excel spreadsheet with Microsoft engine, ask a series of questions and then what it does is that it use, forced us to study in terms of the department and the amount of money they spend on project and certain level of questions—we then plot out, where is the maturities and if you move the maturity to level 2, level 3—what kind of savings you can get.

And that can be a good indicator for the organization, is ok, I’m looking for certain amount of savings, I need million savings and if I do this, this this and this, it will help to influence that in terms of savings. So you can use that as a guide—that was one of the planks that we came up with a couple of years ago in terms of asking a company where they should want to go for determining their maturity.

Does that narrow the question?

[RW]- I think so, Dr. Shan. Thank you very much.


[Dr. SR]- Sure. Thank you.



So Peter Drucker said, “If you want to do something new, you have to stop doing something old.” So when you are going into a portfolio launch, you need to start thinking about how to go about in a very defined, critical way of doing it. I was talking to an executive from an investment bank here, in London and it was quite interesting, actually, because he was looking at it and saying “we need to get portfolio management office in place, we need to get portfolio management [inaudible].”

And what was really surprising for me was that they got someone in and what they looked at is that very simply, that this portfolio that would be for bank is just like a hit list of all the projects they are in and then from using that critical process, we just want to have a dash box of whatever projects, available projects are altogether. That was their concept of portfolio management and having portfolio management in place. Again, that is quite a wrong way of thinking to be honest—because the whole idea that you want to have a portfolio in place that you align with the strategy.

So I was quite surprised when this gentleman told me and I said, “No that should not be the case.” And then I started to explain, I started to say, “There’s more to it than what meets the eye.” So going into—sometimes you may have a certain set of way of thinking and doing. But you need to rethink using the current approach and see how it configures into your organization.


Our Portfolio Process Represented as “Swim Lanes”

Let me share this high level overview of how we approach a portfolio process and we kind of represent it as a swimming lane, to look at it in one way. So if I look into the whole high level view, I look at, from a strategic target, some of the contraints that are in the organization—so this could be investment strategy roadmap that we are looking at and then there is a governance & approval stage that is put into place. So in the pipeline management and you can also call it the demand management part of it where the projects are in, we can—we need to categorize it into some form or another.

So let’s say in this case I have three levels of categories: first level is what we call as regulatory and compliance—there are projects that comes in that must go into the organization because there are regulatory and compliant—primarily in the financial sectors; you know, there are a lot of compliance issues. It could be a small project but you have to do it. It comes into that category, for example. The next category could be [inaudible] if you look into what is called IT Continuity. Sometimes we call [inaudible]. And then you have the center as a bucket for the Discretionary project—it could be strategic project, it could be improvement project, it could be market customer satisfaction—whatever will come under that kind of a bucket to look at.

Now, in my experience, I have found that a lot of the companies—what they, some of the project and program managers, what they do or the business units, business holders who wants the project to be accepted—they just push it into the regulatory, “Oh it’s required, it’s a regulatory requirement…” or it is IT Continuity project, “we have to upgrade or we are going to have some problems.” So most of the projects tend to go in and what happens is that, in this case I’m talking about IT, is that CIO has no choice but to maintain the budget or increase the budget—every time the budget [inaudible] and this is a major issue, and as a result they’re not locating projects where money or investment into projects which are going to enable the business growth—they are not doing that and that is a very big issue.

So what we have done is that all, supposedly, all regulatory and compliance projects comes in, [inaudible] we need to have a look at it but what we recommend is that you need to justify why it is on the regulatory and compliance track—under what specific regulation is this in, can this be deferred or must this be done in this particular year. So that’s the kind of series of questions you put into place so that what we do is that we ensure the project doesn’t come under the radar to push as a forced in project. If it doesn’t meet any of the specific regulations and it can be deferred, you should put it under the discretionary budget.

Same thing with IT Continuity, what we did was we came up with a risk score indicating their level of impact and probability of the reality of risk if this is not done. And what they do is they have to justify, “If I can delay this next day, I should delay the updates next day rather than doing it this moment,” so it can be allocated into the discretionary budget so that I can fund more business enabled projects.

So in the Discretionary Funds Project that comes in, these are projects, which need to have a strategic value for the organization, which are going to grow the organization and then we used the process called the Analytical Hierarchy Process (AHP—we will cover that shortly) in terms of defining and identifying the drivers and the impact of those drivers on the projects, get a strategic value score and then what we do is that we rank those projects and then we optimize projects based on strategic value as one front and then we can use other level of optimization—by financial values or it can be by risk or whatever you can do—and create multiple scenarios for the management to look at.

And then we go into the selected projects, right? Those projects which must be done or come in as what we called as forcing projects into the portfolio. And then we ensure the Portfolio Governance are in place—so that there is a right focus on the priorities, the capacities and the resource—so that you do the optimal delivery and savings that you’ll get.

So again, this whole process, looking from a big picture viewpoint, we do in what we call checks & balances to ensure we get the best portfolio out of here—for the projects that come into your organization.


The next slide, what I’m going to do—I’m going to into the step by step guide.


Pcubed Strategy and Portfolio Management Framework

So the step by step guide—what is the step by step guide.

The first step we are looking at is the Demand and Benefits Capturing and then the front end. In this area, the Demand and Benefits Capturing, what we are looking at is the categorization of the projects and what is the benefit of the projects into the organization and we have, normally, have a business case built into it. I don’t recommend business case for all projects—there is little value in it depending on—some companies have 1 million dollars, some have 500 thousand, depending on what kind of strategic impact it has—so you can condense your business case depending on the organizational guidance you need to have some business cases for certain level of projects.

In categorization, and some categorization when you move on you need to identify what are the Business Drivers—now I go into a bit more detailed on the business drivers, so each year, define: what is business drivers, how does that impact my organization, how does that impact my strategy, how is it aligned to my strategy—and business drivers will have to be specifically, in a simple and measurable way of linking your strategy and then you need to get a visual driver definition and prioritization into place.

And here, the next step after that, you’re looking into what is a Benefit Valuation, Project Impact Valuation (sometimes called a Project Benefits Valuation)—is what the level of the impact of the project is going to be on the particular driver which will have an impact on your strategy, we need to get that. And again, this is one of the most challenging part with an organization, because people don’t want to calculate, “What is my contribution to—what’s the project contribution to the organization and to the strategy,” and most of them just maybe used—what do you call it—I forget the ads, of what the business is going to be but we actually, we emphasize and we demand that you have to be more, very specific in terms of your benefits quantification so that you can actually measure very clearly.

After the benefits valuation has been done and is input, then you can go into your Portfolio Optimization based on the Constraints—it could be the investment, it could be by risk as well, you could also put in a high level resource and get your optimization of your portfolio.

And that is linked to Alternative Trade-Off & Analysis—what we recommend is a multiple scenario approach—it means if you have a 10 percent cut, 15 percent cut, 20 percent cut, what will be in and out if I use my risk or if I use my live cycles apart—you can create multiple scenarios and show them, with the management where does it fit in. And normally, as a [inaudible], a kind of decision framework, as a guidance for us—so we can use that as the framework and create the multiple scenarios for them so that they can look at it and see, “Yep within this framework, we can go ahead…” and so forth. We normally put in a level of, what we call, what are the options of the levels, what is our recommendation based on the cuts you have given to us and why we should save that—and normally, the first project that falls between the gray area, we tend to discuss that more in detail—should the funding be diverted or not, why is it an important project to begin.


And then what we do is we roll that out into a very clear dashbox, for the Portfolio Delivery performance and Benefits Tracking that we put into place so that we can track it on the monthly and then load it up onto the QPR (Quarterly Performance Review) and then have annual, have your [inaudible] primarily for governance level review and that annually you look at for review and then you continue on that basis.


Executive Involvement


If I look at the demand for benefits capturing as it first [inaudible], now this is an anecdote but I think this is important, coming back to [inaudible], senior sponsorship is important, [inaudible] deploy a portfolio management process, “…please ensure that executives are involved in the front end of the business, not in the back end of the business like a crisis management.”


Demand Management View

So in the demand side of it, you must be very familiar that [inaudible] many demands comes from every sector, but on Monday, I was with a client of mine and I was running—I was doing some portfolio work with them and I thought it would take a reasonable three arrows to do it—one of them is a [inaudible], “You shouldn’t put three arrows into this company. You have left, right, center and back. All arrows comes in on everywhere, from the demand [inaudible].” It’s kind of a—when you manage to put in the three arrows, it means that demand can come from any sector and any way it can come in.

So some of the common [inaudible], is the demand from the business, in this case where most of the project, the load is external, you know—the opportunities is, the demand is the driver, so the capacity should be adjusted, so the objective here from businesses is they want to maximize the revenue, the profits from the projects—so you want projects that are going to be business enabled and are going to grow your business.

At the lower end, the demand from operations, here the project load are primarily internal, capacity is the driver in this sense and the capacity constrains your demand in terms of what’s coming in—so you select projects which give you the best benefits in terms of internal improvement that we look at. Now of course there is a demand [inaudible].

Now one of the interesting things in the demand capturing is that I was speaking with a CIO of a company, it’s very interesting what he told me was that for him, “…all IT projects must be business enabled, that is 80 percent of my time is going into that; if not, why are we selling as an IT department, it doesn’t make sense. So IT is an integral part of the overall global organization” So, depending on the senior executive, it will change the perspective and I really advocate his thinking. I think IT should be at a very senior level, should be part of the growth of the business and all IT projects must support business growth.

Then what we do is we do the categorization and how we move: it moves into whether it is distributed through Critical, Strategic or Tactical and as it goes through the process.


Let’s look into the categorization, in this: my next slide will show that categorization.


Example: Categories of Demand

This is an example of categorization. I think the projects which you can use for you to make the [inaudible]: projects, for example, I can go have a projects which are for growth and enhancement projects or it can be transformational projects or even sometimes have foundation projects. In some cases, we have projects which I highlighted earlier like regulatory/compliance and there are discretionary, they would be like growth projects, margin projects or customer satisfaction or [inaudible] excellence projects or the [inaudible] or IT Continuity projects.

An interesting example and just something I’d like to share with you also is that this categorization of demand is unique to the organization and industry that you operate—so there is no hard, fast rule about it. For example, I was with a large French R & D company and this company was doing a lot of R & D projects, specifically the environment sector. One of the things the R & D director was telling me the other day—they have a brilliant R & D strategy in terms of looking at how to manage the product introduction into the marketplace.

So one of the key challenges they had is that, “How do I manage which projects and how do I locate my funding,” so what we did was we did a categorization. We went into, to understand, what was the project were moving on—so are the projects going to support an existing market, for example, or are the projects using existing technology and existing market or new existing technology, new market—new technology, new market—is it risk averse or it could be totally SKY-ward research in something to do [inaudible].

You ask this kind of question and what we do is we then have to categorize it and then what we do is the categorization—we do a very clear definition of what it means and on top of that, what we did was we created a decision tree, which is in the [inaudible] which we can then look at and we ask this question so the projects are loaded according to the [inaudible] they are and categorize where does the projects all seem.

Because what happens is that based on that category, the [inaudible] unlocks the funding because they still want 10 percent of the R & D budget for SKY blue research, for example, and they need for existing technology and the new market—30 percent, 40 percent of their budget for development to go into that—so they did that kind of decision, which is fine. So again, the top process behind the categorization also makes sense depending on where your business is coming in from.


Categorization is a very key part because ultimately, it also links into whether you are going to have something that must be in projects or some may not be in the project, which you need to ask the right questions.

[RW]- Dr. Shan, we’ve got a few questions that are pooling up. I was wondering if we could try to knock some of them down.

[Dr. SR]- Sure. Go ahead.

[RW]- Ok. Tina is asking for advice here on how we would assess the benefit and ROI on infrastructure projects—it always seems that these projects kind of fall off the list but could actually have a pretty big impact to the organization. Any suggestions there?

[Dr. SR]- On infrastructure projects, yes, uh—first, I need to understand how they are currently measuring infrastructure projects. There are ways of measuring the benefits impact on infrastructure projects—so we need to understand what the current way of measuring it—if they do not have a current measurement in place, then what we need to do is understand what is the contribution of the infrastructure project to the organization. What we need to do is then need to calculate what is the benefits we’re going to realize off of that and then use that as a base of calculating the—what we call the value proposition.

We may not have—I mean, the return investment can be calculated based on the investment in [inaudible] and I would go more for the benefits that the infrastructure projects is going to have. Let’s take an example, a CRM project or it could be like—what do you call—a certain deployment project, there are—you can calculate certain degree of benefits very specifically, why this project is going to be in place and that can be used based on the investment and based on the—once the project goes live, what kind of savings you can get out of that.

Does that make sense?

[RW]- Yes sir, I believe so. We’ve got another question around the portfolio management framework and the question is, “We’re pulling in projects into our portfolio to assess and optimize. Do we also bring in the in-flight projects or…”

[Dr. SR]- That’s a very good question, actually. My recommendation—what we have done, it almost depends on the company. In most companies that I have worked with, if the in-flight projects are—they use what are called a Life Cycle as a means of guidance—if they are in Phase 1 and Phase 2 of their Life Cycle, they—companies brought that into the portfolio to calculate on. Some companies, if it’s anything below—after Phase 2, it’s not included.

Now, one or two companies that I have come across, they say, “Oh, in-flight. We have already got the budget to go ahead. We should go ahead,” but my challenge to them was this—if you have been investing for three years into a project, for example—a three years program, you have three years funding you’ve approved in the first year: my question to you is that in the second year, you need to ensure you need to evaluate the value proposition and if it still stands. That would be my challenge to them: are you able to conform [inaudible], planning in the value proposition, what it’s set up to do, is it still on for the second year.

If it is not or it doesn’t scope, whatever it is, in that you case you need to reevaluate—that would be my recommendation, because in the UK government, this has been the biggest issue to be honest. What I mean by biggest issue is that somehow their senior demos and [inaudible] would make decisions on some of the investment that they look in—in the second year or third year when they know the project is not going to give them the value, they still continue because of pride on top of ego or they didn’t want to kill any project that they were already committed to. So that can be a deterrent—because the funding that they can use to fund other much more higher value added project is far much more favorable than putting money into a lost cause, if that makes any sense.

Does that answer the question?

[RW]- Yes, I believe so. And one more question on the current slide, the slide that we’re currently on Dr. Shan, “Can you expound a little bit or tell us the difference between the Utility and Maintenance type projects for demand versus the Foundation category, like what kind of projects would we see or what kind of work would we see underneath each.”

[Dr. SR]- Ok. Unity and Maintenance projects are like—it then goes to like a model upgrade projects, which are—interim projects would come under Utility and Maintenance projects. Now the Foundations, which is non-project work, basically—I don’t, this is—I’m just putting this on a company who put up a list and what they do is: somehow, the smaller cases on work that they do, which are not 100 percent part of a large project but certain—what do you call—incremental work that they’re doing—they put that under Foundation. Because what happen is, if people say they aren’t on project work—they are still doing something that businesses need or some work for some improvements that are needed as a smaller version of a project they are doing. So what they want to do is actually allocate a tiny bit of resources into Foundation work.

Is that right, Rich?

[RW]- Yep, that’s good.

[Dr. SR]- Anything else? Questions coming up?

[RW]- I think there’s a couple questions in the queue but I believe we’ll get to the answers as we move forward.

[Dr. SR]- Alright brilliant. Thank you.



Business Driver Prioritization: Analytic Hierarchy Process (AHP)


So let’s look at the Business Driver Prioritization and the use of the Analytical Hierarchy Process (AHP)—first, let me highlight this AHP. This process is actually a decision model, basically, and in fact it was founded in the United States by Professor Thomas [inaudible] who used to work in the DoD and he actually came up with a decision model—and over the years, it has been used across various sectors as a decision tool but it became really [inaudible] as a powerful means of applying it in a portfolio, specifically in relation to aligning with strategy.

So what it does is that in the business driver prioritization—there are a couple of steps that are involved for you to do with business driver prioritization. First thing you need to understand is what are—what is the business that you are involved in and it means is that each sectors are run different: oil and gas, manufacturing—each of them are different sectors. You need to understand what drives your industry—so you need to collect and define business drivers. So there are specific definitions of business drivers I will cover shortly but you need to define business drivers.

Business drivers will be in line with the strategy—a company may have a number of strategies and normally, a version we have come across is like 5 to 10 strategies or strategy tools that they may have—it could be very fluffy statements, it could be, which you can look into with the—what do you call, corporate document—or sometimes companies have very clear five years plan and five years strategy, what they want to do, it’s very, very clear. Most of the larger progressive companies we have come across, most of them have actually worked with some top notch strategy consultants like McKinzies, [inaudible], Hamiltons—[inaudible] of the world and they have actually a very clear five years strategy. So it’s quite easy for you to actually look at [inaudible]—if you look at them, most of them, a handful of strategies, normally 5 to 7 strategies you will have.

What we need to understand are these are the strategies and as a result, how these strategies or the strategic teams are linked to something which is very clear and quantifiable [inaudible] this led the business drivers. These are the drivers that are going to drive this strategy—so you need to collect and define it.

The next step, you will find that base for each of those strategies will have one or two drivers that will be supporting it or it could be two or three drivers supporting the strategy. What it does is—the next thing you need to do is you need to do individual “pair-wise” comparison sessions with key stakeholders. Let’s say, for example, one of the driver for the organization—it could be a cost-efficiency, cost savings—so in this case, you are going to do a pair wise comparison session with the key stakeholders.

You start to realize that the strategy is not related only to what’s IT; it could be to the CFO, it could be to the operational side of the business—so you have many key stakeholders and each stakeholders have their own, what we call, internal implied deployment—that means there are selfish ones and [inaudible]. The CFO will incur a certain cost definitely, whereas the sales and marketing will be interested in customer satisfaction and [inaudible] as a driver for example, the operational will be more interested in business reliability as a driver for them.

So you start to realize that the key stakeholders in the organization have their own interest in the way the strategy is defined—so when you have drivers coming in, what you need to understand is that you are going to prioritize the drivers in relation to the strategy and in relation to the key stakeholders. What we do is that this is a process called a “pair-wise” comparison where we compare each driver against another through a process of “pair-wise:” one versus one—if you have seven drivers, you do one driver versus one and you view which is more important than the other. So that is what you call a “pair-wise” comparison of business drivers by individuals.

Once you have done that, you will—you can rest assured, there will be a divergence of interest because as I say, each of those functional heads and their own sense of ego and possessive environment is more important than [inaudible]—that’s bound to happen. What we will do is that we will have to do an analysis on the variance and then what you do is you need to achieve a consensus on the divergence—into which of the divergence is more important than the other and this is the AHP Process, which uses a vector approach whereby it provides a calculated way of comparing it.

So that in the divergence, you need to come to an agreement; normally, one of the senior executives will champion in the portfolio and will say—this is the way we are doing it. This is the strategy, I know the finances invested in the cause, I know the operations interested in the business reliability, I know the sales and marketing are interested in the market growth as well as the margin in customer satisfaction—so what we are going to do is the first strategy of the company is the new product introduction and making sure that the product is releasing into the window of opportunity, so this is a market opportunity, so this can be seen as a marketing plan, for example.

They will have to do that consensus discussion and then agree which driver is more important than the other. And normally what we do is we run it as a workshop with the executive team, and then we help to arbitrate them, in fact, and then help them manage and capture those information that comes in. We then ring the business guidance until it comes through. This is very important because in a portfolio approach, especially when the budgets are cut and when you are going for the one bucket of money, the funding is to all the various department and business units and they have to agree—and that’s why this process is so critical, actually, when we do—to get the buy-in from the key stakeholders, at least all of the senior guys normally sitting in together—to agree that this is the strategy direction given by the CEO and they are now supporting it and each of them have their own interest but they still have to look at what is good for the welfare and the direction needed for the company as a whole. This process helps in that particular decision making.

What it does in a very powerful way is actually converting the gut feelings, the intuitiveness and the experience of the senior executive into a quantifiable way of measuring what drives the strategy for the company to achieve the [inaudible] that you are looking at. That’s the power of this work and you will be surprised actually—one of the [inaudible] will be quite energized and say, “Oh very good,” and they will, and they—once they have kind of endorsed it, if everybody has the buy-in, in that case when the project that falls in the different of those drivers or the different strategies—it’s very easy to justify and it creates visibility, nobody will be shouting loud or politically given the confidence in the general consensus in the approach that has been taken.

Is that, is that the question from them?

[RW]- Actually, yes. Just to kind of paraphrase real quickly, Dr. Shan, would it be safe to say that the “pair-wise” comparison is actually a comparison of the business drivers or one against another, business driver—kind of ranking them against one another.

[Dr. SR]- That’s correct.

[RW]- Ok.


[Dr. SR]- And we do it for each single executive separately, and then we bring them together to agree as a whole on where the [inaudible]. So let’s say we have five or six senior executives sitting in: sales and marketing, operational, finance, IT and let’s say we have customer service, for example—there are five of them sitting in together and each of them we will go to for the driver separately and then we bring them together to get a consensus for all of that, and which of them should be the priority for the drivers.

What are Business Drivers? Example

So what are the business drivers and an example when—some definition. Business Drivers are actionable strategic objectives that can be made operational to key projects—that’s the key thing. Drivers should be actionable, measurable and discrete—there’s no overlap of those drivers should occur. Again, you can do a process that many may be familiar—what do you call—S.M.A.R.T.: Specific, Measurable, Actionable, Realistic, and Time. You can use that as a guide in terms of defining your drivers.

Most organizations should have no more than 5 to 10 drivers. On an average, I’ve found 6 to 7 are quite common. Anything more than 10 and you may find that actually, there is a reputational redundancy occurring because there—the company will have so many strategies like, I remember we were in—again, this was financial sector we were in—we found there were 25 drivers in the company. That was quite a surprise because what they did was they didn’t realize some of the strategies were repeating that the way they were looking at—so again, we need to align quite a lot. So sometimes external [inaudible] do help in aligning it because some of the—what do you call—organization doing them, staff, sometimes they are too much in so it’s very difficult for them to see. And in some cases I know, the fluffiness of the strategy is real, a challenging point for them to think through for comfortable drivers.

Again, the drivers should focus on the strategy rather than the financial returns—so we’re not talking about finances at this level but we are looking into where the strategies and how they link to it. Getting the right set of business drivers is the most critical for ensuring that the most strategic initiatives are chosen for implementation and this is the reason why it is best to have the senior executives agree on the right business drivers and ensure that development [inaudible] are agreed in. If not, it could be a big problem to be honest. If not, you will not have buy-in from the whole executive team—so getting the business drivers right is one of the key steps.

Normally, what we do is that because we are quite experienced in different sectors—so there are some best practices in the industry in oil & gas, in manufacturing, [inaudible] or in finance—we already have certain set of business drivers that we work with. In most cases, they will call us in because they need help to speed up the process. Ultimately, we have a lot of experience in the healthcare industries also in the US. So we have done so many times for it is—we are quite familiar, what we do is we, when we’re facilitating, we become more helpful to them, easy for them to see where it comes in. They normally bring us in, especially to sell internally to the executive team because that is a challenging—even if you are leading the portfolio engagement internally, sometimes you need an external support because to sell it more concretely to the executives and why this is important, why this is being done.

We recommend very clearly: get the drivers defined correctly, make sure the definition is written very clearly. I also recommend very strongly as you are going into the company to put in some examples of projects that already existing in the company and where does the drivers, where do those initial drivers fits in and the definition and the name of the driver. We recommend that very strongly. And just for your info, some companies, I know they don’t like to use the word business driver: they call it strategic driver. It doesn’t matter which, how you use the strategy: calling it a strategic driver or a business driver, it doesn’t matter. Look into what is palatable to the executive, what would they like to use. But it is very clear this is a definition in terms of what are drivers.

My recommendation is that if you get the drivers in correctly, which is the definition and that—give some example of projects that define so when executives think to are, they can actually relate it well usually because ultimate purpose of the driver is to ensure that the projects are linked to the driver—this is what you are looking at: so if I got a project in and I look at the scope of the project and I look at the benefit of the project and what they give to me, I know which driver it goes to—so as a result, whichever driver it’s going to, I know it’s linked to this particular strategy, this strategy and this driver and this is the project that is going to contribute to the driver which is going to contribute to my strategy—so that’s where the link comes in and we can normally do or [inaudible] plot the whole lot in—what do you call—an Excel spreadsheet where the links are already clearly linked and that makes huge sense for executives to think, “Ah this particular strategy, this driver—this is what my linkage is, I can now be linked with [inaudible],” so this makes a lot of sense.


With that, what I will do is that I will hand over to Rich, who will actually look into the 2010 Portfolio Server and how the same process that we have used will go into it. Can I pass it to Rich, to you?

[RW]- Yes, sir. Absolutely. I’ll take it from here. We had some questions, a couple folks at the end of the last session asked the question, “Well how does all of this tie to project server, all of the discussion from last week,” and the words that I used is, “It’s kind of like understanding the fundamental terms around project management. If you don’t fully understand the fundamental terms around project management, working with the client Microsoft Project, you’re going to struggle.”


The same concepts are true with what we’re doing here today, what Dr. Shan has taken us through last week and so far this week is just really understanding the fundamentals, those fundamental terms, high level processes and what we’re going to do today or where I’m going to pick up is actually pick up those terms and you’ll see those come to light as we walk through a process here for enabling portfolio optimization within Microsoft Project Server 2010. And I’m showing a slide now on my screen with, again a high level process for portfolio optimization and you can see that we have six process boxes here and we’re going to deep-dive. We’ve got a few slides underneath each one of these processes, so let’s drill right in here.


Portfolio Optimization in Project Server 2010

Again, there’s the overall portfolio optimization process. And we can capture these business drivers that Dr. Shan has told us a little bit about right within Project Server and that is where we will start in our process, enabling portfolio optimization in Project Server—is defining those business drivers. Again, we can capture and store them right within the tool.

What that would look like if we bring up this screen here, this is our Microsoft Project Server 2010 home page. It’s kind of default, out of the box and we’re going to take a look at some of the options here. Our options to enable those, enable that portfolio optimization process starts underneath the strategy over here on the left. And if we click on the Business Driver link, that brings us to a listing of where we would store or archive our business drivers.

In this case, we want to create a new business driver so after we click on Business Driv—or Driver Library, we would click on new and then that would bring us to an input screen and within this input screen, this is where we would simply kind of fill out the form here, completing the information that Microsoft Project Server is asking us for with respect to each driver. We would input the name of the driver, a brief description—if anyone is familiar with Project Server 2010, we have the capability within this tool to kind of separate the system so that perhaps different organizations within one company can use the same solution and leverage this department field to, kind of separate the information.

Now for each business driver that we would input, we actually establish or set up impact statements, which are quantifiable as best we can. We have different categories here at the bottom and as I move to the next screen here, I’m showing you a completed example of what a completed business driver might look like. So, here we’ve created a business driver that says, “Expand into new markets and segments,” a brief description for that. And then in our impact statements, we list out, we quantify—there’s a ranking of none and so it says, “Does not grow revenue from any markets and segments.” If you can envision the future or a couple steps downstream, what we’re going to do is we’re going to take each potential project and we’re going to rank that project against this business driver, ultimately scoring how the potential project lines up and where it fits in—is it low, moderate, strong, extreme or none—how it applies or contributes towards this business driver. So that’s the steps for creating a business driver.


Discovering Strategy

Dr. Shan, you kind of touched on this a little bit already. The next slide that I’ve got here is well, where do we get these business drivers. How do we come up with them? And so here’s a few points around where you might work to uncover those business drivers: Perhaps from some annual reports, from within the vision and mission statements of the organization, capability statements are also a good source, history as well as the current corporate behavior of the organization. Looking into these areas is where you can find your source for those business drivers.

Now Dr. Shan, is there any additional words that you’d like to give us around this slide?

[Dr. SR]- Not quite. But as I mentioned earlier, some organizations do have a very clear—what do you call—documentation to show what is their strategy and it’s in [inaudible] that is highlighted—so if they had one statement or document, brilliant.

[RW]- Ok—

[Dr. SR- interrupts]- This corporate behavior, just to add a little bit of the corporate behavior, is actually, looks into the culture of the company, basically. If it’s a technology like company, you start to realize that it has a more technology strategy focus versus service based company, more people focused for example. So that, in its own right, will play a different—the strategy will shift according to that kind of culture and behavior of the company.

[Kirk]- Hey Rich, this is Kirk.

[RW]- Yes.

[Kirk]- A couple members just commented—I don’t know if this is a good point or not but maybe you could comment on just the—you’re getting into the technology piece here, what you’re showing and like what would be required for them to kind of have on their computer—are you showing Project Server, you know, maybe give them a baseline on what software they would need to have installed to access what you’re showing them.

[RW]- Yeah, the software that I’m showing here again is Microsoft Project Server 2010. As far as the detailed specs that are required for that, I’d have to get that information offline. But all of the screenshots that we’ll be showing from here on out is from Microsoft Project Server 2010.


[Kirk]- Right. Great. Thank you.


Characteristic of Meaningful Drivers

[RW]- Ok. Some characteristics around setting up these business drivers: we should have a few in number and Dr. Shan, I believe that number that you were recommending was somewhere between 5 and 10. Is that correct?

[Dr. SR]- That is correct, Rich.

[RW]- And we attempt to set those up so that they’re understandable, they’re not overlapping, clearly measurable, consistently applied and appropriate for domain.


So all of these words here are around creating and establishing those business drivers that will allow us to, again, figure out what the strategic value is for each of our projects or potential projects.



Examples of Drivers and Benefits Metrics

And so here’s an example. I believe we had a couple folks on the call was asking for, “Can you give us an example of what some business drivers might look like?”

And I know that we’ve got these broken apart by Strategic Focus as well as different industries and sectors. Dr. Shan, this is a good slide, perhaps you can give us a couple of words around this slide.

[Dr. SR]- Yeah, sure. I would like to do that. We took the strategic focus as—what do you call it—most companies, they are looking into growth, efficiency or flexibility as part of their—what do you call—team [inaudible] strategy. So what we did was, because we have worked in all of these sectors before, we start to realize that financial metrics—growth had to look into, what do you call it, cross-sales customers and what are the customers churn that’s coming in, the market share.

One of the key things you need to understand when you put any form of drivers in [inaudible] measurable: that’s key because let’s not forget that every project’s impact statement as you’re coming up is also measurable—so you have to make sure that it’s measurable.

Energy Sector—we have like a reserve additions, resource additions coming in in parts in units: barrels per units. We will come into that.

Government—we especially, capacity are quite common to in terms of—capacity is quite common to look at.

Manufacturing, Market Share, Customer Retention is another key thing in the manufacturing that we looked at and the other is the growth of new customers that comes in.

Efficiency is quite straight-forward in terms of—what do you call—operating cost per transaction that comes in, production efficience for the energy site or the operating cost per barrel that we look at and the heightened R & D cost for new product that comes on, on it. And one of the key challenge we had with efficiency was the calculator that we use so if someone comes up with a project and they say this project is going to provide some model of efficiency and improvement—what they need to do is understand we’re going to need more detail from the tool, calculate how are they getting the dollar value that is going to come out of the efficiency statement. That’s where the problem comes in. Again, it’s as I said that it can be sometimes pretty challenging, especially when they go into the benefits metrics calculation.

Flexibility, what was key for us was actually the cycle time reduction, which is quite common that we use that and then for the manufacturing and the total cycle time and workforce flexibility was another calculator that we used and there is high tech looking into contract for production time.


Let me go back to what I initially agreed to Rich when I said is that the—when you have the drivers identified, you need to make sure that the metrics are very clear and that is always challenging to go into to discuss the metrics with the people. I remember I was with one company, they had 1,500 performance indicated. 1,500 performance indicated! And out of that, they have—what do you call—PPI, we call Process Performance Indicated and FPI, Financial Performance Indicated. The senior executive of those companies and the board—they had no clue how to roll up to look into dashboard, so what we did for them is that we converted the PIs, the 1,500 FPIs and PPIs into 7 KPIs so you can actually use a calculator, you can do a clear definition, link it to 7 KPIs and then we narrow it down to 6 value metrics which are used as dashboard for tracking the project and portfolio, the portfolio, yeah.


  1. Prioritize Business Drivers


[RW]- Alright. Alright, thanks Dr. Shan. So again, all of those slides that we just covered were all about “Defining the Business Drivers.” The next step in our process is about “Prioritizing those Business Drivers.” And so if we, again, take a look into Project Server 2010, we have a section again, a menu option over on our left, option where we can—that says driver prioritization and then once we hit that screen, we are able to create a new prioritization and that screen looks something like this, where we would name that prioritization and we would then pull into this prioritization the drivers that we would want to assess.

After creating the business drivers, they would appear here on the left and then we could add those business drivers to the right side, this empty box here. So with those selected, what we would now perform is that Pairwise Comparison and again, Dr. Shan, you talked about this earlier. This is that process where we take a look at the first business driver or one business driver and move through the process of comparing that to the next business driver.

And there’s a few words here; again, we’re looking into the functionality of Microsoft Project Server 2010 and how this portfolio optimization process could be enabled within this tool. With our business drivers created, it gives us a screen just like this to perform the pair-wise comparison and we would read from left to right, and we would say expand into new markets and segments—and this is where we have the option to rank or score or compare—we would say expand into new markets and segments is more important than the business driver of improving customer satisfaction score. And we would move through this process for each one of these business drivers again, comparing one to the next and establishing that ranking.

[Dr. SR]- Can I give a word of advice on that? I know it—

[RW]- Absolutely.

[Dr. SR]- If you just go back to the slide, in the Microsoft 2010—it’s like one time to be done. So as I mentioned in my earlier comment is that, you can’t get it right first time. You do it one senior executive. What we recommend you to do is that do the thing that you need to do [inaudible], the number of senior executives who are going to be part of the governance to make the decision—so if you’ve got 5 or 6 of them, you need to go 5 or 6 times on this. And then there will go divergence, and you need to manage and arbitrate it and then you put that into the 2010, which is the final version of it. That is what I would recommend you to [inaudible].

[RW]- Yeah, good clarification. Thank you Dr. Shan.


[Dr. SR]- Sure.


Concepts: Consistency Ratio

[RW]-  The other thing that we want to bring to light here is this concept of a consistency ratio and as we’re doing this pair-wise comparison, it is possible to get out of synch and to establish some inconsistencies. Let me just read this example and it’ll make a bit more sense.

If we say A is more important than B and B is more important than C, it’s actually possible to say C is more important than A, which, given the logic, if A is better than B and B is better than C, then C can’t be better than A—but the tool establishing this pair-wise comparison will actually allow you to set up a relationship like that that is not quite accurate in its logic.

We actually call that—there’s a ratio or a mechanism that monitors for our accuracy for what is acceptable and right within Project Server 2010, this calculation is occurring. As we get done or as we complete this pair-wise comparison, one of the things that we would want to check is our consistency ratio—so what we’ve done now or what we’re showing now is the pair-wise comparison has been completed. We walk through ranking each business driver against one another and we got to the end, and when we popped out here and we took a look at our consistency ratio and we’re showing a ranking of—lower than that recommended 80 percent, this is showing at 71 percent.


What it’s saying is we kind of—as we were moving through our ranking of business drivers, we didn’t apply the proper logic or we kind of got our logic a little bit messed up, for lack of a better term, and so we would need to go back and assess or take a look at our business drivers and make sure that we configured things properly.


Concepts: Spotting & Resolving Inconsistencies

[RW]- Again, here’s some suggestions for spotting and resolving those inconsistencies. And as you move through this process once or twice, you’ll get the feel for how it works. It’s kind of like driving a standard vehicle; in finding that third gear, once you move through it a few times, you’re able to spot when folks make an inconsistent connection in the relationship between the drivers. Dr. Shan, can you add any of your experience to this aspect of ensuring that we are establishing the right connection and relationship between the business drivers?

[Dr. SR]- Sure. Let me share one or two—what do you call—experience. One funny experience was that when I was talking to one of the executives, the first comment he made was, “Oh, all drivers are equal. All drivers are equal. No problem. I don’t need to go through each [inaudible]-wise,” and that was kind of a shocker. So you will come across “all drivers are equal” but it is not the case, to be honest, because every strategy is its own priority because there is a priority in the executive’s mind, in the way they’re moving forward. So, all drivers are not equal.

And when you start measuring them just to do a comparison in one against one, you start to realize the light block [inaudible] goes up because in one sense, there will be some biasedness in their view to look at: why in one is more important than the other and how it’s so. So again, the consistency spotting and resolving inconsistencies is very useful because sometimes you don’t understa—it’s not that you don’t understand, you do understand but sometimes you don’t realize as to go through, they may miss something. But there’s no harm done. It’ll let them finish and then what you do is when you observe some inconsistency, you need to ask in a very nice way what do they mean by that and I recommend that sometimes we record assumptions, not why—why do you say so and so, we record assumptions and put them down.


So the point of recording the assumptions down is that, when we do the—what do you call—the arbitration of the divergence and plan to align the divergence together, we can then highlight some of these assumptions that came up which then can put into context why this was placed higher or lower than one another. So it’s a good perspective and I would recommend to record some of those assumptions as you walk through the executives on the driver pair-wise comparison.

[RW]- Ok. Thank you sir. So what we’re showing here is we spotted an inconsistency, we went back and resolved that inconsistency in our logic between business drivers and we now come to the next screen after prioritizing those drivers. And we can see the list of drivers here on the screen; this is a listing of all the drivers that we have—and after we’ve completed that pair-wise comparison, we can see the priority of each of these drivers in relationship to one another. We can see that that’s listed out here. And we can also see that our consistency ratio is above 80, so things are good in the way that we’ve got the system configured.


Example: Automotive Sector


Dr. Shan, I believe this is another slide that perhaps you could shed some of your insight of working with a previous automotive organization.

[Dr. SR]- Yeah, so this is just to give an example—like an automotive sector, where the strategic drivers are slightly different from some other sectors. Again, the same process which we’ve been through and we’ve got the alignment with all the executives—you know, what was quite interesting for us was we had the sales and marketing, the VP of sales and marketing involved, we had the QA (quality assurance) person involved, the operational, VP for operations involved and also we had the corporate—my corporate team were involved, because there was carbon emission [inaudible] social responsibility coming in on carbon emissions and risk in terms of brand values and so forth.

So again, you start to realize that there will be quite a lot of people who will be coming in based on the drivers because the strategy is driving it—as I said, it is quite taxing and a bit of a process that you need to go through. Once this process is in place and the rank is done, it becomes much easier afterwards because then there is a clear buy-in from everyone.


If you don’t get this process correct and there’s no buy-in from this process, it is quite difficult actually to use this moving forward in a much more—what do you call it—acceptable manner.


Scoring Project Impacts using AHP

[Dr. SR]- Ok Rich.

[RW]- And again, another, another slide here.

[Dr. SR]- This slide is actually just giving overview of what we have discussed in a, kind of a step form. What it does look at is each project—when we do the assessments on the projects, what we do is we go into the detail of the projects and identify what is the impact statement of that project is. When we look into the impact statement, it’s, again it’s as I said—it’s very important whether, are we going to save 2.5 percent on efficiency improvements or what the amount we’re looking at as it is in the circle for this example.

In this case, cost effective and efficient operations slows down the production efficiency improvement and the decrease in process-related shutdown—so in terms of percentage, is return in that for the projects [inaudible]. Later, what we do is when we went into dashboard creation, we converted all this efficiency into dollar value so that we will know where the savings are coming in.

And that, in the bottom was indicative for another company that we looked at where-about the impact for the projects of the drivers are and what kind of scoring it has, and where the driver waiting comes in and how the contribution to the score come about. So that’s the ways of calculating it so the Microsoft 2010 has a calculator behind, which helps you to say, “Ok if I have my profit retail growth as strong which has an impact score of 6 and my driver weighting is 30.67, which is a top ranking driver—in that case, I would have a contribution score of 1.82, for example. It’s just a calculation. So same thing in [inaudible] for all the drivers for the particular project.

One project can have one or two different driver’s contribution to look at. In normal cases, they attempt to put in for one driver and what happens is something—they will, normally they will take the highest score of the driver as the main contributor to look at—so it calculates your strategic score for the project to look at.

[RW]- Ok great. And so that’s a good slide, again a good summary slide that kind of takes us through a process, takes us through the process and gives us, ultimately gives us a score, a strategic score for each project and what we should see as we move forward we’ll see that come to light.

Could you kind of explain this slide real quickly?



Align Business Strategy with Portfolio Process

[Dr. SR]- Yes. No problem, Rich. What we wanted to present here is how does all the whole of business strategies align with the portfolio process—this is the model that we have used in our presentation for some of the senior executive teams and they loved it so we use this as a base to explain where is your enterprise strategies are, so as a result and we [inaudible]—the next step is identifying strategic drivers and business drivers and then we weigh the drivers now and then, from then we need a pair-wise comparison that calculated weightings that came out and then we went on to use an example of how the [inaudible] projects, one or two projects put into [inaudible] and get a strategic value score for that.

So this is a sample—when we put in some actual figures and so forth and present it primarily as the next step moving forward in capturing the inventory of the projects, we showed at a high level what it is that we’ve agreed on and what we’re going to do moving forward. So it’s a good tutorial way of linking it.

Do you want to discuss this optimization before me, Rich?

[RW]- Sure. Go ahead, if you could touch on it.



Optimization Objectives

[Dr. SR]- Sure. The whole purpose of optimization, if you look at me earlier when I explained the streams, the stream lanes that comes in—so the purpose of the optimization is that you have a list of submittals in and what you have is that there are forced-in projects which must be done and you have certain amount of projects in the budget which is discretionary that you’re going to use—so if we have a Base Reduction of 20 percent or 10 percent, whatever it is once the projects could be in—what we are looking at is that most projects must be in, are rightfully in and what you do is you want to get a maximum span available of the projects that you want to have improvements done or good within the organization, where you get the maximum strategic value for it.


Portfolio Refinement through Workshops

[Dr. SR]- Ok. We’ll go to the next one? This particular slide, it’s kind of a carry on into that but the power of this slide is that it helps you to refine your portfolio. If you have a very good portfolio, drivers done and as a result, your [inaudible] strategic value done, what will happen is that the gray at the bottom, the gray areas are all like a forced-in projects that comes in. Again, forced-in projects can also be involved in those projects, the high strategic value already in and what will happen is that you may look into interdependencies, the interdependent project will automatically come in as a forced-in project and you can do that.


So you [inaudible] that in and those projects which are clearly out, which would lower strategic value is clearly out- the projects which are in the orange and the yellow area are the fringe project: those are the power of portfolio discussion, to be honest. I know one company, we were—the senior executive was saying he would spend almost one day to do this kind of portfolio selection, the calculation in one day.

But once we had the portfolio in place, it was very easy for him to do that because what happens or what is in definitely was also—their discussion was previous in from one day to within less than two hours to just talk about the fringe [inaudible] project. And we can make a decision—in fact, I can’t present some of this project because I’m not in so all I can—I can increase my budget to make sure these projects are in so that decision and the discussion can be really focused. That’s where the power of it comes in, comes in refining and going to the workshop with the details that they have.

  1. Prioritize Projects

[RW]- Ok. So again, thanks for some of those fundamental concepts there around those topics. What I’d like to do now is move onto the next step in the process for enabling portfolio optimization within Project Server 2010 and that would be around prioritizing the projects against those business drivers but before we do that—you touched on this already, Dr. Shan, about establishing dependencies between the projects and we actually have the capability to do that.


Going into Project Server 2010, into the portfolio analysis screen, we have an option to establish project dependencies. And if we were to create a new dependency—there’s an option here to click on new—and establish that dependency of one project against another, and here’s an example where Project A, “the Audit Tracking System”—I’m sorry, it should actually say “Asset Tracking System”—is dependent upon Project B, the “Acquisition Target Analysis,” so we would establish that dependency and then save that within the system so the system will remember.


Concepts: Create New Dependency

[RW]- Here’s a high level summary of those types of dependencies that we can establish between the projects and a brief definition:

Dependency: project A is dependent on project B

Mutual Inclusion is when project A and B are dependent on each other.

Mutual Exclusion: if project A is selected, then project B would get excluded and vice versa. What we’re talking about now is that step of pulling projects either into the portfolio that we’re going to move forward with or excluding them and establishing that relationship between projects or potential projects. And then there’s also the ability to establish a


Finish to Start type dependency between projects.


Portfolio Analyses

[RW]- So once we have those established, those dependencies established, what we would want to do next is actually perform that portfolio analysis. Again, from the portfolio analysis screen, we click on new and we have the ability to name that, our portfolio analysis here and we get to select the appropriate prioritization process where we, again when we established those ranking of business drivers earlier, we named those here.

And then we get to select the projects that we’re going to assess in our portfolio analysis. And we would also input the primary cost constraint—in this example that we’re going to look at here, we’re going to use the primary cost constraint of the total cost for the project. As we’ve talked about earlier, there are other primary cost constraints that could be used: IRR, Net Present Value, and EBIT— to name a few.

So what we would do is then create that new analysis by pulling our targeted projects, the ones that we want to assess against one another and against the business drivers—we would add those again from our left side of the screen into the right side of the screen here and we would then scroll down the screen; in this case, we’re actually going to assess 23 different projects. But we would continue down the screen, populating additional information with respect to this analysis. In other words, we could input the planning horizon, what’s the timeframe that we want to look at.


The other variable that we would want to incorporate into this analysis has to, is around our resourcing side of things and we would use a field here that we could then use, that we could pull in against all of our resources and compare leveraging this field to help us with that, to identify resource constraint across the portfolio and we’re going to see here in just a moment how that comes to light.


Prioritize Projects

[RW]- So once we code those or configure those options, the next screen that we would advance to is a screen that looks something like this. This is a listing of all of our projects. Again, this screen looks a whole lot like that snapshot or the slide you had there earlier, Dr. Shan, where you had a project listed out and then you went through and ranked that project or with respect to the business driver—how did it stack up; you did an impact assessment for each project against the business driver.


This step, actually in, if you were working with Project Server 2010 and had the workflow capabilities enabled, inputting this information would probably be done on a projects detail page—a little more upfront in the process as we were first capturing details or information on the project. This screen here is bringing all of the projects together so that we can see how they, just at a glance, how they stack up against one another.


Review Priorities

[RW]- The next step in the process is to review the priorities of these projects. And so as we advance forward, what we’ve done here or what we can see now is for each project, using the HP Process, we’ve been able to assign or the system has been able to assign a priority to each one of these projects. In this case, those 23 projects that we pulled into the analysis would add up to 100 percent and they’re actually listed here in the order of highest priority, the highest priority items are at the top.



  1. Analyze Scenario

[RW]- The next step in the process within the tool, you’ll notice we are following a process right within Microsoft Project Server 2010, is to look into the, is to perform or I should say Analyze the Scenario or various scenarios as our next step in the bigger process here. And we’re going to focus today, or initially on the cost side of things. Again, we’re back into Microsoft Project Server 2010 as we advanced to the next screen after we had up our list of projects and priorities. The next screen is to analyze the cost.

We can see from this screen: here’s all of our projects listed down here. If we bring all of these projects in and if we were actually going to do all of these projects, it would cost $19,684,000. That’s what the system has calculated here based upon the total cost of all of those projects in that selected portfolio. We can also see from this screenshot that there’s another term here.


Dr. Shan, if we could touch on real quickly this concept of the efficient frontier, we are starting to run into a little bit of time constraint. But if you could give us a few words real quickly on the efficient frontier.


Portfolio Optimization Well Executed

[Dr. SR]- Ok. The efficient frontier has been in existence for some time and it was invented by Mark—I cannot remember currently, it will come to me—Mark, so what they focus on is that where the strategic value of the projects you look at and you look against the constraint—what happens is that as you cut from the total cost in terms of—what do you call—when you cut the cost, there is a marginal value where there’s little loss of strategic impact occurs. So what it means is that even if you lose of course, you are not losing much. Basically, that’s what it says. So you are actually well within the budget to look at—you can cut costs but you’re not losing strategic value of it. That is what it means in the efficient frontier to look at.

Does that make quick sense, Rich?

[RW]- Yes. Yes. I know there’s a whole class around efficient frontier. We could spend the whole day deep-diving that topic but—maybe some other time.

[Dr. SR]- I remember. Markowitz. It’s Markowitz, who invented this portfolio optimization. The optimizer with efficient frontier.


[RW]- Great. And that concept around efficient frontier has been incorporated within Project Server 2010. We can see that here in this graph, the efficient frontier. And that’s showing initially if we were to do all projects. If we can’t afford to—if we can only afford to spend 10 million dollars or we only have a budget of 10 million dollars, we can simply input that information into the system here and say we have a limit of 10 million dollars.


Force In/Out

[RW]- We do have the ability to, even though the system gave us an output or gave us an answer here—we do have the ability to force projects into the portfolio simply by changing a setting here and saying, “Hey, rather than automatically forcing this project out of the portfolio—instead of automatically taking this project out of the portfolio, I would like to force it in,” and when we do that, we must click on recalculate here in the ribbon and the system will automatically move that project or those projects in that we forced in. But in return, remember, we have a constraint, a cost constraint for our budget of 10 million dollars. In return, you’re playing a trade-off.

Because we could only spend 10 million dollars, the system had to drop some projects out. And once it did that, you’ll also notice that our strategic value has now been reduced again because we’re electing to force some projects in, which weren’t the best or didn’t return the fastest from the priority or strategic value perspective.


Scatter Chart


[RW]- Another view here, just a kind of out of the box view here within Project Server 2010, we get a little scatter chart here, an option. This is configurable as far as the variables that you could show on this scatter chart. What we’re looking at is the value of projects on the left side here and then the total cost. It just kind of plots the projects based upon their total costs compared to their strategic value that they’re contributing to the portfolio. So again, another out of the box view.


Next Week: Maximize Resource Utilization through Capacity Planning


[RW]- That kind of concludes the screenshots or the cost analysis—again, we could play a number of “what if” games around assessing the cost of our portfolio but that’s just one of the scenarios, the constraints that we would have to work with. Next week, we’ll take a look at the constraints around resource utilization. That’s kind of the next step in the process where we can play some “what if” games and figure out which mix of projects, what’s that portfolio of projects that gives us the biggest bang for the buck.


Benefits from this Approach

[RW]- So Dr. Shan, I think I’d like to kind of toss the hands back over to you. Perhaps you can bring us home here as we’re down to our last couple of slides for today.

[Dr. SR]- Not a problem, Rich. It’s good. I think it’s very useful to, what you have demonstrated at home to the audience, appreciates and understands, is that how do the tools enabling the process. Please bear in mind that it is not the tool [inaudible]. You need to understand the process first and then the tool is enabled, it’s much easier for it to work with. If you do not understand the process and you just need a private tool, in that case I think you will be in for some serious trouble along the way.

So what is the benefit out of this total approach that is coming out—we have demonstrated to you, there’s a shared perspective of how strategy should be made operationalized for the investment that we’re looking at. If you remember last week’s session, we looked at the S-I-O model: Strategize, Implement, Operate. In the strategy that we look at, we are translating all that into projects which are going to make things happen. What we have done now is actually demonstrated through the business driver identification and the benefit impact statement of the drivers which projects [inaudible] and which projects are linked to the strategy. There is a very clear link between strategies to the investment that has been made.

The second thing that has a tremendous advantage on this approach is the common language, which is used to assess a strategic alignment. All the executives in the company understand what is the definition of the business drivers and what kind of projects are in the business drivers—and we went through a very key process of the AHP: getting a pair-wise comparison done so that all the executives agree this is the priority of the project which are related to the priority of the strategy and that makes a huge sense in terms of the common language that we are using to align their projects.

We’re using the process as a result and have made it available towards the organization to become more transparent in terms of portfolio selection decisions. In fact, one of the key advantage in the transparency is that whoever is coming out of business case or when you’re capturing demand, the project or whoever creating the demand—you can understand which projects goes to which of those drivers and as a result, which of those strategies the project is satisfying. It becomes really clear then, crystal clear.

The metrics to illustrate the strategic impact of alternative portfolios—again, based on the benefit impact statement and we come up with, we can demonstrate where the impacts are and we can create multiple scenarios to show where the alternative impacts comes in.

Enabling decision to cut or delay projects which are not able to quantify sufficient strategic benefit—absolutely. What Rich had demonstrated in terms of who can [inaudible] project he wanted to move in, some have been moved off and there must be a trade-off coming in. Alternatively, [inaudible] so everyone can put in some extra projects. You can make what we call as a, this community choice of decision in way we move forward rather than purely into [inaudible].

Finally, which is very critical, is improving the dialogue and data for evaluating alternative portfolios. Because businesses have their own demand of what they’re looking at, because of transparency and, you can never have a good informal discussion and dialogue to making sure what is in and what is out, what is the value of the portfolio we are looking at.


Is there—the next slide?


Final Questions

[Dr. SR]- Oh look, we have come to the end of the session, which is very good. We have a couple of minutes actually. Are there any questions that we have that you’d like Rich and me to answer?

[RW]- Yeah, we do have a few questions here that have queued up for us, Dr. Shan, so we’ll do the best we can here to knocking some down. Kirk, please keep us within our time-frame so we don’t cause any conflicts. One of the first questions here that I see is someone saying, “Hey, this looks great—the analytics that we can get out of Project Server 2010 looks great. What’s the lowest or the least amount of money that we could spend to get this kind of data on our portfolio of projects?” Dr. Shan, do you have any insight on that specifically?

[Dr. SR]- It’s very difficult to say. I think it depends on the number of users, the kind of deployment. If you’re looking at the portfolio [inaudible] 2010, I think it pays to be honest. I think you get to—Microsoft would be the kind of investment. You can actually evaluate depending on what they’re looking for.

[RW]- Yeah. And again, it’s in my real world take on things that—what’s the true problem that you’re trying to solve and like this gentleman says, what’s the least amount of money that we can spend to get there. You know, we, we actually—P-cubed actually has an offline version or kind of an Excel based version of a process and Excel based tool to get you pretty close. With respect to Project Server 2010, I do know that there are a number of organizations out there that are offering hosting solutions. If you’re looking to get started and to quickly get up and running at the least possible expense, you might look into that as well.

[Dr. SR]- There was, offering an assessed solution for this, Rich. [Inaudible]?

[RW]- I’m sorry. What’s that?

[Dr. SR]- Companies are offering it as an assessed solution.

[RW]- Yeah, like a hosted solution. Yes, sir.

[Dr. SR]- Hosted solution. Ok. Very good, very good.


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