Every organization has to make tough choices on which projects to run and which to cut based on resources, finances, AND projected returns. At the same time, they also need to account for current and future market trends and align with the organizational strategy to achieve long-term gain.
Strategic portfolio management is a term that involves selecting, prioritizing, and managing projects based on their potential to contribute to long-term strategy.
What’s the difference between SPM and PPM?
In short, PPM is the foundation of Strategic portfolio management. When your projects are running successfully, the next step is to make sure they are strategic - that the align with the organization's goals. Strategic Portfolio Management is an ongoing process: optimizing, adapting, and balancing the selection, value, and priority of projects, programs, assets, and investments is never done!
Strategic Portfolio Management requires a shift in mindset but the result is an organization with greater alignment in project, programs, and resources. When every initiative supports the broader strategy, the company moves farther in less time. Working with portfolios in a strategic way means that investments are developed from a collective strategy rather than individual business cases. This means you can prioritize high-impact projects and capture the value.
SPM enables more informed decision-making and better use of resources - because everything fits together as a whole it becomes easier to get comprehensive overview of ongoing efforts, allowing teams to adjust proactively, mitigate risks, and adapt to changing conditions.
It's about creating alignment that ensures that all projects and initiatives contribute to moving the organization forward.
Effective strategic portfolio management depends on understanding the organization's long-term goals, vision, and mission. Taking time to set these makes it easier to set priorities when it comes to portfolios. You want to define the strategic objectives with the hightest priorities - these will be your guide when it comes to future portfolio decisions. It ensures that you balance your portfolios according to how they support and move strategic objectives forward.
In order to balance your portfolio and make great decision, you must perform an inventory of current and proposed initiatives. Collect all ongoing and potential projects, programs, or initiatives and categorize them. Categorization can help with clarity and make it easier to compare. You can group initiatives by type, department, strategic importance, or other relevant critieria.
Finally, you should always identify important stakeholder and make sure you get input from all relevant departments, business units, and key stakeholders. They may have strategic insights, value propositions, or ideas that can improve your strategic portfolio management decisions.
Once you have the full overview of initiatives, ideas, projects, and any other types of work, it's time to prioritize.
Defining assessment criteria is a way to create consistency in the evaluation process. They should encompass both the immediate benefits, as well as the long term strategic aligment. The combination of criteria is unique to each organization as is highly dependent on the current strategy, operational model, as well as established practise in teams and departments.
Criteria might include:
Based on these criteria it is now possible to score and rank the projects according to their contribution to strategic goals. Scoring helps provide objectivity in ranking but it's not the final answer - there's always room for finesse and not every criteria will fit perfectly to illustrate every projects importance. That's why people with experience should always be the ones to make the final decisions.
Having the right resources available for the right tasks at the right time will always be a part of succesfully completing projects and therefore also part of moving strategy forward.
In strategic portfolio management, resources (people, budget, time, etc.) are located to projects based on their strategic priority
However, when balancing the portfolio, you should still ensure a good balance of risk and reward across the portfolio. Some projects may have high strategic value, yet delayed benefits, while others have immediate ROI, but less strategic drive. A mix of long-term and short-term projects, usually suits most organizations.
Monitoring progress isn't just about tracking progress of work and results. Metrics like costs, timelines, risks etc, should be displayed alongside the impact on strategic goals.
Using tools like OKRs can sometimes help in figuring out what you need to track in order to make sure you are working towards your strategy.
This should be supported by regular reviews that look at the overall portfolio performance so you can make adjustments based on changed priorities, new opportunities, risks and so on.
Adjusting the portfolio as you go along can be done in two ways: either by checking in regularly and making adjustments, or by identifying triggers that necessitate change or action.
Regular check-ins are great for making sure you have time and space to make adjustments. It can also be a great way to catch things that you might not have defined up front. Regular check-ins are also great for evaluating and capturing lessons so far to improve future portfolio balancing and decision making.
Setting up triggers works well with risks-analysis as indicators that mitigation plans should go into effect.
The portfolio can always be adjusted by adding or delaying projects. Sometimes, it's also necessary to cancel projects to maintain alignment as strategy evolves or market conditions change. Cancelling projects is never easy, but Strategic Portfolio Management sometimes makes cancelling projects easier - does it move the strategy forward or not? If it doesn't it has to go.
Strategic portfolio management includes a strong governance framework. Establishing clear governance helps create a foundation for decision-making in the organization. This includes which information you need, how to get it, as well as roles and responsibilities for approving, reviewing, and adjusting the portfolio.
Stakeholder engagement is, as always essential. Clear and regular communication with stakeholders ensures alignment in the organization and makes it easier to adjust and change your portfolio.
Strategic portfolio management isn't instead of PPM. In fact, great project portfolio management is the foundation of strategic portfiolio managent. You still need to ensure that your projects and initiatives are completed succesfully: on time, within budget and scope. Strategic Portfolio Management builds on top of that, using the data and structures that exist while expanding to the whole organization.
Strategic portfolio management, done right, means that the right projects are funden and prioritized in a way that improves the organization's ability to deviver on its strategic goals.
