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Breaking News in the Project Management World
Thursday, February 28, 2008
Report from Clearwater Beach - Using Corporate Portfolio Management to Drive Shareholder Value
Reported by A Matt Piazza in Florida
The Corporate Portfolio Management Conference in Clearwater Beach, Florida included a Workshop on 25 February 2008 by Michael Menke of Decision Strategies, Inc., entitled “Using Enterprise Portfolio Management to Drive Shareholder Vale.”
According to Mr. Menke (pictured), while project selection is absolute, portfolio selections are relative. Michael showed how one can get MORE out of a portfolio by putting LESS projects in the pipeline. The answer is optimizing the project selection within the portfolio at a group, business unit and / or corporate level.
As management methodology has evolved, today’s “Third Generation” corporations’ portfolio management uses six practices to achieve optimal resource allocation and add value by ensuring appropriate ownership of portfolio management and by aligning internal and external perceptions of value.
Real world examples from Michael’s years with Hewlett Packard were provided to reinforce the principals and practices identified in his presentation. He also gave the class an exercise in project portfolio selection. Based on given measurements, each table of attendees formed a team and selected the ‘best’ portfolio. No two teams selected the same combination of projects and no table manually calculated the ‘optimal’ selections. The process is very complex and without best practices and automated tools, the average management team will usually make some good selections and miss the other best opportunities. While no complete selection is the “right” answer in life, many choices made today are less than optimal and shareholders values are not realized to the fullest extent.
The best practice of generating Efficient Frontier diagrams was explained and demonstrated in several fashions. A SmithKline Beecham case study was used to backup this practice and showed that an approximate US $1 million portfolio optimization process investment netted an increased US $2.6 billion in shareholders’ value more than 1000:1 ratio improvement!
To maximize shareholders’ value, today’s management will perform better by utilizing corporate portfolio management at all levels of the business.
The Corporate Portfolio Management Conferences is organized by the Product Development Management Association (PDMA) and IIR, a division of SRA International. Information about the conference can be found at
http://www.iirusa.com/cpm/overview.xml.
The Corporate Portfolio Management Conference in Clearwater Beach, Florida included a Workshop on 25 February 2008 by Michael Menke of Decision Strategies, Inc., entitled “Using Enterprise Portfolio Management to Drive Shareholder Vale.”
According to Mr. Menke (pictured), while project selection is absolute, portfolio selections are relative. Michael showed how one can get MORE out of a portfolio by putting LESS projects in the pipeline. The answer is optimizing the project selection within the portfolio at a group, business unit and / or corporate level.
Real world examples from Michael’s years with Hewlett Packard were provided to reinforce the principals and practices identified in his presentation. He also gave the class an exercise in project portfolio selection. Based on given measurements, each table of attendees formed a team and selected the ‘best’ portfolio. No two teams selected the same combination of projects and no table manually calculated the ‘optimal’ selections. The process is very complex and without best practices and automated tools, the average management team will usually make some good selections and miss the other best opportunities. While no complete selection is the “right” answer in life, many choices made today are less than optimal and shareholders values are not realized to the fullest extent.
The best practice of generating Efficient Frontier diagrams was explained and demonstrated in several fashions. A SmithKline Beecham case study was used to backup this practice and showed that an approximate US $1 million portfolio optimization process investment netted an increased US $2.6 billion in shareholders’ value more than 1000:1 ratio improvement!
To maximize shareholders’ value, today’s management will perform better by utilizing corporate portfolio management at all levels of the business.
The Corporate Portfolio Management Conferences is organized by the Product Development Management Association (PDMA) and IIR, a division of SRA International. Information about the conference can be found at
http://www.iirusa.com/cpm/overview.xml.
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