You have established that a project portfolio is a group of projects to be carried out under the sponsorship of a particular organisation. These projects must compete for scarce resources (labour, finances, time, etc.), since there are usually not enough resources to carry out every proposed project. Project portfolio selection is the periodic activity involved in selecting a portfolio from the set of available project proposals and from projects currently underway. Compared to the managerial and operational decisions which are usually involved in managing individual projects, portfolio selection is a strategic decision. To ensure a maximum return on selected projects, the selection process must be linked to the business strategy of the organisation.
Leading corporations recognise that portfolio selection and management is a strategic process, using known techniques and tools in a logical and organised manner. Project portfolio management is now used in many corporations with applications in new product development (NPD), construction, pharmaceuticals, process development, product maintenance, fundamental research, and so on. Multiple tools and techniques have been developed which are now used by these corporations to manage their product portfolios. These techniques include approaches such as economic return, market research, portfolio matrices, comparative approaches, scoring models, optimisation models, and portfolio decision support systems.
One key aspect of these approaches is to try to reduce the overall risk which the corporation may have with its portfolio. In any portfolio there are multiple sources of risk, including technology, market, schedule, cost, legal, political, and so on, depending on the field of application. Sophisticated methodologies to assess risk amount and impact prior to project commitment, through risk identification, quantification, response development, and control, are areas in which major advances have been made. A key criterion for successful application of risk evaluation in portfolio selection is that risk assessment and quantification be uniformly applied across all projects and teams to distinguish among projects which have acceptable and unacceptable levels of risk.
For this week, describe an organisation which you have been a part of and discuss the following questions:
Discuss the approach your organisation used to manage its new initiatives-especially new product developments.
Discuss how your organisation evaluates projects within its overall portfolio. Discuss the tools and methods it uses to evaluate its portfolio, both quantitative and non-quantitative. Discuss the strengths and weaknesses of each approach.
Discuss the different categories of risk which your organisation assesses in its risk assessment of new initiative or new product developments. What are the strengths and weaknesses of the approach your organisation uses?
Discuss and evaluate the principal methods for assessing risk which you would recommend to your organisation for use in its new product development initiatives for the future. What challenges do you see which your organisation would face in adopting these methods of risk assessment?