Chapter 2: Project, Program and Portfolio Selection

Question 1

Strategic planning

Answer 1

• involves determining long term objectives by analyzing the strengths and weaknesses of an organization, studying opportunities and threats in the business environment, predicting future trends and projecting the need for new products and services
• provides important information to help organizations identify and then select potential projects
• usually includes the organization’s mission, vision and goals for the next 3-5 years

Question 2

Pyramid for a traditional Project: planning process

Answer 2

Step 1: Strategic planning
Step 2: Business area analysis
Step 3: Project planning
Step 4: Resource allocation

Question 3

Agile planning ?

Answer 3

• agile planning (different from top-down) => more flexible and allows teams to provide feedback to strategy which can influence a change in direction
• Instead of annual strategy meetings, agile organizations often hold quarterly business review (QBR) meetings (less hierarchical, more organized as tribes)

Question 4

Strategy implementation circle

Answer 4

strategy => objectives => projects => products => value => feedback => benefit => strategy

Question 5

Product roadmap

Answer 5

• important artifact
• used to show a high-level visual summary of the vision and direction of a product or products over time
• it can show one product, or many products
• defines the WHY behind the projects/program
• created first to focus on strategy

Question 6

Gantt Charts

Answer 6

=> a standard format for displaying project schedule information by listing project activities and their corresponding start and finish dates in a calendar format
=> Can be used for the same large-scale initiative
=> defines HOW and WHEN
=> created to focus on implementing that strategy

Question 7

Product management

Answer 7

• Product management is the practice of strategically driving the development, market launch, and continual support and improvement of a company’s products
• Product managers are responsible not for a specific project or team BUT rather for one or more of a company’s products (from the conception until forever)

Question 8

Program management

Answer 8

Program management involves identifying and coordinating the interdependencies among projects, products and other important strategic initiatives across an organization

Question 9

Methods for selecting projects

Answer 9

1. Focus on competitive strategy and broad organizational needs
2. Perform net present value analysis or other financial projections
3. Use a weighted scoring model
4. Implement a balanced scorecard
5. Address problems, opportunities, and directives
6. Consider project time frame
7. Consider project priority

Question 10

1. Focusing on competitive strategy and broad organizational needs

Answer 10

• Competitive strategies:
  => Cost leadership: attract customers primarily because products or services are inexpensive
  => Focus: Develop products and services for a particular market niche
• Broad organizational needs: people agree there is a need for a project, they will make funds available and there is a strong will to make the project succeed

Question 11

2. Perform net present value analysis or other financial projections

Answer 11

• Financial considerations are often an important aspect of the project selection process
• 3 important methods include:
  => Net present value analysis
  => Return on investment
  => Payback analysis

Question 12

Net present value analysis (NPV)

Answer 12

Net present value (NPV): method of calculating the excepted net monetary gain or loss from a project by discounting all expected future cash inflows and outflow to an instant T
=> regards the time value of money
=> means the return form a project exceeds the opportunity cost of capital – the return available by investing the capital elsewhere
=> positive NPV should be considered if financial value is a key criterion
=> projects with higher NPVs are preferred

Question 13

NPV Considerations

Answer 13

• Determine estimated costs and benefits for the life of the project and the products it produces
• Determine the discount-rate (capitalization rate or opportunity cost of capital)

Notes:
=> Some organizations consider the investment year as year 0, while others start in year 1
=> Some people entered costs as negative numbers, while others do not
=> Check with your organization for their preferences

Question 14

Return on Investment (ROI)

Answer 14

Return on investment (ROI): (the project costs - the benefits) / costs
=> ROI = (total discounted benefits – total discounted costs) / discounted costs
=> The higher the ROI, the better
=> Many organizations have a required rate of return or minimum acceptable rate of return on investment for projects
=> Internal rate of return (IRR) can be calculated by finding the discount rate that makes NPV = 0 (goal seek function in excel)

Question 15

Internal rate of return (IRR)

Answer 15

=> Internal rate of return (IRR) can be calculated by finding the discount rate that makes NPV = 0 (goal seek function in excel)

Question 16

Payback analysis

Answer 16

• Important financial consideration
• Payback period is the amount of time it will take to recoup, in the form of net cash inflows, the total dollars invested in a project
• Determines how much time will lapse before accrued benefits overtake accrued and continuing costs
• Occurs in the year when the cumulative benefits – costs = 0
• The shorter, the better

Question 17

3. Weighted scoring model

Answer 17

• A tool that provides a systematic process for selecting projects based on criterias
  => Identify criteria important to the project selection process
  => Assign weights (%) to each criterion so they add up to 100%
  => Assign scores to each criterion for each project
  => Multiply the scores by the weights and get the total weighted scores
  => the higher the better

Question 18

4. Sample balanced scorecard strategy maps (Nemours)

Answer 18

• A methodology that converts an organization’s value drivers – such as customer service, innovation, operational efficiency and financial performance to a series of defined and coherent metrics

Question 19

5. Problems, opportunities and directives

Answer 19

• Problems: undesirable situations that prevent an organization form achieving its goals (current or anticipated)
• Opportunities: chances to improve the organization
• Directives: new requirements or regulations imposed by management, government or some external influence

Question 20

6. Project time frame

Answer 20

• The time it will take to complete a project or the date by which it must be done => influences on the project selection
• If the project cannot be finished by the set date, they are no longer valid projects
• Even though some projects can be completed quickly, it is important to prioritize them

Question 21

7. Project priority

Answer 21

• Many organizations prioritize projects as being high, medium or low priority based on the current business environment
• Organizations should always focus on high priority projects

Question 22

Project portfolio selection

Answer 22

• Focusing on enterprise success when creating project portfolios is crucial
• Need to cancel or put several projects on hold, reassign resources form one project to another, suggest changes in project leadership, or take other actions that might negatively affect individual projects or programs to help the organization as a whole