Research on the Application o Project Portfolio Management (PPM), Program Management (PM) and Project Management in Enterprise Strategic

Management
Zhu Yuming, Pan Quan, Guo peng Northwestern Polytechnical University, P.R. China, 710072 E-mail: [email protected]

Abstract
A framework for application of project portfolio management (PPM), program management (PM) and project management is proposed for employment with enterprise strategic management (ESM). From corporate strategy, business strategy and functional strategy, the three level strategies, the framework illustrates the alignment between PPM, PM, project management and ESM. The theoretical evolution of project management area from traditional project management and then PM, to recently PPM is summarized. On the basis of Diamond-E model for strategic analysis, the paper analyzes the necessity and significance of application of PPM, PM and Project Management in ESM. The advertences of applying PPM, Program Management and Project Management in ESM are summarized as well. Keywords: Project Portfolio Management (PPM), Program Management (PM), Project Management, Enterprise Strategic Management, Alignment

1. Introduction
The measurement of traditional project success dwells on the four pillars of success i.e. scope, time, cost and quality. And also original project management is adopted to make single project successful. Along with challenges arose from multi-project management and integration of operations and multi-project in organization, the basic concept of project management has evolved to what so-called Program Management (PM) and, finally, Project Portfolio Management (PPM). The evolving concepts of project management are summarized and depicted in Table 1. After transplanting project management into enterprises, the practitioners tried hard to find good alignment between project management and organizational strategy. Research in the literature has examined the idea of alignment in following areas. (1) Alignment between project management
This study is sponsored by National Natural Science Foundation of China (70572073 and 70672103)

and functional strategies. Because project management is similar to these functional strategies, it should be aligned with the business strategy too [3]. (2) Alignment between project management and business strategies. Most studies link the business strategy with project management through project selection, viewing it as part of the alignment process [4][5]. (3) Alignment between project management and competitive attribute of business strategies [6]. (4) Alignment between project management and strategies implementation. The strategies should be aligned and moved from the corporate level through portfolios, programs and projects in a systematic and hierarchical manner that provides cohesion, visibility and an effective means of communication [7]. All above-mentioned researches studied the alignment between project management and strategic management in one or another aspect, such as functional area, competitive capability and strategy implementation and so on. In this study, we are trying to put forth an overall alignment framework. The study is conducted as follows: firstly, Diamond-E model based analysis of alignment between PPM and ESM is given (section 2); then, The Framework of Application of PPM, PM and Project Management in ESM is put forth (section 3); finally, the conclusions drawn from this study are summarized, and future and further works are also suggested (section 4).

2. Alignment between PPM and ESM An Analysis based on Diamond-E Model

Management Preference

Organization

Strategy

Environment

Resources

Figure 1. The Diamond-E Model

The Diamond-E model, as shown in Figure 1, identifies the key variables that need to be considered in the strategic analysis and structures the critical relationships among them.

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As critical linking variable in the model, the strategy tells you what opportunities the business is pursuing in the environment and by, inference, what resources, organizational capabilities, and management preferences are required for effective implementation. Any of the variables can, of course, either drive strategy or constrain strategy [8].

Figure 2. Diamond-E Model based Alignment between Strategy and PPM

In visualizing the alignment between PPM and ESM (see Figure 2), the term strategy is assigned to the element of means and approaches that will be used to accomplish the desired outcomes i.e. the mission, goals and objectives. In the alignment, the strategy is carried out by a set of projects, which become candidates for inclusion in the enterprises project portfolio. A strategy-support project isnt guaranteed to pass into the project portfolio. It is still competing with other candidates for the limited resources of the enterprise. Because of that, it needs to pass through the enterprises project portfolio evaluation and selection process, which consist of a series of criteria. The criteria that projects will be evaluated against are the degree of match the project has between management preference, organization structure,

resources and environmental opportunities. The analysis of the project-management preferences match usually starts with the identification of the preferences that would be conformity with the successful execution of the project, which will lead to a successful implementation of the corporate strategy. Usually, a practitioner can identify the preference from four aspects of goals, product/market focus, value proposition and core activities. The analysis of the project-organization match also starts with the identification of the major organizational capabilities that would be required to successfully fulfill the project, which would have key impacts on the success of corporate strategy proposal. Then compare the identified organizational capabilities with those currently in the organization. If the gap is obviously too large to bridge, reject the project and test another one. With respects to project-resources match, the analysis should start with identification of resource requirements, from both tangibles and intangibles, so as to compare the project resource requirements with the current resources in the organization or readily available to it. If the cost of closing resource gap is affordable, carry the project forward. Otherwise, reject the project and try another one. As far as project-environment match is concerned, the analysis should commence from the project proposal to define the boundaries of the external environment from prospects of politics, economy, society and technology, so as to find out how well the project proposal anticipate the opportunities and challenges arise from external environment. If the proposed project cannot match the shift of external environment, reject the project and test another one instead.

Aspects Orientation Goals

Adaptability Responsible Personnel Culture

Supported Information System or Software

Table 1. Evolving Concepts of Project Management [1][2] Project Portfolio Traditional Project management Program Management Management Specific project-oriented Strategic and operating Integration-oriented incentives-oriented Get each quality project deliver on Integrate multi-project to Maximizing benefits and time and within budget be done more efficiently reducing terminated projects to zero Originally for construction, Applicable to functional Universal applicability aerospace, and defense industries and operational type organizations Functional managers and project All functional manager and Team management managers Program manager A professional discipline A management discipline Top level commitment and a and a business culture mature and cooperative environment for the project and governance teams Scheduling system and software A communication and Automated information system visibility system and highly integrating all integrated database individual systems

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The biggest challenge for strategic management of enterprise is to implement the crafted strategy i.e. to get things done. PPM, by which the crafted strategy is clearly translated into workable plan for their resources, provides the approaches and processes for enterprise to work in total alignment from top to bottom, and the abilities to achieve total alignment of the enterprise, and become the foundation for enterprise-wide shared value and commitment. From the above analysis, we can see that the PPM can play an important role in implementing strategy. It links corporate strategy with tactical decisions in determining which projects should be included in that portfolio. Meanwhile, aligning PPM and ESM is a natural extension to strengthen strategy and increase possibility of strategy success. Effective PPM provides the capability to manage the project portfolio as an integral part of an ongoing, iterative process that takes shifts in resource availability as well as changing external environment into consideration.

3 The Framework of Application of PPM, PM and Project Management in ESM

Nowadays, the world of business has recognized business strategy planning, portfolio management and project selection as the important roles in enterprises success. When these activities and processes are aligned, as shown in Figure 3, the corporate strategic element feeds the portfolio element, the portfolio element feeds the business strategic element, the business strategic element feeds program element, the program element feeds functional and project management element, the functional and project management element feeds projects and the team's execution and vice versa.

Figure 3. The Framework of Application of PPM, PM and Project Management in ESM

The framework provides the systematic approach for staying connected to enterprises three level strategies [10],

remaining responsive to business needs and prioritizing resources for maximum effectiveness and efficiency. The application of this framework expands focus from pursuing results on a project-by-project basis to a seamless enterprise-wide view of all tasks one needs to be accomplished. The framework provides a structure for selecting the right projects and eliminating wrong ones, so that the limited resources are allocated to the right projects, thus reducing wasteful spending. In the framework, the corporate strategy, business strategy and functional strategy are interconnected by PPM, PM and project management respectively, so that the mechanism for total alignment is created. The vision/mission, goals pursued by corporate strategy can be translated into tangible objectives to be pursued as projects. Through PPM process, the up-to-criteria projects can be selected and prioritized. The objectives for business strategy, mainly focus on building competitive advantages, response to changing conditions and collaboration between stakeholders, are made clear. By PM process, the multiple plans and schedules can be aligned into an integrated, comprehensive view for management teams. Program managers are responsible for establishing and managing programs, which consist of projects that support some shared goal or objective. Prioritization of projects may then occur within a program, across programs, or at the program level across the enterprise. The functional management and project teams represent the functional and technical resources who plan the execute activities to deliver in conformity with enterprises objectives. To facilitate the application and implementation of the framework in the enterprise, the practitioner should pay more attention to the followings: Leadership. By directing the selection and overseeing the management of projects, the top-management team is able to keep a tight rein on the organization's project portfolio. On the other hand, moving some of this responsibility down in the organization, to a project management team, frees up senior management for more strategic tasks and gives those closest to the action more power [11]. Business processes. The process for PPM extends well beyond the scope of traditional project management. As an enterprise-wide process, PPM involves a wide range of participants, and extends deeply into the hierarchy. Within an organization, the systems used to gather, analyze, and disseminate information must support project-based work. An enterprise level strategic project office (SPO) is usually setup to improve PPM practices across its organization. Its main functions include evaluating and enhancing project management maturity, integrating process and systems enterprise wide, creating a project culture, establishing project quality, allocating resources across projects and portfolios [12]. Human capabilities. It's a truism that effective project

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management requires the right people, with the right skills. Some people are just not suited to the challenges of project management; they do not thrive in the inherently ambiguous and give-and-take environment of projects. Others blossom in it. They love the challenge of working toward a goal and being part of a project team, and the unique challenge that each project brings. Such people are motivated by the opportunity to learn. Those who install project management must have the ability to identify, hire and retain people who are best suited for project work. Cultural shift. Resistance to change is natural in most enterprises. New ways of doing business are not successful if those new methods are simply levied upon people in the enterprise. Unless an enterprise demonstrates visible, unreserved commitment to sound PPM practices, the chances are PPM will be viewed as just another activity. The successful installation of PPM depends on an enterprise's explicit belief that how projects portfolio are managed is just as important as what they achieve. There are four cultural characters in an enterprise that must be managed to initiate and sustain meaningful change: involvement, empowerment, adaptability and knowledge sharing. It is a time and cost consumption work to design and implement an effective, practical solution for application of PPM, PM and project management in an enterprise. It is important to start with the current reality, and design a solution that evolves from the current level of maturity, and focus on fundamental capabilities that can provide immediate benefits, while allowing the PPM process to mature. A successful PPM solution design should have fundamental capabilities in: Enterprise-wide project definition, prioritization and empowerment Resource capacity planning, selection and allocation Detailed project definition, planning and scheduling Enterprise-wide and project-specific involvement, communication, visibility and reporting Integrated information and knowledge sharing system

objectives from these strategies, and launch projects with full confidence that business requirements will be complied with, and competitive capabilities can be improved. Meanwhile, by the successful application of PPM, the corporate strategy can get well fit with management preference, organization and resources so as to adapt better to environment shift. PPM enables enterprise to create ownership among staff by empowerment and total involvement, build avenues for individuals to identify opportunities and obtain support, and assist project teams understand the value of their contributions. The future study works can lie in two directions. One is in theoretical ways, for instance, by means of scientific and quantitative methods to select suitable projects for project portfolio. Some methodologies in multi-players and multi-criteria decision-making and combined optimization can be used in this area. The other is to increase the feasibility and operability of the framework, for example, by using a real world case to illustrate the steps and procedures of implementing the framework.

5. References
[1] H. A. Levine, Project Portfolio Management: A Practical Guide to Selecting Projects, Managing Portfolios, and Maximizing Benefits, Jossey-Bass A Wiley Imprint, 2005. [2] S. Gaddie, Enterprise Programme Management: Connecting Strategic Planning to Project delivery, Journal of Facilities Management, 9(2003), p177 180. [3] F. L. Harrison, Advanced project management: A structured approach (3rd ed.). New York: Halsted Press. (1992). [4] N. R. Baker, R&D project selection models: An assessment, IEEE Transactions on Engineering Management, 21(4) (1974). p165-170. [5] J. F. Bard, R. Balachandra, & P. E. Kaufmann, An interactive approach to R&D project selection and termination, IEEE Transactions on Engineering Management, 35(3) (1988). p139-146. [6] D. Z Milosevic, S. Srivannaboon, A Theoretic Framework for Aligning Project Management with Business Strategy, Project Management Journal, 8(2006), p98-111. [7] P. W. G. Morris, A. Jamieson, Moving from Corporate Strategy to Project Strategy, Project Management Journal, 12(2005),p5-19. [8] M. M. Crossan, J. N. Fry, J. P. Killing, Strategic Analysis and Action (sixth edition), Toronto: Pearson Prentice Hall, 2005. [9] N.Archer , & F.Ghasemzadeh, An integrated framework for project portfolio selection, International Journal of Project Management, 17(4), 1999, p207-216. [10] A. A. Thompson, A. J. Strickland, STRATEGIC MANAGEMENT: Concepts and Cases (13th Edition), McGraw hill, 2003. [11] A. Longman, J. Mullins, Project Management: Key Tool for Implementing Strategy. The Journal of Business Strategy, 5(2004), p54-61. [12] J.S. Pennypacker, P. Sepate, Integrating Project Portfolio Management with Project Management Practices to Deliver Competitive Advantage, Project Portfolio Management, 2005.

4. Conclusions and Future Work

By using the proposed framework, the portfolio decision is tightly aligned to strategic business goals and objectives. With help of theory and methods of PPM, the effectiveness and efficiency of strategic decision of management will be greatly improved. The application of theories and methods of program management and project management can effectively improve the efficiency of ESM, especially the competence of strategy implementation. With strong learning/experience curve effect, the successful application of PPM in ESM can bring hard-to-copy intangible asset to enterprise, which will certainly lead to a competitive advantage. The PPM, PM and project management provide management team with the tools to tie directly into enterprise strategies, develop various

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