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Managing Portfolios and Programs in Project Business Management

Project Business Management

SERIES ARTICLE

By Oliver F. Lehmann

Munich, Germany

 



“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

Charles Dickens – “David Copperfield”

 

Summary

Portfolio management and program management are two implementations of multi-project management. Their description commonly ignores commercial aspects that sit at the core of project business management (PBM). The inclusion of these aspects can help multi-project management gain more relevance for the practice in complex project supply networks (PSNs) working for paying customers.

Case Story: A Project Portfolio Needs to be Better Managed

Lucky Tapeworm, Inc. [1] is a prime contractor working mostly for corporations, doing projects at the crossing points of production hardware, production management software, and organizational development on customer side. When the author first made contact with the company, it was working on nine projects concurrently for different customers, and each of them had subcontractors, the smallest project five, the largest almost 100. Many of these subcontractors are involved in more than one of Lucky Tapeworm’s projects, which makes the business relations in the company’s entire supply network quite confusing. In addition, the company had a portfolio of seven internal projects, performed to resolve organizational problems that had accumulated over many years, and to make their business future-proof. Roughly half of the work inside these internal projects was also outsourced; the other work was done by own people. Figure 1 shows the two project portfolios and their relationship to other companies.

Figure 1: The two project portfolios of Lucky Tapeworm, Inc. The arrows point in the drection of payments.

The author’s contact with the company as a trainer and consultant began, when Lucky Tapeworm’s management asked for support to increase their hit-rates in business development for customer projects. As many other companies also do, Lucky Tapeworm, Inc., had fostered a habit of responding to all customer inquiries it received with a bid or a proposal. Less than every tenth offer finally led to a contract with a customer, which means that 90% of the offers were futile work that bound human resources but did not succeed in bringing business to the customer. To make things worse, the lucrative business commonly went to the company’s competitors, while the tedious and poorly paid customer projects that made unpredictable use of the company’s assets were too often won instead.

Another problem was the input the company needed for developing the offers from its suppliers. Second-tier sellers were given the chance to support business development and become subcontractors when the business would be won by Lucky Tapeworm, but the information from them generally came late and not with the depth and quality of material required to win the business. These sellers had made the experience too often that Lucky Tapeworm would not win the contracts for which it had quoted and that they would therefore also not get the business. Their lack of motivation to support their direct customer in its strive to become prime contractor was among the reasons that the hit rate was so low.

Lucky Tapeworm, Inc., was a classical JAM company in project business management: It was “just about managing”, and the low-value business did not enable the company to build the reserves potentially needed to cope with negative risks from a customer project turning into crisis.

Lucky Tapeworm had developed a process using templates and standardized text blocks for their offers. These helped the company to reduce the workload for the development of bids and proposals and made it possible for its proposal managers to respond to a higher number of enquiries. The disadvantage of the approach was that many enquiring buyers did not see their questions answered and their needs reflected in the offers. This was the cause of both, the low hit rate and the failure to win the worthy business. The first step to improve the business therefore was to replace the standardized offer development process with a customer-centric one. This began with a deliberate offer/no-offer decision, reducing the number of responses to enquiries and leaving more time for the development of a specific argumentation. The customers could see that their requirements were understood and gain insights as to how the contractor would meet them.

As a second step, meetings were held with the company’s suppliers to discuss the low hit-rates and how everyone could work together to improve them.

Based on these discussions, a strong “Mission Success First” culture was agreed upon, inside both the company and its supply network. On this, the company and its partners would focus the resources needed to win the contract once a decision had been made to submit a bid or proposal. Figure 2 shows the main criteria used for the offer/no-offer decision.

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About the Author


Oliver F. Lehmann

Munich, Germany

 


Oliver F. Lehmann
, MSc., PMP, is a project management author, consultant, speaker and teacher. He studied Linguistics, Literature and History at the University of Stuttgart and Project Management at the University of Liverpool, UK, where he holds a Master of Science Degree. Oliver has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich

He has been a member and volunteer at PMI, the Project Management Institute, since 1998, and serves currently as the President of the PMI Munich Chapter. Between 2004 and 2006, he contributed to PMI’s PM Network magazine, for which he provided a monthly editorial on page 1 called “Launch”, analyzing troubled projects around the world.

Oliver believes in three driving forces for personal improvement in project management: formal learning, experience and observations. He resides in Munich, Bavaria, Germany and can be contacted at [email protected].

Oliver Lehmann is the author of the book “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016.

To view other works by Oliver Lehmann, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/oliver-f-lehmann/