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A Health Check for a Portfolio with Customer-Facing Projects

 

Project Business Management

SERIES ARTICLE

By Oliver F. Lehmann

Munich, Germany

 



Summary

Project portfolio management for corporations doing customer projects to make a living has its specific challenges. Projects in crisis can impact the entire portfolio and jeopardize the existence of the company. The magic triangle on contractor-side is made of customer-happiness, profitability and liquidity.

A Project Portfolio in Need of a Turnaround

ArmyAnt, Inc.[1] is a company that performs projects for a major number of customers integrating hardware and software to complex working systems. Companies decide to buy and use their services due to ArmyAnt’s great experience from past projects and also to a thick folder with letters of reference and of gratitude from customers of previous projects.

ArmyAnt has many assets such as skilled people, know how, licenses and equipment that customers love to tap into and use them as project resources. ArmyAnt in turn loves to tap into customers’ financial assets and turned them into revenue and finally into profit. ArmyAnt was just a typical company bringing money home by performing projects for customers against payment under contract.

As any company that made its living from being a contractor for one or more customers, ArmyAnt worked inside a magic triangle of objectives, that included the happy customer, protection of the own liquidity, and profitability. Liquidity protects the presence of the organization, the happy customer as an incumbent and a reference allows it to be successful in the future, and profitability provides the resources to realize this future. The magic triangle is shown in Figure 1.

Figure 1: Profitability of customer-facing projects is one corner of the “Magic triangle” of Project business management for vendors

However, in the recent past this profit topic turned out to become more and more a problem. ArmyAnt had started almost two decades ago as a one-man-one-customer provider. Archibald Ant, the founder of the organization, began doing customer projects as a self-employed service provider for his former employer, after his boss had to run a lay-off project, which affected many jobs including Archibald’s. While the company made him redundant, his no-more boss still wanted to use his competencies and experience. The solution was to assign work to him as a contractor instead of hiring him as an employee. The costs he incurred for the organization moved from the payroll to the procurement budget, a development that was welcomed by shareholders. Archibald found that somewhat strange, because as a contractor he was rather more expensive. So he started his little business, which soon proved to be highly profitable  for him.

Despite the profit, Archibald soon noticed the risk of having only one customer: The company could end business with him at any time and such a decision would leave him without income from one day to the next. His income was fully dependent on his single client, and when they had negotiations about fees and contractual conditions of business, he learned that the company was fully aware of his dependency.

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Editor’s note: This series of articles is by Oliver Lehmann, author of the book “Project Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in 2018. See author profile below.

How to cite this article: Lehmann, O. (2018). A Health Check for a Portfolio with Customer-Facing Projects; Series on Project Business Management; PM World Journal, Vol. VII, Issue XII (December).  Available online at https://pmworldjournal.net/wp-content/uploads/2018/12/pmwj77-Dec2018-Lehmann-A-Health-Check-for-Customer-Facing-Projects.pdf



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 served five years as the President of the PMI Southern Germany Chapter until April 2018. 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 “Situational Project Management: The Dynamics of Success and Failure” (ISBN 9781498722612), published by Auerbach / Taylor & Francis in 2016 and ofProject Business Management” (ISBN 9781138197503), published by Auerbach / Taylor & Francis in June 2018.

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

 

[1] All names changed.