Project portfolio management, or PPM, is similar in purpose to financial portfolio management.
As with financial portfolio management, your company's project portfolio should balance investment to assure the greatest chance of achieving your unique company goals. This typically means investing in a mix of types of projects with varying risks and payoffs. You may balance some long-term investments with short-term payoffs. Your goals may require investment in projects that will serve current customers, while also investing in projects that will take you into new markets and applications.
There are many more possible dimensions in which to make trade-offs. This balancing act and the project investment choices are the outcome of PPM. Companies proficient in PPM have clear processes for inputting corporate and product strategy, execution status and capabilities, and revealing financial impacts to guide in decision making.
You are probably often presented with projects having a positive "net present value of cash flows," (meaning projects that do better than recover the investment cost, when the "time value of money" is taken into account). But no company has unlimited funds to invest in projects. You need to make your investment choices wisely. Managing a project portfolio wisely means you will always have the information you need to get the best possible reward from your investment in projects and that those rewards will be in alignment with your corporate goals.
While a PPM process should be tailored to a given company in a specific industry, serving a unique market, there are tenets of project portfolio management that are key to devising the most effective process:
Project portfolio management is perhaps one of the most underutilized tools in a firm’s kit, and even where implemented it is often only used for a fraction of its power. But correctly used, PPM will make your strategy stronger. PPM will make your implementation better.
Bridging the worlds of strategy and execution, with one foot in the corporate and product strategy camp and one in the project implementation or execution camp, a properly-chartered project portfolio management team staffed with knowledgeable leaders who are authorized to take action will drive your firm to greater effectiveness.