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Project Portfolio Management: How to Craft a Portfolio in 5 Steps

Project Portfolio Management: How to Craft a Portfolio in 5 Steps | Video

A strategic portfolio of programs, projects, and initiatives has balance and delivers value. But how do you assemble a strategic project portfolio? I want to share with you a simple five-step Project Portfolio Management approach I learned long ago: DDAPM.

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The Project Portfolio Management Process

The Project Portfolio Management process can be described in five letters: DDAPM.

DDAPM stands for:

  • Destination
  • Direction
  • Alignment
  • Prioritization
  • Management

Project Portfolio Management Step 1: Destination

You must start with an understanding of your organization’s strategic destination. This starts with its mission and vision statements and includes any strategic planning documents. These will draw in market assessments and assessments of competencies, capacity, opportunities, and threats. It will also access market and sociological forecasts.

Project Portfolio Management Step 2: Direction

Next, you need to determine the direction the organization needs to travel, to reach its destination. What changes will it need to make to its policies, processes, staffing, capabilities, technology, product or service lines, logistics, structure, geography, assets, and culture, to achieve this?

Each change may give rise to one or more potential projects or programs.

Project Portfolio Management Step 3: Alignment

Next, you need to ensure that these programs are all aligned to the chosen direction and that no two are either overlapping and trying to achieve the same thing, or conflicting with one another.

However, some ‘strategic redundancy’ can reduce risk – although there are costs. If two projects aim to achieve the same critical outcome in different ways, then if one fails, you have a backup.

Likewise, you may consider some strategic misalignment. You cannot know what the future may hold. So, a small investment in projects or programs that take your organization towards a variant destination can provide resilience, if events mean you need to change your destination. If they do not happen, you will abandon those projects and write off the cost as insurance and strategic risk mitigation.

Project Portfolio Management Step 4: Prioritization

Next, you need to prioritize the basket of possible projects and programs. This is for importance – which will you definitely do, which will you hold on, and which will you abandon? This also sets you up to allocate investment budgets linked to importance.

Prioritization is also for urgency and sequencing. Which will you do first, later, and far down the program?

Things to consider, when determining priorities, include:

  • Value: cost and benefit
  • Risk: scale, complexity, novelty
  • Strategic importance: core asset, enabler, risk-spreading, tactical

Project Portfolio Management Step 5: Management

Once you have your projects and programs prioritized, you start the management process by scheduling them into time blocks of around ¼, ½, or even whole year precision. And the next task is to allocate key personnel: Sponsors and Project/Program Managers 

From there, the projects and programs have the key components they need to start managing their own delivery. But the portfolio function also needs to consider the governance of each one – its oversight and decision-making. This means both the top-tier board or steering group and allocation to a Portfolio, Program, or Project Management Office (PMO) to provide support, guidance, services, assurance, and data collection and consolidation services.

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What Kit does a Project Manager Need?

I asked Project Managers in a couple of forums what material things you need to have, to do your job as a Project Manager. They responded magnificently. I compiled their answers into a Kit list. I added my own. 

Check out the Kit a Project Manager needs

Note that the links are affiliated.

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About the Author Mike Clayton

Dr Mike Clayton is one of the most successful and in-demand project management trainers in the UK. He is author of 14 best-selling books, including four about project management. He is also a prolific blogger and contributor to ProjectManager.com and Project, the journal of the Association for Project Management. Between 1990 and 2002, Mike was a successful project manager, leading large project teams and delivering complex projects. In 2016, Mike launched OnlinePMCourses.

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