Academic journal article E+M Ekonomie a Management

Project Portfolio Optimization as a Part of Strategy Implementation Process in Small and Medium-Sized Enterprises: A Methodology of the Selection of Projects with the Aim to Balance Strategy, Risk and Performance

Academic journal article E+M Ekonomie a Management

Project Portfolio Optimization as a Part of Strategy Implementation Process in Small and Medium-Sized Enterprises: A Methodology of the Selection of Projects with the Aim to Balance Strategy, Risk and Performance

Article excerpt

Introduction

Project Portfolio Management (PPM) deals with the coordination and control of multiple projects that pursue the same strategic goals and compete for the same resources, whereby managers prioritize among projects to achieve strategic benefits. PPM deals with simultaneously managing multiple projects and includes defining values, specifying priorities, solving conflicts between projects as well as defining organizational structure and the rules of its functions (Spradlin & Kutoloski, 1999).

To provide maximum value to the organization, the portfolio must contain a balance of project types and risk levels as well as limit the number of projects to ensure that all projects can be resourced effectively (Killen, Hunt, & Kleinschmidt, 2008). According to numerous studies, project portfolio management is currently applied in the practice of nearly all modern enterprises (Miguel, 2006).

In order to use PPM methodology successfully, it is necessary to form an effective portfolio configuration to control project prioritization and how set goals are fulfilled. It is also necessary to create a suitable organizational structure throughout the entire organization (Kunz, 2007). The main goal is to implement suitable projects at the correct time together with the optimum use of available resources. It is often asserted that the introduction of a PPM process is a key factor for project success (Wideman, 2005; Cooper, Edgett, & Kleinschmidt, 2001).

Project management processes are included in international standards such as the PMBOK[R] (PMBOK, 2013), the PRINCE 2[R] (PRINCE2, 2017) and the IPMA[R] (IPMA, 2015). These standards are internationally recognized and used. In this context, the German environment regularly uses the term 'multi-project management', which means the complex planning, coordination and control of multiple, mostly mutually dependent projects within one organisation / organisation unit. The definition of multi-project management is based on DIN 69901, which defines multiproject management as 'an organisational and procedural framework for managing more than one partial project' and is thus ranked into the systems of management. If more projects are to be implemented simultaneously within an organisation, the nature of multi-project management enables this expectation.

This subject has been addressed by many authors such as Aritua, Smith, and Bower (2009), Seidl (2011), Lomnitz (2004), Lukesch (2000), Steinle, EUeling, and Mach (2010), Archer and Ghasemzadeh (1999) and many others. A survey of empirical studies is exemplified by Martinsuo (2013) or Verbano and Nosella (2010). Project portfolio development is one of the key phases of PPM. Its output is an optimized portfolio, the implementation of which contributes to the fulfilment of strategic goals and complies with the Arm's strategy. To meet this demand, the portfolio development process must meet specific requirements in terms of the content and progress of its creation.

During portfolio development the value of each single project, which represents key input information for portfolio optimization, must be taken in account. After performing a preliminary screening, unsuitable projects are eliminated from the portfolio. Managers of project portfolios must pay continuous attention to these characteristics even beyond the phase of portfolio selection. Project portfolios must be managed as periodic dynamic decisionmaking processes that encompass project evaluation, selection and prioritization in order to achieve a Arm's strategic objectives and ensure projects are balanced without exceeding available resources or breaching set constraints (Ghasemzadeh & Archer, 2000). Attention is paid to tools and techniques for portfolio evaluation and prioritization (Ringuest, Graves, & Case, 1999), portfolio-oriented product development process management (Cooper, Edgett, & Kleinschmidt, 2002), as well as resource management. …

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