Maximizing the Internal Value of Company Projects

Abstract

This research paper focuses on the topic of project success from the perspective of the companies executing the projects. It explains what project success means and why it is important to establish a well-working Project Portfolio Management process, in addition to Project Management. It also highlights the most important Project Portfolio Management practices that enable the project success and it brings in
survey results to discuss the present implementation of those practices. The paper ends with a proposal on next steps for further research and process improvement implementation.

Full text

Maximizing the Internal Value of Company Projects
Maximierung des internen Wertes von Projekten im Unternehmen
Irina O. Korova∗
∗IT Business Process Manager
irina@bpmexplained.com; https://orcid.org/0000-0002-5681-8181
Abstract —This research paper focuses on the topic of project success from the perspective of the companies
executing the projects. It explains what project success means and why it is important to establish a well-
working Project Portfolio Management process, in addition to Project Management. It also highlights the
most important Project Portfolio Management practices that enable the project success and it brings in
survey results to discuss the present implementation of those practices. The paper ends with a proposal on
next steps for further research and process improvement implementation.
Zusammenfassung —Der Augenmerk dieses Forschungspapiers richtet sich auf das Thema Projekterfolg
aus Sicht der durchf¨
uhrenden Unternehmen. Es erl¨
autert, was Projekterfolg bedeutet und warum es wichtig
ist, ¨
uber das Projektmanagement hinaus, einen gut funktionierenden Projekt Portfolio Management Prozess
zu etablieren. Es werden die wichtigsten Projekt Portfolio Managment Praktiken vorgestellt, die einen Pro-
jekterfolg erm¨
oglichen. Eingebrachte Umfrageergebnisse geben dabei Aufschluss ¨
uber die Implementierung
dieser Praktiken, die im Anschluss diskutiert werden. Die Arbeit schließt mit Vorschl¨
agen f¨
ur weiterf¨
uhrende
Untersuchungen und Implementierung von Prozessverbesserungen.
I. Introduction
Project Management is not a new process. Since
centuries, people have been structuring their work into
projects. Examples include the Pyramids of Giza, the
Olympic games, the Great Wall of China, Taj Mahal, hu-
mans landing on the Moon, and many, many more [1]. To-
day, 30% of the global economy is project-based [2].
Even with such an extensive Project Management expe-
rience, around 70% of all started projects are either chal-
lenged in some way or completely fail (see Fig. 1). This
equates to 1 million USD wasted every 20 second globally
on poor Project Management practices, which rounds up
to 2 trillion USD a year [3].
II. Objective
Presently I work as a Senior Quality Manager at an IT
organization of around 10,000 people in size. Our work
is structured into projects and I experience first-hand the
daily struggles of different specialists (incl. myself) as-
signed to various IT projects, as well as the company as
a whole, while trying to bring these projects to successful
completion.
The goal of this research is to set the direction for en-
abling organizations to successfully and consistently deliver
projects that add value. The main focus is not so much on
the Project Management process, because its scope is lim-
ited to one project only. The intention is to look broader at
the internal strategic and governance elements that impact
Project Management and see how those can be improved in
order to achieve project success consistently. In that sense,
certain elements from the behavior of the Project Manage-
ment process can serve as an input for identifying improve-
ment opportunities on the strategic/governance level, and
Fig. 1. Project success in the years 2011-2015 [4]
also as indicators of whether improvement has indeed been
achieved.
III. Analysis
The structure of this research can be broken down into
two parts:
A. Single-project scope: What are the criteria for a suc-
cessful/unsuccessful project?
B. Multiple-project scope: What are the strate-
gic/governance elements impacting the project suc-
cess?
A. Single-Project Scope
Until recently, project success has been defined by com-
pleting the projects on time, on scope, and within budget
[4, 5, 6]. However, none of these three project attributes
provide any visibility as to whether the project actually
FDIBA Conference Proceedings, vol. 3, 2019 7

Fig. 2. Survey results from 4,455 Project Management Practitioners
(global total) [7]
brought value to the customer, whether the delivered prod-
uct/service was of the expected quality, etc. Therefore,
more and more definitions of project success are emerging
to include more factors (aka ”constraints”) than the tradi-
tional three, such as:
•on time, on budget, on target, on goal, value, satisfac-
tion [4];
•time, scope, cost, quality, risk, value, im-
age/reputation [5];
•product and project quality, timeliness, budget com-
pliance, degree of customer satisfaction [6].
As observed, there is not one single definition of project
success. What project success is (financial and qualitative
criteria) and how it will be measured throughout the course
of the project is left to the organizations to define prior to
the start of the project, typically in the business case [1].
Even without a clear definition of project success, one
element is becoming more and more prominent: value /
customer satisfaction. [2] and [5] argue that the new defi-
nition of project success will be based on value only. Value
can then be further decomposed into: time, cost, quality,
technology and scope, client satisfaction, and risks [5]. In
this way, all constraints to achieve the project success will
become components of the value constraint.
To understand what value means, we can look into its
definition: A project’s business value is the benefit that
the project results provide to its stakeholders [1]. The
benefit from projects may be tangible (monetary assets,
stockholder equity, utility, fixtures, tools, market share,
etc.), intangible (goodwill, brand recognition, public ben-
efit, trademarks, strategic alignment, reputation, etc.), or
both.
Needless to say, the project’s value is not only linked to
external customers, but also to internal stakeholders. A
project stakeholder, by definition, is any person, group, or
Fig. 3. Organizational context of Project Portfolio Management [6]
organization that can impact or be impacted by the project
[1]. Therefore, a project will not be considered successful
if it provides the intended value to the external customer,
but not internally to the company delivering the project.
In order for a company to ensure its projects deliver value
internally as well, it has to keep them in a constant align-
ment with its strategic direction [6]. However, [7] shows
that changes in the organizational priorities and changes
in the project objectives are the most frequent reasons for
project failures (see Fig. 2). One possible explanation is
the lack of strong alignment between the value a project
will deliver and the company’s strategy from the very start
of the project.
Another possible explanation, however, is sponsorship.
Organizations have limited resources to invest into their
projects. This causes projects to be in a constant compe-
tition for some or all of the company resources [6]. Con-
sequently, not sponsoring a project, strategic goal, or any
other type of initiative means failing to achieve its purpose
and benefit from its results.
Because of these two reasons - strategic alignment and
sponsorship (i.e. resource allocation) - we have to refer to
the Project Portfolio Management process (see Fig. 3). A
portfolio is a collection of projects, programs, subsidiary
portfolios, and operations managed as a group to achieve
the company’s strategic objectives [6]. In other words, the
scope of the Project Portfolio Management process is all
projects inside a company.
In comparison, the main definition in Project Manage-
ment is: A project is a temporary endeavor undertaken to
create a unique product, service, or result [1]. In other
words, the scope of the Project Management process is a
single project. However, an individual project can not tell
us whether all company strategic objectives have been met,
or whether all company resources are being utilized in the
best possible way. We have to look into all projects as a
whole to give answers to these questions.
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B. Multiple-Project Scope
Project Portfolio Management manages the collective
whole and the relationships among projects, programs, sub-
sidiary portfolios, and related operations (aka ”portfolio
components”) in a way that brings value to the organi-
zation [6]. Value is the primary focus and also the crite-
rion by which the portfolio components are evaluated and
added to the portfolio. The portfolio success is measured
in terms of the aggregate investment performance and ben-
efit realization of the portfolio, i.e. the entire quantifiable
and qualifiable benefits, worth, and usefulness of the orga-
nization (all tangible and intangible elements of the busi-
ness value). And the success of the whole Pro ject Portfolio
Management process is measured by whether it optimizes
investments and meets the organizational strategic and op-
erational goals.
By applying the Project Portfolio Management practices,
the company ensures that the investment in a portfolio de-
livers the required return to its stakeholders as defined in
the organizational strategy and as expressed by the port-
folio components (projects and programs) [6]. The under-
lying premise is that if a portfolio component successfully
builds its assigned deliverables, it can make its contribu-
tion to the chain that links the deliverable to component
outcome to benefit to value all the way up to the organiza-
tion’s mission (see Fig. 4).
Fig. 4 also shows that, to enable the portfolio compo-
nents to execute successfully, the Project Portfolio Man-
agement process has to set the stage by:
1. ensuring the portfolio is aligned to the strategy,
2. designing the portfolio, and
3. governing the execution of the portfolio.
From there on, we move down to the level of Project Man-
agement, which manages the actual portfolio component
delivery and, thus, realizes the value of the whole portfo-
lio.
1) Strategic Alignment: In order for Project Portfolio
Management to use the strategic objectives as input, they
have to a) exist, and b) be of the expected quality.
The strategic objectives are created on the basis of the
organizational vision and mission [6], therefore, these pre-
requisites need to be in place too.The stakeholders then
break the company’s path (i.e. strategy) to achieve its vi-
sion into more manageable steps, which represent the com-
pany’s strategic objectives.
Once defined, the strategic objectives should be all of the
following [6]:
•Understandable: Is it stated simply and easy to un-
derstand?
•Suitable: Does it fit with the vision and mission?
•Acceptable: Does it fit with the values of the organi-
zation and the employees?
•Flexible: Can it be adapted and changed as needed?
The benefits of having a clear and working strategy are
well known. A recent study [8] shows that companies which
get strategy right are three times as likely to report above-
average growth, twice as likely to report above average prof-
its, and generate 14.2% higher annual Total Shareholder
Fig. 4. The link between strategy and portfolio performance via the
component deliverable [6]
Return (TSR), based on capability-driven deals. And yet,
79% of the surveyed leaders say their company does not
have a list of strategic priorities, and 63% say their com-
pany does not have a well-defined strategy and a clear sense
of where it is heading. This suggest that the companies still
do not know what their competitive advantage is, what to
focus on, and what to let go of, in order to formulate a
clear vision and strategic path to it.
2) Portfolio Design: Once the organizational strategy
is in place, the next step is to identify what benefits the
projects will bring, in order to make an informed decision
of whether a portfolio component is in alignment with the
organizational strategy or not, i.e. whether it should be
part of the portfolio or left out. Proposed portfolio compo-
nents or current inventory of work either not aligned with
the organizational strategy or deemed unlikely to deliver
the intended value are not recommended for inclusion in
the portfolio [6].
The survey carried out in [9] shows that nearly three
quarters of the organizations frequently identify the project
benefits before the project start. At the same time, the re-
port also shows that 83% of the projects suffer from a lack
of maturity with benefits realization, 48% of the projects
are not well-aligned with the organizational strategy, and
62% of the projects that are not well-aligned with the or-
ganizational strategy are implemented nevertheless.
The possible reasons for this project misalignment to the
company strategy are shown in Fig. 5. They suggest that
the project stakeholders are focusing too heavily on max-
imizing their Return on Investment (ROI), losing sight of
the project’s (and portfolio’s) true requirement, which is to
return value. This is a very common mistake, also pointed
out in [6].
FDIBA Conference Proceedings, vol. 3, 2019 9

Fig. 5. Survey results from 1,189 Project Management Practitioners
(global total) [9]
It is important to note that identifying the project bene-
fits upfront also informs the organization about what met-
rics to use to track if the projects are performing as ex-
pected [5, 9]. Therefore, failing to identify, agree on, and
prioritize the project value elements with all stakeholders
at the project start also leads to a) lack of project control
while the project is already ongoing, and b) inability to
assess if the project has been successful at project closure.
3) Portfolio Governance: To enable effective manage-
ment of the portfolio, the results (expected or realized) of
its components should be measured, ranked, and priori-
tized [6]. Prioritization shows which portfolio component
the organization should invest in at any given time. Not
every component has the same urgency. It is important
to recognize the sequence of component completion based
on the organizational goals and be able to facilitate the
higher-priority components first, followed by those lower
on the list.
To enable prioritization, the organizations need a way of
describing their projects so they can compare them [10].
They do this by assigning attributes, which form the basis
of a categorization system.
To investigate the successful implementation and opera-
tion of project categorization systems, [10] also performed
a survey. According to it, 39% of the companies classify
some of their projects (but not all), and 16% of the com-
panies do not classify any of their projects. Some of the
reasons for these results are: categorization is an abstract
concept, project attributes are not linked to the purposes
for which they are used, difficulties in using the categoriza-
tion system (e.g. system is too complex), etc.
The conclusion is that companies are either not con-
vinced that project categorization systems can align or-
ganizational capability with strategic intent or they do not
believe such alignment is needed. In any case, a minimum
of 55% of the organizations are presently not utilizing their
resources in the optimal way and, thus, maximizing the
value their projects can bring.
IV. Summary
Project success is an interesting topic, because a) people
tend to organize their work into projects, and b) they want
to see their investment bring its intended results. That is
why, in business terms, project success is measured by the
value it brings to its stakeholders. The value is realized
by the total sum of all projects and is, therefore, better
managed by the practices of Project Portfolio Management
than Project Management alone.
Project Portfolio Management enables the project suc-
cess by governing and aligning the projects to the company
strategy, which in turn brings the company closer to its vi-
sion and mission. Several surveys show, however, that the
Project Portfolio Management practices are not well un-
derstood and/or implemented. As a result, in 70% of the
started projects the benefits are compromised and invest-
ment is lost.
V. Epilogue
This research paper sets only the initial steps for enabling
project success every time. It highlights the major areas
of concern when it comes to project/portfolio governance
and strategic alignment, which prevent companies to realize
their full potential.
As next steps, further analysis can be performed inside
real-life groups of projects and portfolios to understand in
more detail why the current Project Portfolio Management
practices are at least partially ineffective. It is possible that
these practices are not fully implemented, in which case the
ways of working of the organization(s) can be improved.
There is also the chance that the current theory may have
some flaws, which prevent its full implementation and ef-
fective execution. In that case, an improved theoretical
model can be proposed.
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