Practical Tools for Project Portfolio Management

Portfolio2For any size business that undertakes multiple simultaneous projects, the ability to manage the project portfolio is a constant struggle (1).  In particular, the portfolio over time tends to move to a higher state of disorder akin to the concept of entropy (2). Think about what happens at most companies, large and small: over time, more projects get started before existing projects are complete. Engineers are expected to work on not just one or two projects, which is ideal, but now must multi-task across multiple projects. On top of that, important customers demand new software features or enhancements to existing products, further diluting the focus on current projects. Statements like “every project seems to be late, never early”, “we always underestimate project cycle time” and “we constantly pull team members from a project to fix high priority customer requests” are common, especially in small to mid-sized firms. There are simply too many projects for too few resources, and the system grinds to halt. 

So what can be done? Returning to the concept of entropy, a way to bring order to chaos is to put energy into the system. In this case, the “energy” I am referring to is management time and engagement. The purpose of this article is to highlight several tools that management can use to help bring more order to a chaotic project portfolio.

Tool #1: Idea Management

First, a process for collecting and screening new ideas is important. This process can be viewed as a sub-process to the overall project portfolio management system. It is important because not all ideas are created equal and you do not want to waste valuable, key resources on ideas that really should have been rejected earlier for whatever reason, strategic or otherwise. A robust process for screening ideas is a good way to protect the portfolio itself and make sure that projects don’t get added without basic up-front due diligence. Figure 1 below summarizes the process.

Picture1Figure 1

There are a couple key points to make about this process. First, someone should be the process owner. In many cases, this will be a Product Manager (3). In many companies when I ask who manages this process, the answer is “…well, we all do that.” In my opinion, that means no one is doing it and no one takes responsibility. Whoever is responsible for the process does not necessarily make all decisions, but guides the process and involve all the key stakeholders in the decision making process.

Second, ideas come from many sources including customers, internal staff, power users, suppliers, etc. They come in many forms, including verbal and written, and include ideas for new products as well as enhancements to existing products. That should be encouraged but with a note of caution: there is a danger in always listening to your customers. They often ask for enhancements to your current product in this way or that. They may not be able to express latent needs, and may not give you a true answer in terms of how much they are willing to pay. Existing firms with existing products are very good at incrementally improving existing technology, spurred on by customer “demand” and the competitive jockeying that consumes much of our management attention. Senior management must be on guard that in your quest to compete, you don’t get ahead of what customers really want and at what price they are willing to pay for improvements.

Finally, as the simple process diagram implies, each company will have to determine a “fitness” test in deciding which ideas will be rejected (with feedback to whoever submitted the idea), which ones will be recorded for future consideration and which will move on to the next step. That next step likely should include a simple 1 or 2 page description then the idea will enter the portfolio process where it will get prioritized against all the current projects, projects that are in the queue waiting for resources and other new ideas.

Tool #2: Managing Customer Requests

For many small to mid-sized firms especially, their dedication to quickly responding to customer needs is both a blessing and a curse. Many companies become successful by quickly responding to customer needs. Typically, these requests might come through the distribution network and be championed by, for instance, a salesman who convinces management that “…if we just had this one new feature, we can sell X number of additional units every year!” This is particularly true of software enhancements. The problem is that at some point, these requests become overwhelming and many small requests add up to a major drain on resources, preventing the business from making strategic decisions and instead priorities change daily. Ultimately, the organization will only survive if it learns to sometimes simply say “no”.

Figure 2 below is a simple flow diagram for making these decisions (4). This process could be viewed as the “fitness” test described in Tool #1, at least as it pertains to customer requests. Again, someone must be responsible for this process. All too often, organizations are structured such that customers and salesman contact engineers directly who make decisions about fixing this or adding that, and suddenly there is no control of the resources. I am not saying this should never happen, but there has to be a balance between satisfying customer needs and making long-term strategic decisions about the best use of scarce resources.


Tool #3: Resource Allocation Process

Is your business tracking where resources are utilized? For many small to mid-sized firms with a few to several simultaneous projects, this becomes an important exercise. Again, it can be viewed as a sub-process within the overall portfolio management system. For companies who have no process in place, a simple Microsoft® Excel spreadsheet will suffice.

Figure 3 below is a simple example for a single project. On the left axis are all the critical resources. The horizontal axis is time in quarter/year. At the top, a timeline using arrows indicates the project phase. The percentages of time each team member has actually spent on the project through 3Q12 is indicated in red, and projections through the end of the project are in black. It is a simple matter than to combine this with other projects and summarize for each key resource how much of their time is allocated for projects and how that will change over time. This can also be done by resource rather than by project. Only by understanding where your key resources are spending their time will you be able to prevent overloading the system, a common problem no matter the size of the organization. It also will help highlight where key resources may be multitasking across more than 2 projects. That might be possible for CAD resources and technicians, for instance, but it is typically counterproductive for key engineers.

Resource #1

Tool #4: Financial Modeling Tool

As an organization’s processes become more mature, financial modeling tools can be another important way to assess a portfolio. In collaboration with SmartOrg, a beta version of a simple financial modeling tool appropriate for small to mid-sized organizations has been developed (5). This tool allows financial aspects of a project to be input, along with risk factors, then projections made in terms of earnings, margins, NPV, etc. Figure 4 is an example for a project called “STAR”.

Figure 4

From that data, a tornado chart (in this case for NPV) can be presented as shown in Figure 5. The important point here is that for this project, the marketing cost estimates, unit volume estimates, and the burdened unit cost projection, along with the respective uncertainties, are the primary source of the overall uncertainty in NPV. The project team might need to spend more time reducing the uncertainty in these projections, and management can visualize sources of risk vis-a-vie other projects competing for the same resources.

Rangal #2

Copyright 2014 SmartOrg Inc.

Going one step further, the tool then provides a way to look at the entire portfolio as illustrated in Figure 6 and 7. Figure 6 allows the portfolio to be mapped using a common portfolio mapping diagram. Figure 7 first sorts the projects by expected value/projected cost to arrive at a “productivity factor”, then plots the projects on a cumulative basis. This helps illustrate the so called “cumulative frontier” and highlights the fact that it might be appropriate to discontinue or re-think the STAR project relative to the rest of the portfolio, as it adds little value at significant cost in resources.

Rangal #3

Copyright 2014 SmartOrg Inc.

Tool #5: Portfolio Visualization Tool

Another useful visualization tool related to the one described in Tool #4, but more generic in nature, is PortView (6). This tool allows the user to input data via Excel and plot a wide variety of bubble charts, using any x and y axis definition that makes sense. To illustrate, Figure 8 shows another example of a “cumulative frontier” for a company managing multiple projects. In this example, and very typical of most existing project portfolios, about 90% of the value generated by projects could be done with 50% of the resources. Again, some of the projects in the flatter portion of the curve in the upper right quadrant of the graph might warrant a “kill” decision. Of course, there may be good reasons to continue them, but this is one more tool management can use to help bring order to a chaotic project portfolio, and reallocate scarce resources to higher-value projects.

New Portview 1

Copyright 2014 Adept Group

Figure 8

Another example of PortView is shown in Figure 9. In this example, months until launch is on the y axis, and the project phase on the x axis. All projects are represented by bubbles, the size being NPV relative to other projects, the color associated with market segment, and the segment the probability of success. You will also notice that each bubble has a line with an arrowhead. This indicates where the project was the last time it was evaluated. In a perfect world, all projects would start in the upper left quadrant, and progress to the lower right quadrant. Reality is much different. For instance, in this example, the “Venus J” project has moved almost vertically since the last evaluation. For whatever reason, the time to launch has increased, not decreased. If a majority of projects in this diagram exhibit similar patterns, then the portfolio is in a high state of disorder and management must determine the reasons and take corrective action.

New Portview 2

Copyright 2014 Adept Group

Figure 9

In summary, I have highlighted five very important tools that can assist management in understanding the state of the project portfolio. With an understanding it is then management’s responsibility to be engaged in the process and ask the hard questions, and expend the energy needed to bring more order to the project portfolio.

What tools do you commonly employ to help manage the project portfolio? Which ones have you found to be effective, and which ones are least effective? Are there other useful tools not described here you would add?


  1. For additional information on portfolio management, see these articles: Assessing Disorder in a New Product Development (NPD) Process, The Importance of a Balanced Project Portfolio, Critical Aspects of Project Portfolio Management in NPD Success.
  2. Paul O’Connor of the Adept Group ( is credited with the concept of entropy as it relates to higher states of disorder in project portfolios. The second law of thermodynamics states that all systems move to a higher state of disorder. To bring more order, energy must be expended.
  3. See for example, this article on the role of a Product Manager: The Product Manager and New Product Development (NPD) Success.
  4. Flow diagram is credited to Hutch Carpenter and originally published in his article “Decision Flow for Customer Feature Requests
  5. SmartOrg ( is a leading supplier of portfolio management tools. If you are interested in a demo of the tool referenced, please contact Jeff Groh at New Product Visions (
  6. PortView is a product of the Adept Group ( If you are interested in assessing its capabilities for your application, please contact Jeff Groh at New Product Visions (

New Product Visions is a consulting company that helps organizations improve the effectiveness of their new product development processes. We specialize in small to mid-sized companies that manufacture highly engineered products. Contact us today about how we might help you!

Specialties: NPD consultants, new product development consulting, developing new products, new product development seminars, small business consulting, new product development expert, product development process, new product development strategies, integrating NPD for mergers & acquisitions, organizing for innovation, management role in NPD, project risk analysis, innovation management

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