2.1.2 Corporate Strategy
Shendar et al. (2001) argue that project portfolios are powerful
strategic weapons therefore they can be described as building blocks in
implementing an organisation's intended strategy. Muller et al. (2008) on the
other hand state that there exist a positive relationship between strategic
portfolio selection and project portfolio performance. Understanding the
strategic orientation of an organisation is therefore crucial when wanting to
implement project portfolio management processes. Various definitions exist in
literature for the term `strategy'; early strategic management
literature puts emphasis on the activities that are undertaken by an
organisation in order to maintain its competitive advantage when defining
strategy (Chaffee, 1985). The focus on competitive advantage is also supported
by Walker and Ruekert (1987) who describe business strategy as the way in which
an organisation decides to compete in a given industry in comparison to what
its competitors are doing. Yelin (2005) argues that every organisation has a
strategy therefore there cannot be a single, definitive definition of the term.
For the purpose of this dissertation which focuses on project portfolio
selection in International Development Organisations, the term strategy will be
defined using the Five P's of Strategy proposed by Mintzberg et al (1998)
because of the specific nature of this type of organisations:
- Plan: strategy is a direction, guide or course
of action into the future that an organisation follows
- Pattern: the organisation's strategy is
consistent over time
- Position: strategy is a means of locating the
organisation in its external environment
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- Perspective: strategy looks into inside the
organisation and is applied throughout
- Ploy: strategy is a specific manoeuvre
intended to outwit an opponent or a competitor
Strategy is therefore the direction that an organisation follows
over a long period of time and which helps it achieve its objectives in a
changing environment (Johnson et al, 2006).
2.1.3 Project Portfolio Selection Process
Projects as we know them can be defined as being temporary
endeavours undertaken to create a unique product, service or result (PMI,
2006). To create this unique product or service, a well-defined process
consisting of interrelated activities as to be followed (APM, 2006). This
process converts inputs into outputs. Project portfolio selection has become
increasingly popular in recent years as illustrated earlier in project-based
organisations. The PMI (2008) defines the project portfolio selection process
as the process which ensures that projects are reviewed to ensure that
organisational resources are allocated accordingly and that the management of
the projects in the portfolio is consistent with and aligned to the
organisation's strategy. Englund and Graham (1999) argue that the project
portfolio selection process begins with the establishment of an upper
management team. The role of this management team is to set directions for the
portfolio, manage multiple projects or a set of projects, decide on the
selection criteria, and aid in cross-organisational issue resolution. The goal
of this management team is to ensure that the projects in the portfolio support
the organisation's strategy. The APM (2006) describe the project portfolio
selection process as a process that is concerned with screening, analysing, and
appraising the characteristics of a project or group of projects in relation to
the organisation's strategy. The strategic alignment of the projects selected
for the portfolio is therefore crucial within organisations. Levine (2005)
argues that the project portfolio selection process' aim is to help the
organisation rank projects according to their value and benefits, the risks of
achieving these benefits, the resources available to the organisation to help
support the implementation of the projects in the portfolio and the size of the
pipeline. He later on argues that the project portfolio selection process is
made up of two sub-processes:
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the selection and prioritization of projects and the management
of the selected projects. These two sub-processes are directly linked to the
organisation's strategic objectives in that they help in executing the
strategic plan set by the organisation with a focus on meeting both the
individual project's goals and the portfolio goals. The project portfolio
selection process is not as straight forward as it might seem; factors such
conflicting objectives, unavailability of resources, uncertainty and risk can
turn it into a very complex process as it was observed by Ghasemzadeh and
Archer (2000). The strategic focus of the portfolio selection process should
therefore take into consideration of these factors to ensure that the process
is effective.
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