Portfolio and Portfolio Management: PDMA Body of Knowledge: Chapter 2 Insights
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The kHUB Curator Team members have each been assigned a BoK section to own. This includes seeking, editing and sharing content related to that section. The curators are also sharing their perspective of various sub-sections of their chapter and contributing personal examples, experience, or related articles corresponding to the subject matter.
Portfolio and Portfolio Management
According to the PDMA Body of Knowledge 2nd edition, a portfolio is “A set of projects or products that an organization is investing in and making strategic trade-offs against”.
On the other hand, the PMI (Project Management Institute) and its PMBOK Guide define that “A portfolio includes projects, programs, other portfolios, and operations managed as a group to achieve strategic objectives”.
For PDMA, portfolio management can be seen as a pipeline that consists in defining new product ideas and/or product enhancements followed by evaluation, planning, execution, launch, market analysis and end of life.
In (Kock et al., 2014) the activities performed during the first stages of the innovation (the so called “Front-End Success” are analyzed to establish a relation between them and the success of the project portfolio. The study was held in Germany in 175 medium-sized and large firms. Among the suggested activities to be performed during the “Front-End” of the innovation are: The alignment of the ideas generation and selection to the innovation strategy, the adequate management of the ideation processes establishing rules and procedures and the support and autonomy to employees for creativity tasks.
According to (Cooper et al., 1999) portfolio management is measured according to the goals such as having the right number of projects for the available resources, avoiding the pipeline gridlock in the portfolio, achieving a balance portfolio according to some criteria and ensuring the portfolio is aligned with the business’s strategy.
It is important to emphasize that some of the key characteristics of portfolio management are:
- It is a decision-making process in a dynamic environment.
- There is no certainty of success and,
- Resources are limited and must be assigned to obtain the best financial return.
Finally, when an organization tries to start doing the right projects (Sull et al., 2015) mention that it is important to demystify some wrong beliefs such as:
- Execution equals alignment
- communication equals understanding
- performance culture drives execution
References
Anderson, A. and T. Jurgens-Kowal. 2020. Product Development and Management Body of Knowledge. Second Edition.
A guide to the Project Management Body of Knowledge: PMBOK® guide. Third Edition. 2004.
Kock, A., W. Heising, and H. G. Gemünden. 2014. How Ideation Portfolio Management Influences Front-End Success. Journal of Product Innovation Management.
Copper, R. G., S. J. Edgett and E. J. Kleinschmidt. 1999. New Product Portfolio Management: Practices and Performance. Journal of Product Innovation Management. 16:333-351.
Sull, D., R. Homkes and C. Sull. 2015. Why Strategy Execution Unravels-and What to Do About It. Harvard Business Review. 93(3):58-66
ABOUT THE AUTHOR
Salvador earned a B.S. and M. Sc. in electrical engineering and a PhD in automatic control. Since 2009 he is a full-time professor at Tecnologico de Monterrey Campus Morelia (Mexico) at the School of Engineering and Sciences, teaching subjects such as Mechatronic Design and Industrial Robotics. Salvador is a New Product Development Professional by PDMA and passionate about the use and impact of tools and methodologies for (New) Product (Process or Service) Design and Development. His publications in international journals are in the area of educational robotics. He also loves teaching robotics and coding to kids.
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