Find out why strategic portfolio management is paramount to managing your projects in the modern workplace, along with FAQs, key benefits, use cases, and differences between SPM and PPM.
What is Strategic Portfolio Management?
Strategic portfolio management (SPM) is a systematic approach to planning, managing, and delivering projects across an entire program or portfolio. Its rigid processes and practices help to align portfolios to strategic business goals, something traditional ‘project portfolio management’ (PPM) often lacks.
Strategic portfolio management is the more sophisticated counterpart that may be the answer to all your project and portfolio woes. It essentially bridges that vital gap between project execution and achieving specific goals.
It requires a deeper understanding of the various factors at play, from risk management, investment analysis, portfolio performance measurements, resource management, and general portfolio optimization.
Recognizing the role of these components, and how they contribute to your organization’s overarching goals is the difference between traditional PPM and Strategic portfolio management.
According to Gartner, by 2025 around 70% of digital investments will fail to deliver expected outcomes for organizations because of a lack of a strategic portfolio management.
To quote Peter Kestenholz, founder of Projectum, “PPM drives projects. SPM drives strategy.” Although brief, it is a succinct explanation to recall the differences. Speaking of differences, look at the table below for more insight.
Importance of Strategic Portfolio Management Today
In today’s working world, change is two things. Fast and vast. Every industry has benefitted from rapid technological shifts, lower barriers to entry, and increased global competition.
For this reason alone, strategic portfolio management can help organizations adapt to evolving industries, and changing (and challenging) market conditions, while also staying ahead of the curve by achieving their goals and mitigating setbacks.
These things are essential to project portfolio management in the modern workplace, and their importance will only grow stronger from here. Project execution, alone, isn’t enough today.
In Gartner’s key findings on strategic portfolio management, the importance of SPM in the modern workplace is further emphasized, calling on post-pandemic uncertainties and autonomy:
“With increasing post-pandemic uncertainties and a shift to autonomous delivery models, digital leaders are increasingly identifying strategic portfolio management (SPM) as a critical set of enterprise-level capabilities required to drive digital business acceleration.”
With the right tools, most businesses can plan, manage, and execute projects with complete ease. PMOs are becoming leaner, yet stronger. In 2024 and beyond, strategic portfolio management is the solution to set your business apart.
PPM vs SPM: Key Differences
It’s hard to differentiate between normal project portfolio management and its shinier sibling, SPM. Let our handy comparison table help below!
| Component | Project Portfolio Management | Strategic Portfolio Management |
|---|---|---|
| Key focus | Helps plan, manage and deliver individual projects. | Aligns every project within a portfolio to strategic business objectives |
| Scope | Focuses only on specific projects. | Very broad scope to encompass entire portfolios across your business. |
| Decision Making | Emphasis on project execution and efficiency. | Project completion, resource utilization, and adherence to deadlines. |
| Success Measurement | Strategic alignment, effective resource utilization, and leadership buy-in to new processes and approaches. | Strategic impact on business objectives. |
| Common Tools | Project management tools that offer task management and resource allocation. | Enterprise-ready apps that support strategic planning, for an end-to-end experience. |
| Main Challenges | Meeting deadlines and delivering completed projects. | Helps plan, manage, and deliver individual projects. |
| Timescales | Short-term vision, to ensure projects are delivered within deadlines. | Long-term vision, with an emphasis on driving sustainable business success. |
Despite the similarities, both PPM and SPM are vastly different, and serve businesses in unique ways. Now that you have a solid foundation on what strategic portfolio management means, let’s look at the benefits!
Benefits of Portfolio Management
The primary benefits of portfolio management include improved portfolio ROI, enhanced performance measurement, better decision-making, accurate strategic alignment, refined resource utilization, and effective investment strategy.
Within Gartner’s findings, it is said that “Most strategic portfolio leaders expect the adoption of Strategic portfolio management standards to bring high value.“
The guide pinpoints particular benefits like “reducing coordination complexity across silos and increasing the ability to innovate.” Building on this, let’s dive into some of the benefits of portfolio management most organizations should take note of!
Improved Portfolio ROI
Being strategic with your project investment, your resource utilization, and your decision-making will ultimately lead to an improved ROI (return on investment).
You are essentially maximizing every dollar spent, becoming critically aware of how each aspect of strategic portfolio management makes a difference.
According to Don Creswell’s Six Principles of Strategic Portfolio Management, one organization chose to reduce its projects from 70 to 20, shifting to a value-based evaluation approach
The guide describes how this “strategic reduction improved the return on investment (ROI) by over 100%. By focusing on fewer, higher-value projects, they optimized resource allocation, eliminated unnecessary projects, and accelerated the development of more promising initiatives.”
Enhanced Performance Measurement
Unlike traditional project portfolio management, SPM offers a new and improved approach to measuring performance. Aligning your portfolio closely with wider organizational goals inevitably leads to a better grasp of success.
Strategic portfolio management will bring visibility to the impact of your projects, and how near or distant you are to achieving specific goals. Instead of celebrating the execution of projects, you’ll be able to answer the following:
- Did our portfolio stay within budget?
- How does our portfolio benefit in the long term?
- How successful was resource utilization?
Better decision-making
Better decision-making is another benefit of strategic portfolio management because you have enriched your portfolio with tighter processes, deeper metrics, and a closer analysis of things like budgets, resources, and alignment.
In layman’s terms, you are expanding your depth of knowledge for an entire portfolio, gaining a long-term vision, and thinking strategically about its various components – outside the constraints of project delivery.
In fact, research has found that 73% of organizations that adopt structured project portfolio management typically reach their goals. Further demonstrating that better decision-making is a result of strategic portfolio management.
Accurate Strategic Alignment
Alignment is the buzzword with strategic portfolio management. It’s also one of the major benefits of portfolio management generally. By Aligning efforts to the wider organizational goals, you are operating with a newfound focus and accuracy.
Individual projects may be successful, but in the grand scheme of things, that doesn’t always move the needle. Project success doesn’t equate to organizational success, after all.
Refined Resource Utilization
Strategic portfolio management demands more effective use of resources. That’s because you have uncovered a strategic direction that aligns with key business goals, meaning your resource allocation can mirror those priorities.
Strategic portfolio management reduces resource waste, helping you to optimize resource allocation with a stronger focus. It’s through SPM that you must ask yourself, “What portfolio priorities need more resources to achieve our business objectives?” Only then are you able to enhance resource utilization.
Speed to Market
Next up, speed to market! See, strategic portfolio management is PPM with legs. It streamlines your processes, invests rigidly, and optimizes resource allocation to bring projects, services, and products to market quicker.
Your strict approach to portfolio management makes every dollar count, every risk mitigated, and efficiency maximized. To put it simply, by refining your approach, you are avoiding the common pitfalls of traditional PPM.
Organizational agility
Our next benefit of portfolio management is increased agility. In the modern world, businesses are battling with the pressure to deliver quicker than ever. That’s if they want to remain competitive.
As new markets emerge, new customer needs are born, and competitors ramp up their efforts to innovate, so too must your organization. Luckily SPM offers improved agility.
Adopting SPM practices enables organizations to prioritize quickly. Organizational agility increases due to developing roadmaps, setting new objectives, and defining a solid direction across their portfolios.
Stronger innovation enablement
Innovation is a must for businesses of the twenty-first century. Failing to innovate is failing to compete. However, one of the major benefits of portfolio management is stronger innovation enablement.
See, strategic portfolio management aligns projects with long-term objectives, improves cross-departmental collaboration, and increases operational efficiency.
In other words, your ideas are backed by the strategy to succeed. Ensuring your efforts aren’t random, but instead accurate and intentional.
Effective Risk mitigation
Like many of the benefits of portfolio management we’ve outlined in this guide, knowledge is power! So, what does this mean?
Well, as you align your portfolios, allocate resources precisely, and optimize investment budgets more than you perhaps would with traditional PPM practices, you also mitigate risks and bottlenecks much more effectively. It’s as simple as that!
Conclusively, there are so many benefits of portfolio management. By abiding by the rigid processes and practices of SPM, your business and replicate some of these advantages outlined above.
To help differentiate the benefits of portfolio management with those of general project management benefits, we’ve created a useful comparison table below! Some people misunderstand the differences between the two.
| Benefits of Portfolio Management | Benefits of Project Management |
|---|---|
| Aligns entire portfolios with business goals. | Focuses on delivering individual projects |
| Mitigates risks and challenges across a portfolio to enhance agility. | Manage several risks associated with a single project. |
| Fosters full-scale innovation by aligning portfolios to specific goals. | Encourages incremental refinements within projects |
| Aims to maximize portfolio ROI through strategic alignment | Focused on specific project outcomes |
Strategic Portfolio Management Use Cases
There are many reasons why organizations may choose to adopt strategic portfolio management moving forward in 2024. From change management to innovation management, let’s take a closer look!
Change Management
The first use case is change management. By implementing change across your entire portfolio, you ensure all projects align with your new strategic direction and the goals of your business.
Investment Allocation
Another use case of strategic portfolio management is investment optimization. Knowing where best to invest your efforts, resources, and dollars, depending on strategic alignment, and possible ROI.
Innovation Management
Strategic portfolio management can help align innovation projects with wider business objectives. Ensuring funding of new ideas and opportunities not only support short-term progress, but long-term business growth.
Risk Management
Risk management at any stage is important, but with the use of strategic portfolio management, you can gain an all-seeing perspective for an entire portfolio, not just a single project! Do your best work, worry-free.
Scenario Planning
Finally, scenario planning is another use case to consider! A useful way to understand various scenarios and grasp evolving markets within your industry through resource planning.
Strategic Portfolio Management Case Study
Note: The company name has been changed to protect their identity.
Meet Blue Innovators Inc. an innovation consultancy based in the Northwest. In recent years, the company has witnessed a shift in its industry, and new markets emerged. Projects that once worked were now failing to hit the mark, taking them further from their business objectives.
As their team began to realize its current project portfolio was underperforming, project completion rates dropped by 20% – a spiral consequence that led to fragmented resource management and higher operational costs.
Blue Innovators Inc. realized early on that it had to realign its project portfolio to support its long-term vision, “Help organizations innovate for the modern workplace.” Something it was starting to fall short of.
It required a new approach. One that enabled the company to become a leader (once again) in innovation consultancy worldwide. The solution? Strategic portfolio management. See, it had all the right ideas, but its current focus was inaccurate.
The Solution: Strategic Portfolio Management
Going from directionless project portfolio management to full-scale strategic portfolio management worked tremendously! New projects felt intentional, with set objectives that aligned with the way the industry was moving.
They allocated the right resources for the right projects, assigned strict budgets, and identified the key risks. Decision-making improved, and so too did their consultancy services.
In fact, by adopting strategic portfolio management, Blue Innovators Inc. saw a skyrocketing 36% increase in project completion rates, while total portfolio ROI improved by 20% in the first 6 months.
This degree of improvement led to Blue Innovators Inc. acquiring 6 new clients, as they found a repeatable formula that worked.
Key Results for Blue Innovators Inc:
- 6 New Clients
- 36% increase in project completion
- 20% increase in ROI in 6 months
- Project portfolio management overhaul
- 25% reduction in portfolio risks
Final Thoughts on Strategic Portfolio Management
Strategic portfolio management isn’t just a nice-to-have in the working world of today, it’s a must-have! Organizations can no longer rely on traditional PPM as a means of delivering change, transformation, and success.
As we’ve seen from the stats, quotes, and case study above, the benefits of portfolio management are vast, as are the consequences of sticking to traditional PPM.
It’s no secret that change happens rapidly in the modern world, and as more organizations opt for strategic portfolio management, it threatens to leave so many businesses behind. Don’t let yours be one of them!
What we can conclude from this guide to strategic portfolio management is that whether you’re responsible for innovation or project delivery, SPM is a beneficial system in every sense.
It is a framework meeting the pressures and demands so many organizations are suffering against in 2024 and will continue to in the years to come.
Strategic Portfolio Management FAQs
Below are a handful of common strategic portfolio management questions! Hopefully, this provides you with further insight into the workings of SPM, and how it can benefit your business.
What industries can benefit from Strategic Portfolio Management?
All industries can benefit from strategic portfolio management, from construction and engineering, healthcare, finance, government, and more.
It is simply the approach a business takes to deliver its initiatives and projects to support wider business objectives. Whether that’s the construction of a new skyscraper or the development of a new product.
What are Some Examples of Strategic Portfolio Management?
The best example of strategic portfolio management is Blue Innovators Inc. An innovation consultancy who drove a 36% increase in project completion, acquired 6 new clients, and increased portfolio ROI by 20% in 6 months.
What is the difference between PPM and SPM?
The difference between project portfolio management and strategic portfolio management is that one drives project execution, and one steers strategic alignment of projects, initiatives, and more. In simple terms, it is the shinier, refined version that takes much more than project delivery into consideration.
What are the Challenges of Strategic Portfolio Management?
The primary challenge of strategic portfolio management is leadership buy-in and inefficient PPM tools. A lot of organizations do not have access to ideation software like edison365, making the rollout much more complicated.
