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Moving to a value paradigm

Keeping a portfolio of projects under control can be frustrating. In this article, Chris Lovelock explains how companies can draw value from their portfolios and achieve excellent project and business outcomes. The trick? Completely aligning the portfolio to the organisation’s strategic objectives.

Chris Lovelock corporate headshot

by Chris Lovelock

Portfolio Optimisation Service Line Lead, Newcastle

21 June 2018
Onsite inspection

Keeping a portfolio of projects under control can be frustrating. Assets are aging, but the sustaining capital budget is often capped. Stakeholders often expect to see financial returns from the same portfolio, and every dollar needs to deliver the most value possible.

Finite funds plus demands for returns plus assets needs equals frustration Infographic

The balancing act

Within a portfolio, each and every project should demonstrate its ability to deliver measurable value, aligned to the organisation’s strategic aims, with a balance of risk reduction and financial return. We call this a ‘balanced portfolio’.

Strategy, risk, financials Strategy, risk, financials

It’s not enough to pick the projects that just deliver the most strategic value; the selection needs to be optimised to maximise the use of a limited budget. Cue in the ‘Efficient Frontier’ theory.

The ‘Efficient Frontier’ of a particular group of projects shows the maximum value that can be extracted for any given capital spend. Once we're able to collate the contribution of each project, we can optimise the strategic return for the given budget.

 


The ‘Efficient Frontier’ of a particular group of projects shows the maximum value that can be extracted for any given capital spend.

Efficient frintier Efficient frontier

Moving to a value paradigm

When an organisation knows that the portfolio is completely aligned to its strategic objectives, the best set of projects for the business becomes the delivery of value. Project Managers feel pull for their projects from the business. Stakeholders become active supporters providing input, access and approvals. The organisation shifts from ticking off a list of projects to realising value by completing one project after another.

Setting up a Portfolio Management Office (PMO) helps to steward the delivery of value, and benefits realisation becomes a leading portfolio delivery metric. A PMO helps achieve excellent project and business results through:

  • Standardisation

  • Building capability

  • Sharing and continually improving practices

  • Ensuring portfolio governance/assurance

  • Performance monitoring and controlling.

The organisation can then demonstrate to stakeholders an improving risk profile of the business and attract more capital.

 


 The Arrium case study 

Cumulative EBIT deliveredCumulative risk reduction points delivered

“Our Alliance allows us to manage a portfolio of projects across a number of geographical sites without a significant increase in overall labour hours, even though the workload can change as much as 120% on a year-to-year basis. The resource management processes have helped us reduce our Alliance group resources from 90 to 40 during downturns without redundancy costs. According to IPA audit results, our labour productivity is among the best in Australia.” Robert Finlay, General Manager, OneSteel Engineering and Reliability


 

A well-defined capital portfolio process

Delivering an optimum portfolio in a dynamic environment is challenging. We’ve supported a wide range of clients and portfolio types, and can recommend ‘golden rules’ to stay on track. We also help to customise the overall process so that value is locked-in while meeting the changing asset and business needs.

We realise everyone is on a ‘portfolio management journey’ towards the delivery of more and more value from their capital portfolio.

  • Where are you on the journey?

  • Where do aspire to be?

  • Do you have all that you need to get there?

We can review your level of portfolio management maturity. We can then work with you to plan to improve portfolio outcomes. We have the know-how and tools to help you to achieve more value, faster. We focus our help on your success on the portfolio management journey.

Chris Lovelock corporate headshot

Chris Lovelock

Portfolio Optimisation Service Line Lead

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