Savings Available from Implementing MCDA
Many of our potential customers with large project portfolios ask us for help in answering the following questions:
- How can we prove to our staff and ratings organisations that our reporting on sustainability is transparent?
- How do we align I.T. or other initiatives, systems and architecture with business goals, transformation and innovation?
- Is our spending on strategic activities balanced? Are we spending too much on some strategic drivers and not enough on others?
- How would our strategic direction change if we included the opinions of our customers, investors, vendors, S.M.E’s, consultants?
- Where should we look in our project portfolio for cost savings candidates?
- What do we need to accelerate or stop in order to reach our business goals more quickly?
- How can we assess all our capital investment initiatives using the same measures?
- How can we ensure a shared vision of what we need to do at all levels of our organisation?
- What should we do first, second, third ………………………… last?
Of course, there are many more related and unrelated questions that could also be asked in relation to project portfolios
Opportunity Cost
The forgone benefit that would have been derived from an option not chosen
Various studies have found however that the net effect of not being able to answer these types of questions is a portfolio of investment that is unlikely to be optimal with industry experience pointing to savings available exceeding 5% of the total value of the portfolio.
Some estimates, such as those arising from research performed by Gartner, Forrester Group and the Project Management Institute estimate as much as 23% of the portfolio could be saved
An example is an organisation is likely to save $50,000 per $ Million of the value of the portfolio, but could save an additional $180,000 per $ Million of the value of the portfolio, depending on the maturity of portfolio analysis implemented.
Limited guidance is available for a value proposition with regard to savings available alone. However, the savings will be made in the following ways:
- Alignment of the investment portfolio with true business value (Whatever represents business value in your organisation for the decision being taken, commonly strategic alignment)
- Enabling the adjustment of investments where the cost is disproportionate to the benefits derived or extent to which the investment aligns with corporate strategy
- Virtual elimination of “Pet projects”
- Virtual elimination of intended and unintended bias in selection of an investment initiative or investment portfolio
- Reduction in the number and value of investments that could be harmful to the business in ways other than financial
- Increase in capacity for the business to be flexible in its investments, recognising the multi-dimensional nature of business itself and enabling rapid adjustment of strategy during harsh economic conditions such as being affected by the COVID-19 outbreak.
AND, in the process of working to answer these questions will provide your business with an opportunity to lift your strategy development, portfolio governance and management processes to “best practice”, ensuring the agility required to thrive in this ever-changing ever-challenging business environment.
More Information
If you would like to know more about how to optimise a Project Portfolio please read our article “The Difference between PPM and PPO”.
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