What does project portfolio in business mean? When managing multiple projects, the term portfolio applies. The word Portfolio is used in different contexts and mainly involves various items and objects. The most common meaning of the portfolio refers to a collection. In addition, the combination of the term portfolio with other words such as “project” and “management” has created new terms such as “Project Portfolio Management (PPM)” and “Portfolio Management” that most of the time are used mutually to indicate the management of multiple projects. Read more to learn about the meaning of portfolio in business and the different types of portfolios and organizations.
Portfolio in Business and PMI
The Project Management Institute (PMI) defines Project Portfolio Management (PPM) as a coordinated management of portfolio components to achieve specific organizational goals. Organizations can be effective when they use processes, methods, and techniques that support them to achieve organizational goals. It is important to note that there is a distinction between program and portfolio. A program can be defined as a collection of correlated projects that are part of a bigger initiative. At the same time, projects and programs that compose a portfolio can be independent of each other. PMI says a portfolio can comprise different portfolios, programs, and projects.
When managing multiple projects, organizations can use Project Portfolio Management (PPM) to determine the optimal resources needed to achieve their operational and commercial goals best. In addition, PPM provides companies with tools and instruments to schedule, monitor, and control activities by considering strategic objectives.
Companies can also reach their goals by using a Project Management Office (PMO), which is responsible for implementing governance and processes to use the right resources to execute projects and programs. Moreover, if managing multiple projects, the PMO is responsible for choosing the most valuable projects and programs for the companies’ portfolios.
Even if some general elements of PMI can be considered in adopting PPM, those standards do not include all the needed details to implement a process. Organizations should generally implement a PPM model according to their needs and goals.
Different Portfolios in Business
When it comes to the meaning of a project portfolio in business and managing multiple projects or portfolios, you should remember that different types of portfolios exist, such as investment portfolios, IT portfolios, patent portfolios, and so on. Let’s analyze the characteristics of two of them: the investment portfolio and the IT portfolio.
An investment portfolio is a collection of assets such as stocks, bonds, and cash held by an institution or a private individual. Investors can reduce their risks by considering investments from companies in different fields. If some investments decline, other more profitable ones can balance the whole portfolio.
Experts define the IT portfolio as applying systematic management to large classes of items managed by an organization’s IT capabilities. Big and international organizations must be able to manage IT portfolios because they are crucial for their success. IT portfolios provide companies with many advantages. For instance, they make connecting different business units easier, reduce the time needed to implement IT changes, reduce operating costs, and finally, make implementing processes and procedures easier.
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Project portfolio in businesses of different types
Studies have identified different PPM models worldwide by interviewing hundreds of companies. Each company should customize the PPM approach based on its needs.
One of the first steps to implementing PPM is creating a project portfolio. All projects included in a portfolio should guarantee the highest value to the organization. Thanks to PPM, companies can manage projects effectively to reach strategic objectives. PPM can be used in different organizations, such as owner and contractor companies, but with some crucial differences.
Owners organizations usually use PPM to create portfolios that help them reach their goals using the right resources. Sometimes, these organizations create their portfolios based on various criteria, such as a business line, location, technology, etc. By doing so, they create different portfolios at different levels.
Contractor organizations generally negotiate a new contract with clients to increase profit and keep employees busy. So, PPM helps them execute projects efficiently and use their resources effectively. They usually build their project portfolios based on their clients’ needs. At the same time, location and business lines can also affect the creation of new portfolios.
The term portfolio has different meanings. When managing multiple projects, the most common definition of project portfolio in business refers to a collection. PMI defines Project Portfolio Management (PPM) as a coordinated management of portfolio components to achieve specific organizational goals. Different types of portfolios exist, such as investment and IT portfolios. PPM can be used in different organizations, such as owner and contractor companies, but with some crucial differences. It is important to remember that correctly forming portfolios helps organizations boost their resources’ efficiency and reach their strategic objectives.
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