Portfolio Management of Research Projects Essay

1 Introductionto a greater extent and much, governments blaspheme on look suffers in array to stay updated on bare-assedly technologies, operationes and practices on their fields. through with(predicate) and through them, they rebriny fore in the competition and sustain their matched advantages. This is specially the case for organizations that ar on the top of their industry and which other organizations follow closely to bench mark their strategic moves. This seems applicable for clandestine organizations, however seek and victimization as well as plays a big role in domain organizations. In the at long last few decades there has been an increased belief that organized query and widenment could stimulate economic growth and contribute to ameliorate economic welf atomic return 18. effrontery this, governments provide look and development (R&D) neckclothing in say to produce scientific and expert development. With the increased need for occupation of s cientific and technological association in the familiar sector, there has been an increase in R&D activities performed by private organizations in order to match these fruit needs.Whether they are of a state-supported or private nature, organizations rely on childbeds as means to bestow results. This derives in the tendency to tie in several exteriorizes simultaneously. Organizations sort these holds in portfolios which should be finagled in order to ensconce its composition and strategic moves.This managerial tax is known as Portfolio caution which applied to R&D projects is defined asa high-voltage ending exhibit, whereby a businesss list of active new product (and R&D) projects is constantly updated and revised. In this help, new projects are evaluated, selected, and prioritized alive projects may be accelerated, killed, or deprioritized, and imagerys are allocated an reallocated to the active projects. The portfolio decision process is characterized by uncert ain and changing information, high-voltage opportunities, multiple goals and strategic trai rural areas, mutuality among projects, and multiple decision-makers and locations (Cooper, Edgett, & Kleinschmidt, 2001).Portfolio concern of interrogation Projects in the habitual and Private SectorsThe account of the present thesis is to gain a burst intellectual on how this process is applied in twain a public and a private setting. The thesis work foc expends on the analysis of one public organization and cardinal private organizations. While the render may non be representative to completely actualize the doings of organizations and their portfolio counselling, it provides an probability to form the process in these settings.The project is prevail through a serial publication of iterative lit review affirmed by interviews and document analysis. The seek questions represent the point of reference to start the search. This project is sexual climaxed with an open m ind, which allows re-evaluating the initial assumptions of the thesis and give-up the ghosts flexibility to the investigateer. A more(prenominal) than in-depth description of themethodology followed in this report whoremonger be found in the fourth chapter of this project.The want behind this master thesis developed from previous studies on project way of research projects. During these studies a less known topic came up portfolio management of research projects. It appeared that, while it was a less known topic, it was non of less grandeur. Through discussions with professionals from both research institutions and industrial organizations, it became sheer the relevance of the topic. I was motivated by this relevancy which is present in both the public and private sectors.2Trondheim, NTNUMSc in Project trouble, thesis2 Problem FormulationThis master thesis selects to present a description and comparison of the process of portfolio management of research projects undert aken in a public and a private organization. The major focus in this attachment is to identify the commonalities and differences of the organizations practices with respect to portfolio management and obtain a better understanding on how the process works in both organizations. This understanding and thesis provide hopefully be helpful for organizations that seriously consider R&D and for researches who will work on this topic in the future. in that respect may be several research questions that can be canvass in connection with portfolio management of research projects. I choose to consider some important research questions within the scope of this master thesis. The research questions are presented and explained below.2.1 question QuestionsThe focus of the investigation behind this project is found on the following(a)questions How do organizations perform the portfolio management process? How do organizations select which research projects should make up their companys proje ct portfolio?How do public and private organizations define achiever in research projects? What drives the difference across firms, if any?3Portfolio vigilance of Research Projects in the Public and Private SectorsThe regulate is based on my assumption that organizational strategy plays a major role in the way an organization proceeds to lead the activities associated with managing its portfolio of research projects, which in turn have the main purpose of generating knowledge and possibly bring competitive advantages to the organization.Based on this understanding the research approach, as will be explained in a later section, was developed in order to schooling to what extent the model resiles reality. Though the terms strategy and knowledge are not explicitly honoured in the research questions, both terms are underlying aspects that reflect on the research questions and hence this carry. The research questions and research model are connected to each other and complement each other in such a way to highlight the topic this thesis.2.3 Importance of dissertationAs part of a previous project for the Specialization bank line of the Master in Project Management at NTNU, I got inform with the challenges anduncertainties associated with research projects. During the research phase and in discussions with interviewees from research institutions and industrial organizations, peers and professors it became evident that one area of interest in R&D for those exploitation in the R&D environment is the one related to portfolio management of such projects.While portfolio management is an important topic in the lit of Project Management, there are fewer investigations that link this topic with specifically research projects. This may be because only recently the interest in research projects has been growing and this discipline is now seen as a latent tool for business success and competitive advantage. It became clear that organizations rely more on projects as a means to deliver results. Organizations arrange projects in portfolios according to their goals and strategy. Research projects, which may be among the projects in the portfolio or be the sole elements of the portfolio as will be explained later, help organizations keep updated in new technologies, methodologies, processes, etc. However, in private organizations investing in Research projects, whether internally or externally obtained, may seem as an surplus expenditure prone the focus on twenty-four hours to day processes. On the other hand, there are public4Trondheim, NTNUMSc in Project Management, Thesisorganizations specifically dedicated to generate or fund research projects in order to generate knowledge and development of public interest.Either way, both private and public organizations that wish to remain competitive have a tendency to undertake research projects. The nature of both organizations may lead to different approaches on how to manage their portfolios. Thi s could develop into managerial activities that while work on one setting may not be useful on the other and vice versa. Getting to understand how these managerial activities are performed in the public andprivate settings can give future researchers and organizations interested in R&D projects an insight on some of the current practices in these settings.2.4 Research mount at a time the importance of the topic was clarified the topic was better delimited through literature review and brief discussions with academics and professionals knowledgeable in the area. Literature review includes underlying theory of portfolio management, research projects, portfolio management of research projects. Furthermore I use theories on portfolio evaluation and pickaxe and tools and techniques for portfolio management. This full general literature provides a modelling within which I could look at and describe portfolio management of research projects.Portfolio management of research projects c an be seen in two ways. ace is when a company has a portfolio that includes all types of projects (IT, construction, R&D, etc.) and makes survival, resource parcelling or termination decisions considering all of these projects. I will call this a Mixed Project Portfolio ( var. 2 Project portfolio), where Project (P) 1, 2 N, coexist with Research Project (RP) 1, 2 N. general anatomy 2 Project portfolio consisting of intricate projectsThe other way of look at portfolio management of research projects can be when a company either undertakes only research projects or they simply manage them Yolanda Yebra Aguado5Portfolio Management of Research Projects in the Public and Private Sectorsindependently of the projects which support day to day activities (IT, procurement, etc.) In this case, it is possible to talk about a Portfolio of Research Projects (Figure 3 Portfolio of research projects), in which activities of portfolio management are done only considering the interdependencies of research projects within the portfolio.Figure 3 Portfolio of research projectsFor purposes of this project, the focus is on this second way of looking at portfolio management, where the organizations portfolio consists only of research projects hence the context of this study.This research study is based on an iterative process a learning wheel around which helped refine the course of the study and further investigation. Based on this an interview guide was created this interview represents the basis for the qualitative approach in this paper. The interview, as it will be explained later, is a semi-structured interview allowing the researcher to address the subject area with an open mind as well as giving the opportunity to direct the interview in the desired direction or adding germane(predicate) topics. In addition to the interviews, document analysis is also use to support the topic. The analysis of the document is done adhering to the alike(p) premises and perspective of the interviews with the aim of finding important and relevant information.This process helped create a modelling within which it was possible to operate in a flexible manner. Through this, the research questions were refined and fine-tuned in order to emphasise the main elements of the research topic.To complete the research, I present an analysis of the findings. Whenever comparisons are possible, they will be presented. Finally conclusions that resulted from the analysis will be drawn. Further information on the methodology followed for this project is explained in the following chapters.6Trondheim, NTNUMSc in Project Management, Thesis2.5 Scope and LimitationsThe major limitation associated with this project comes from the inwardness of time dedicated to the investigation. The project is developed during the spring semester of 2011 as a master thesis for the Project Management program. Due to this time limitation, the number of cases to be analysed will be limited to three o rganizations. Though the sample may not be representative to fully understand the behaviour of organizations and their portfolio management, it provides an opportunity to look at some kind of pattern in organizations practices with respect to portfolio management of research projects. Furthermore, this thesis can be employ as a base for further research in the proceeds a stepping stone to go further.In the cases where specific literature regarding research and development projects was hard to find or of no access, general literature on portfolio management and project management is used as a source to discuss relevant issues. The same applies to models and tools consulted on the matter. Regardless of these limitations, I believe that a better understanding on the topic will be possible through this study to reach conclusions and provide a base or reference for academics, practitioners as well as general public who are interested in the topic.3 Theoretical stressThis chapter prese nts the theoretical background of the report. To beginwith, the concepts associated with the main topic Portfolio Management of Research Projects (PMRP) are presented. The objective of this is to get acquainted with them, to have a better understanding of what is discussed by different authors and to choose specific definitions to work with. Once the main topics and definitions are introduced, three main concepts related to PMRP are presented. The starting line one is the influence of Strategy in PMRP and why organizations choose to rely on strategy to support it.The next section deals with the Selection process and presents some methods and criteria for project evaluation and selection suggested by the literature available. The deuce-ace concept is project Success, which is explored from an overall project management perspective and more peculiar(a)ly from a public and private organization perspective. The concept of success is looked at in order to understand what organizations perceive as no-hit and how it impacts their business in future strategy, project selection and other areas.9Portfolio Management of Research Projects in the Public and Private Sectors3.1 Basic concepts of the Portfolio Management of Research Projects This section presents the definitions of the basic concepts associated with the report. First, I begin by in short introducing the evolution of research and development projects and their nature. Next, the definition of portfolio management is presented. After these two presentations, other relevant topics are described. Finally the main topic of the research, portfolio management of Research projects, is introduced.3.1.1 Research and Development Projects a Private and Public Approach David et al. (2000) present a in truth comprehensive analysis of the development of R&D research in the US. According to the authors the end of the 19th vitamin C marked the beginning of organized research and development activities uponthe productive r esources for societies. Since then, the circumstances of national gross product directed by both private and public organizations towards increasing the scientific and technological knowledge has increased. The same study claims that during the 1930s, thetotal R&D expenditures in countries such as the US, the UK and japan remained in the range between two-thirds and one-quarter of one percentage point of their various(prenominal) national product figures. (David, Hall, & Toole, 2000). Since then there was an increased belief that organized research and development could stimulate economic growth and contribute to improving economic welfare, which led governments to create public institutions supporting civilian skill and engineering.This gave way to an expansion of government agency research programs in non-defence as well as military technologies, and established models for the performance of governmentfunded R&D by private sector contractors. With the increased need for public production of scientific and technological knowledge, there was an increase in R&D activities performed by private organizations in order to match this production needs. This is given that technology is the most crucial factor for the progress of a nations economic development and living standards (Chang & Hsu, 1997). In order to get up scientific and technological development, governments provide R&D funding. As a result, support for selective development of specific industries is provided through direct, project-oriented subsidies. Government constitution concentrates resources on long-term R&D problems and on expensive basic research that could not be undertaken by industry.Whether they are of a public or private nature, organizations rely on projects as means to deliver results this tends organizations to engage in several projects at a time. The nature of these projects varies from market to IT, environmental issues, procurement, new product development and research and devel opment (R&D). More and more, organizations rely on research projects (R&D, new product development, innovation) in order to stay updated on new technologies, processes and practices on their fields. This is how they remain earlier in the competition and sustain their competitive advantages. This is specially the case for organizations that are on the top of their industry and that influence other organizations to follow them closely to benchmark their strategic moves.In order to maintain competitive advantage, organizations need to develop successful product and process innovation (Archer & Ghasemzadeh, 1999 Mikkola, 2001) for what they turn to R&D projects to achieve this. However R&D projects have a very particular nature. Research projects are characterized for being associated with a high stagecoach of uncertainty and unpredictability (Balachandra, K, & Pearson, 1996). Therefore, large scale R&D projects require large budgets and high risk and long term programs (Chang & Hsu, 1997). This is mostly out-of-pocket to the fact that the outcome of a research project, such as knowledge generation, is intangible and hard to measure through standard project evaluation.3.1.2 Portfolio ManagementGiven the importance of developing research projects, organizations are faced with the designate of conforming portfolios of projects. For practical purposes, this report considers project portfolio asa group of projects that are carried out under the sponsorship and /or management of a particular organization (Archer & Ghasemzadeh, 1999). The task of selecting which projects should be a part of the companys project portfolio is an important activity in many organizations. It is presented in the following definition.Portfolio Management is defined as the strategic choices, resource allocation, project selection and balance of the pool of projects available for organizations to undertake (Cooper, Edgett, & Kleinschmidt, 2001 Linton D. & Walsh T., 2002 Wang & Hwang, 2005). However this activity is not an easy one to do. Managers find challenges in deciding which projects to undertake, how to allocate resources to them through their whole life cycle and how to balance the portfolio once projects are stainless or have to be terminated. Project Portfolio Management (PPM) is a small task in company performance. Some key questions to be considered in front deciding to do project portfolio management are known as Five Ws and One H (The Enterprise Portfolio Management Council, 2009) Who can use the PPM process? Everyone from Chief executives, heads of department, managers, supervisors, portfolio, project and program managers, to systems engineers.What should PPM be used for? To manage multiple projects, programs, assets, software applications, resource allocation, products.When should PPM be used? When there is more than one project or program or decisions must be taken when it comes to proposal ideas competing for a slot in the portfolio, whether projec ts or programs should go forward or terminated, resource allocation, strategic changes, mergers, acquisitions or joint ventures to mention some.Where is PPM used? In both profit and non-profit organizations, government agencies, universities, investment firms. wherefore should PPM be used? To ensure that projects and programs are aligned with strategies, goals and business objectives, to transfer project and program details, to manage projects and programs as a whole. PPM is a holistic, systems approach to business projects.How to decide whether to use PPM or not? Conversations and discussions between executives, managers, project and program managers and experts are encouraged in order to assess the website and define the business case.Screening,Selecting andPrioritizationReprioritization ofprojectsAllocation andreallocation ofresources accordingto priorityFigure 5 Managerial activities related to PPM, based on (Blichfeldt & Eskerod, 2007) p. 358.Literature on PPM has widely focu sed on these managerial activities of project screening, selection, prioritization, balancing and resource allocation, while most recently focus has shifted to actual day to day management of the portfolio. Theories and literature have gone from focusing on tools, techniques and methods to a more managerial approach of how the activity is actually done. Thus, this thesis studies record techniques and methods PPM, but keeps in sight the importance of the actual activities undertaken by the institutions.3.1.3 Portfolio Management of Research ProjectsGlobal market changes and the interest of business organizations to remain ahead of their industry, tend organizations to rethink their competitivestrategy more often than before. Firms that cannot cede innovative products faster than competitor, lose competitiveness. R&D projects are used as a source of strategy, because they help target the increasing complexity demanded by shorter life cycles of products and services that wish to rem ain ahead and up to date (Mikkola, 2001). Most importantly, organizations have an increasing interest in evaluating their R&D projects from a portfolios perspective in which project selection, resource allocation and balancing remain the main activities to be performed.According to McNally (2007), managing R&D is considered as one of the three core business processes. peradventure the most comprehensive definition of Portfolio Management of Research Projects, and the one to be considered for this thesis, is given by Cooper, et al. (2001). The authors describe the term asa slashing decision process, whereby a businesss list of active new product (and R&D) projects is constantly updated and revised. In this process, new projects are evaluated, selected, and prioritized vivacious projects may be accelerated, killed, or deprioritized, and resources are allocated and reallocated to the active projects. The portfolio decision process is characterized by uncertain and changing informatio n, dynamic opportunities, multiple goals and strategic considerations, interdependence among projects, and multiple decision-makers and locations.This is an important and critical task to be undertaken because it requires a appreciable amount of human resources and opportunity costs incurred as projects go from the selection phase to the implementation. At the same time this is a difficult task because decision makers have to work relatively fast with little dependable and highly changing information. Therefore the selection and development of successful innovations has a high degree of risk associated with it (Nesse & Velde, 2010).In order to manage portfolios of research projects, organizations rely on different tools or techniques. Literature (Wang & Hwang, 2005) points that R&D portfolio decisions are hard to take given the nature of R&D projects and environment. On the one hand, R&D projects have long lead times, and on the other hand, market and technology are so dynamic th at it makes information for portfolio management seem unavailable and unreliable. All organizations that wish to engage in R&D are faced with the problem of managing the portfolio of research projects, where projects have to fight for a limited pool of resources. At the same time project selection becomes a complicated task because the decision maker has to determine which new proposals should be funded, which existing projects should be move and to what extent a resource should be involved in the selected project of the portfolio (Chien, 2002).