Portfolio Management of Research Projects Essay

1 IntroductionMore and more, organizations imprecate on seek redacts in ordain to stay updated on new technologies, transiti one and only(a)s and practices on their fields. Through them, they re important ahead in the competition and sustain their combative advantages. This is specially the brass for organizations that be on the top of their industry and which early(a) organizations follow well-nigh to benchmark their strategical moves. This seems applicable for esoteric organizations, however explore and evolution besides plays a big role in human race organizations. In the last few decades there has been an increased belief that organized explore and reading could expedite frugal growth and contribute to improving economic welf ar. Given this, governments provide research and development (R&D) funding in order to promote scientific and technological development. With the increased need for production of scientific and technological knowledge in the semi popula r sector, there has been an increase in R&D activities performed by private organizations in order to match these production needs.Whether they are of a public or private nature, organizations rely on projects as means to deliver results. This derives in the tendency to engage in several projects simultaneously. Organizations group these projects in portfolios which should be managed in order to decide its composition and strategic moves.This managerial task is cognise as Portfolio counseling which applied to R&D projects is defined asa dynamic stopping point process, whereby a businesss list of spry new product (and R&D) projects is constantly updated and revised. In this process, new projects are evaluated, selected, and prioritized existing projects whitethorn be accelerated, killed, or deprioritized, and options are allocated an reallocated to the active projects. The portfolio decision process is characterized by uncertain and changing information, dynamic opportunities, multiple goals and strategic considerations, interdependence among projects, and multiple decision-makers and locations (Cooper, Edgett, & Kleinschmidt, 2001).Portfolio Management of investigate jumps in the Public and private SectorsThe aim of the set out thesis is to gain a better take ining on how this process is applied in both a public and a private setting. The thesis work focuses on the analysis of one public organization and two private organizations. succession the sample may not be representative to exclusively understand the behaviour of organizations and their portfolio counselling, it provides an opportunity to model the process in these settings.The project is have through a series of iterative literature round support by references and document analysis. The research questions represent the point of reference to start the research. This project is approached with an open mind, which allows re-evaluating the initial assumptions of the thesis and gives flexi bility to the researcher. A more in-depth exposition of themethodology followed in this report burn be found in the fourth chapter of this project.The motivation behind this stamp down thesis developed from previous studies on project trouble of research projects. During these studies a less known topic came up portfolio focus of research projects. It appeared that, period it was a less known topic, it was not of less importance. Through discussions with professionals from both research institutions and industrial organizations, it became evident the relevance of the topic. I was motivated by this relevancy which is present in both the public and private sectors.2Trondheim, NTNU disseminated multiple sclerosis in Project Management, Thesis2 Problem FormulationThis master thesis aims to present a description and comparison of the process of portfolio management of research projects undertaken in a public and a private organization. The major focus in this regard is to identify the commonalities and deflections 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 lead hopefully be cooperative for organizations that seriously consider R&D and for researches who will work on this topic in the future.There may be several research questions that can be studied 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 Research QuestionsThe focus of the investigation behind this project is based on the followingquestions How do organizations perform the portfolio management process? How do organizations select which research projects should make up their companys project portfolio?How do public and private organizations define success in research projects? What drives the diff erence across firms, if any?3Portfolio Management of Research Projects in the Public and Private SectorsThe model is based on my assumption that organizational dodge plays a major role in the vogue 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 peradventure 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 study to what extent the model reflects reality. Though the terms strategy and knowledge are not explicitly mentioned in the research questions, both terms are underlying aspects that reflect on the research questions and hence this study. 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 ThesisAs part of a previous project for t he Specialization passage of the Master in Project Management at NTNU, I got acquainted 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 underdeveloped in the R&D environment is the one related to portfolio management of such projects.While portfolio management is an important topic in the literature 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 potential 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 unnecessary expenditure stipulation the focus on day 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 carry on competitive have a tendency to undertake research projects. The nature of both organizations may lead to different approaches on how to manage their portfolios. This could develop into managerial activities that while work on one setting may not be useful on the other and vice ver sa. 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 cash advanceOnce 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 basic theory of portfolio management, research projects, portfolio management of research projects. Furthermore I used theories on portfolio evaluation and selection and tools and techniques for portfolio management. This general literature provides a fabric within which I could look at and describe portfolio management of research projects.Portfolio management of research projects can be seen in two ways. One is when a company has a portfolio that includes all types of projects (IT, construction, R&D, etc.) an d makes selection, resource allocation or termination decisions considering all of these projects. I will call this a Mixed Project Portfolio ( depend 2 Project portfolio), where Project (P) 1, 2 N, coexist with Research Project (RP) 1, 2 N.Figure 2 Project portfolio consisting of mixed projectsThe other way of looking at 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 through with(p) only considering the interdependencies of research projects within the portfolio.Figure 3 Portfolio of research projectsFor purposes of this project, the focus is on t his 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 unit of ammunition 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 issue with an open mind as well as giving the opportunity to direct the interview in the desired direction or adding relevant topics. In addition to the interviews, document analysis is also used to support the topic. The analysis of the document is done adhering to the same premises and perspective of the interviews with the aim of finding important and relevant information.This process helped create a framework within which it was possible t o 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 amount of beat 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 organizations. Though the sample may not be representative to fully understand the behaviour of organizations and their portfolio management, it provide s 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 used as a base for further research in the matter 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 BackgroundThis chapter presents the theoretical background of the report. To beginwith, the concepts associated with the main topic Portfolio Management of Research Projects (PMRP) a re 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 first 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 third concept is project Success, which is explored from an boilers suit project management perspective and more particularly from a public and private organization perspective. The concept of success is looked at in order to understand what organizations perceive as successful and how it impacts their business in future strategy, project selection and other areas.9Portfolio Management of Research Projects in the Pu blic 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 briefly introducing the evolution of research and development projects and their nature. Next, the definition of portfolio management is presented. by and by 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 preliminary David et al. (2000) present a very comprehensive analysis of the development of R&D research in the US. According to the authors the end of the 19th century attach the beginning of organized research and development activities uponthe productive resources for societies. Since then, the percentage of national gross product directed by both private and public organizations towards change magnitude the sc ientific 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 keep oned in the range among two-thirds and one-quarter of one percentage point of their respective 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 science 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 n eeds. 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 promote 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 policy concentrates resources on long-run 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 foodstuffing to IT, environmental issues, procurement, new product development and research and development (R&D). More and more, organizations rely on research projects (R&D, new product development, innovation) in order to stay updated on new technologies, process es and practices on their fields. This is how they remain ahead 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 degree of distrust 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 due to the fact that the number of a research project, such as knowledge generation, is intangible and hard to measure through standard project evaluati on.3.1.2 Portfolio ManagementGiven the importance of developing research projects, organizations are faced with the task 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 action mechanism in legion(predicate) 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 decision making which projects to undertake, how to allocate resources to them through thei r whole life cycle and how to balance the portfolio once projects are sinless or have to be terminated. Project Portfolio Management (PPM) is a comminuted task in company performance. Some key questions to be considered before 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 knob 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 projects 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.Why should PPM be used? To ensure that projects and programs are align with strategies, goals and business objectives, to communicate 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 amidst executives, managers, project and program managers and experts are encouraged in order to assess the situation 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 focused 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 documented 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 supply 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 remain 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. maybe 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 dynamic 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 existing 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 information, dynamic opportunities, multiple goals and strategic considerations, interdependence among projects, and multiple decision-makers and locations.This is an important and crit ical task to be undertaken because it requires a considerable 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 reliable 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 that 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 continued and to what extent a resource should be involved in the selected project of the portfolio (Chien, 2002).