Industry models of project portfolio management and their development

Karlos A. Artto, Helsinki University of Technology (HUT), Finland Perttu H. Dietrich, Helsinki University of Technology (HUT), Finland Taina Ikonen, Helsinki University of Technology (HUT), Finland

Projects are, to an increasing extent, considered as vehicles that contribute to the strategic management of a company. Many companies have adopted project-oriented work methods in their businesses. Project-based organizations increasingly operate in networks. Companies have consciously decided to band together and develop the activities of the overall network developing products, processes, and producing final products.

New project-based organizational models are affected by the following trends/factors in the future business environment: globalization, deregulation, digitization/information and communication technology, networked company and industry structures, and knowledge and information (Paija 2001). The development of technology is the most important factor affecting economic growth in a long perspective. Information and communication technology has contributed to the rapid technological development of the world economy. The current stage is considered to represent the third industrial revolution. Furthermore, it is considered that we are on the edge of the fifth long wave of the economy and the industrial society. Features typical for the waves include the following phenomena that were observed with the previous waves: changes of company structures, with companies using leading-edge technology, new competence requirements, change in products, new ways to produce innovations, new infrastructure investments, beginning and growth of new companies that are lead by innovators and entrepreneurs, centralization of business activities from previous waves, new consuming habits (Koski et al 2001). Informationalism results in a social and organizational structure that represents the network society. Its technological core is information and communication technology that enables rapid and flexible production and distribution of information with the possibility to continuously merge and combine the information for new contents. However, the application of new technology requires organizational changes that always occur in a slow pace (Koski et al 2001). The organizational structures in companies have developed towards networked, flexible structures.

The network structure—or project structure—represents the current organizational structure in companies. The network structure is essential for project-based companies that produce and supply complex and unique products. The following discussion of the evolution of the production paradigm emphasizes the increasing strategic context of projects in production and in management of companies (Artto et al 1998; Ranta 1993, 1997). The functional structure is indicative of a typical line organization-based business. The classical production line structure was the prevailing view in the beginning of this century when products were individual products. At that time production volumes were low. Ford's application of serial production in the automobile industry can be regarded as a shift from the functional structure at the beginning of this century to the collaboration structure of the 1930s, where production began to use subcontracting organizations efficiently. There was simultaneously a considerable jump in the size of series and in the efficiency and volume of production. At first production using the collaboration structure was typically based on the American Tayloristic approach to production. Later the application of the Japanese production philosophy and lean production approach brought small improvements in production efficiency and increased prevalence of more customized customer-specific products in production. The current network structure and the related business logic can be seen as facilitating a rise in efficiency and increase in volume, but it also fosters a shift toward more flexible production and supply of unique products in project form. For the time being the speed of production and flexibility aspects are of key importance. Many project companies are currently using network structures to upgrade their unique project products and develop their production and business approach.

The business interactions of multiple projects across different corporations combine the individual projects to entities of whole networks of interacting projects and corporations. In the future, companies start measuring their success and business potential even more as a share of the overall success in entire project networks by measuring their customers, suppliers, and competitors (on business networks; see e.g., Ollus et al 1998a, 1998b; Uzzi 1997). Project delivery chains are vehicles initiated for delivering the end product that fulfills the final customer's business need. Project delivery chain is defined as an entity formed by several projects built in a hierarchical fashion where the supply relationship is depicted with respect to the customer above and the buyer–subcontracting relationship to the organization below (Artto et al 1998; Poskela 2001; Suominen 2001). Priorities in project networks may be negotiated in the form of project delivery chains, as a content of business transactions.

Artto et al (2001a) discuss how an engineering company focusing on shipbuilding industry, Deltamarin, uses a web-based project communications software for an improved integration in the logistical delivery chain. The advantages of the system relate to the integrative features of the system where the information sharing between the client, supplier, and other stakeholders is effective and occurs real time. Another approach to improve the collaborative planning for timely deliveries is discussed by Halmepuro and Nieminen (2000). In Jaakko Pöyry, systematic project development is used to reduce uncertainty in the implementation phase. However, the appropriate delivery time reduction methodologies vary by industry. In the telecommunications network supplies, Nokia must start pre-planning and preparations at its own risk before the actual point of signing the binding contract (Oranen 2000).

Recently, companies have made a substantial effort into aligning projects and their management to the management of the corporation as a whole. Such development of strategic project management is contained in the concept of project portfolio management. Project portfolio management is applied for maximizing the value/benefit of the projects as a whole, balancing portfolios relative to, e.g., risk/reward and resource allocation, and aligning projects to business objectives. In today's complex business networks, this is undoubtedly more important than ever.

Project Portfolio Management and Project-Based Organizations

Literature presents several frameworks and models on project portfolio management and its elements in different industries (Dye and Pennypacker 1999; Cooper et al 2000; Archer and Ghasemzadeh 1999; Luehrman 1999; Meredith and Mantel 1999; Platje et al 1994; Combe 1999; Foti 2002). Research studies have tied, for instance, successful research and development (R&D) performance with the existence and use of systematic project portfolio management tools and practices (Hendriksen and Traynor 1999; Cooper et al 1998; Roussel et al 1991). Even though most of them have been developed and utilized in the research and development environment, the motivations have arisen from the challenge of efficient and effective product development investment (Cooper et al 1997a, 1997b; Cooper 2001; Spradlin and Kutolowski 1999; Aalto et al 2002).

There are extensive managerial models with practical orientation for product management and new product development that rely on many approaches that relate closely to project portfolio management. For example, McGrath (1996) discusses an integrated development process, alignment with product strategy, phase review process, and pipeline management. McGrath (2001) introduces vision, aligning vision and strategy, product platform strategy, product line strategy, pricing strategy, market-related strategies, and strategic balance and portfolio management as important elements in the overall product strategy for high-technology companies. Project portfolio management relates to the wide area of management of project-based organizations. The wide management content for project-based organizations and project business is analyzed by Turner (1999, 341–363), Turner and Keegan (1999, 2000), Turner et al (2000), Gareis (2000a, 2000b), and Artto (2001).

According to our definition, project portfolio management constitutes the management of a multiproject organization and its projects in a manner that enables the linking of projects to business objectives. This implies development at two levels. First, there is a need to bring a holistic view to the process of managing single projects. However, the project concept must be redefined to include the activities from the very early preproject phases to very late post-project phases. Such view suggests that the project must be managed already before the project is formally established, and that the project must be managed after completing the execution and dissolving the formal project team. This approach to the extended project process widens the scope of project management outside the traditional planning/execution centered view. Second, management processes and approaches must be developed at the level of business units or other organizational units above projects. Such management approaches and processes relate to questions of how responsibilities, decision-making, and information sharing are arranged and supported in a multiproject environment so that they are linked to the overall business scheme. This wide-scope management perspective is needed to enable transparency across projects, across whole portfolios of projects, and across different organizational units.

The Need for New Project Portfolio Management Content

The underlying research problem of this study can be formulated to a question: How can project portfolio management be organized and developed in an organization with multiple projects? Furthermore, as our intention is to expand the scope of project portfolio management towards enterprise project management (or business-oriented management of multiple projects as a whole), the research problem could be formulated in an even more ambitious form with the question: What are the important managerial issues in the project-based organization of the future?

This paper makes an attempt to answer those questions. The study employs empirical data from four case study organizations to discuss the important new content of project portfolio management and management of a project-based organization. The empirical study is based on project portfolio management content and their development in four private and public sector organizations. The focus of the analysis is on the needs and applicability of different project portfolio management approaches, applications, and their development schemes. This study reports observations from the case study organizations from three viewpoints. The first viewpoint includes definition of the managerial area of project portfolio management in terms of investigation of managerial problems and their solutions in a cross-functional analysis. The second viewpoint includes relevant information content for decision-making, goal setting, prioritization, and resource alignment. The third viewpoint includes discussion of responsibilities, roles, managerial bodies, and functions arranged for management of portfolios.

Based on the empirical study and on the literature analysis, the paper introduces the important management content in the project-based organization of the future. This future management content provides directions for future research on project portfolio management.

Empirical Study with Project-Based Organizations

Data Gathering

The paper derives findings from two research projects initiated in early 2001 with four Finnish organizations developing their project portfolio management. The four participating case study organizations include two private sector and two public sector organizations. The organizations have a long-term objective of implementing systematic project portfolio management with all projects across the whole corporation. The ultimate aim is to improve the capability to manage the project-oriented organization as a whole. However, the organizations have started their portfolio management development by piloting portfolio management first with certain project types. The research conducted so far for this paper includes the first developmental phases and piloting of project portfolio management in the case study companies.

The case study organizations have started developing their project portfolio management procedures and methodologies mainly in business development projects and R&D project portfolio pilots. The investigated process and product development projects are inclined towards new service development or towards improving production of services. With nearly all development projects of today, there is a strong orientation towards application of information technology (IT). Especially in two organizations, the point of departure is to focus first on project portfolio management for the IT project portfolio area of business development projects.

The empirical data was gathered from group discussions in well-planned systematic development workshops. This approach is supplemented by interviews and even by testing initial managerial procedures, methodologies, and tools in organizations. The empirical data was continuously linked to existing theory and bodies of knowledge of project portfolio management, and to a wider theoretical context of management of project-oriented activities in an organization as a whole.

The empirical data gathering has mainly occurred in five sequential workshops arranged for each organization separately. However, with some organizations only three [first] workshops have been arranged so far. Thus, this study reports findings based mainly on the three first workshops and related further interviews and piloting. Several individuals have participated in each workshop. Their job assignments related directly or indirectly to the project process. Thus, the individuals represent different functions and roles, which guarantees a cross-functional view to projects. The coverage of the vertical dimension in the organizational structure was ensured by involving individuals from different organizational levels to the workshop. In the following, we discuss issues and observations woven mainly around the themes of the three first workshops. The themes discussed in the following include cross-functional analysis, analysis of information contents, and organizational model and responsibilities.

Cross-Functional Analysis

The data for the cross-functional analysis was produced in group discussions in a workshop with participants from several organizational units. Prior to the workshop a pre-workshop survey was conducted. The survey was used for providing information about important problem areas, individual project-related problems, and potential solutions to be further considered in the workshop by the cross-functional group. The workshop concentrated on defining cause and effect descriptions for major problem areas, and potential solutions for the problems with their relation to a generic project portfolio management process.

The cross-functional analysis with its problem and managerial solution descriptions serves as a starting point for defining new content for project portfolio management, discussed in more detail in Elonen and Artto (2002) and Elonen (2002). Elonen develops the project portfolio management area by suggestions that fall into the following six areas of managerial activities: project level activities; portfolio level activities; management of project-based business; information management; commitment, roles and responsibilities; and resources, competencies, and methods.

Contribution of Project Success and Project Competency Studies

Project success studies and project competency studies contribute to definition of important managerial areas included in the new content of project portfolio management (or management of project-based organization). There are recent review studies on project success studies that make an attempt to analyze existing knowledge in the field of project success (e.g., Saravirta 2001; Poskela 2001; Deleslie 2001). We also want to make a notion that the project failure studies relate to the success issue (see Ingram 1998; Pinto 1997; Kharbanda and Pinto 1996; Standish Group 1995; Kharbanda and Stallworthy 1983). However, we consider that the recent success studies provide a somewhat more thorough insight on the alignment of the project with business purpose and business environment as a whole.

According to Saravirta (2001) and Kotsalo-Mustonen (1996), the relevant success domains are related to: strategy (e.g., new competitive advantage, reference value); relationship (e.g., client satisfaction); situation (e.g., learning by doing, unlearning); product/service (e.g., commercial success, quality); and project implementation (e.g., cost, time, process quality). Furthermore, evaluation of success depends on the stakeholder and its perspective on the project. From Morris and Hough (1989) and Rouhiainen (1997) we can derive the following synthesis of what the important success domains are: 1) Technical performance, project functionality, client satisfaction, and technical and financial performance of the deliverable for the sponsor/customer; 2) Project management: on budget, on schedule, and to technical specification; 3) Supplier's commercial performance: commercial benefit for the project service providers; 4) Learning that project stakeholders acquire. Shenhar et al (1997) introduce the following four dimensions of project success: project efficiency; impact on customer; business success; and preparing for the future. The success domains/dimensions in success studies are analogous to the four perspectives of Balanced Scorecard introduced by Kaplan and Norton (1996). The four perspectives introduced by Kaplan and Norton are: customer; financial; internal business process; and learning and growth. The scorecard can be used to derive objectives and measures from company vision and strategy, that finally can be derived further to project-specific objectives that are well aligned to business strategy.

According to Brown and Eisenhardt (1995), important success factors of product development include cross-functional teams enabling cross-functional integration, effective internal and external communication, powerful project leader, and senior management support. Furthermore, the authors discuss the important role of team tenure that reflects the effectiveness of the pattern of working together, the important role of gatekeepers as individuals who supply external information to the team, and the important role of team group process that enables effective internal and external communication within the team and with customers, suppliers, and other individuals in the organization.

The competency studies discuss appropriate practices with relation to issues raised by project success studies. The competency studies include important areas for organizational competencies and individual competencies (e.g., project manager competencies). The recent studies of Toney (2002a, 2002b) provide reviews of project manager and organizational competency studies. The project manager competency studies emphasize, e.g., project manager's role as a gatekeeper, managing team communication, and external communication in the host organization and with external stakeholders. Furthermore, similarly, organizational competency studies focus on managerial areas of project organization (with cross-functional teams, team tenure, rewarding, resourcing), host organization (with aspects related to product, market, technical synergy, senior management, support), and the external environment (e.g., product competitiveness, product technology, customer, market, growth, competition) (Toney 2002b).

The success studies and competency studies introduce important business-oriented aspects for the management of projects from the perspective of management of a project-based organization. However, many studies still limit their views to the effective and successful management of a single project, without in-depth consideration of management of a portfolio of projects as a whole.

Analysis of Information Contents

The important information content for decision-making and goal setting was analyzed in a specific workshop with an intention to relate the information content to the decision points—or gates—through the project process. The cross-functional workshop and pre-workshop interviews provided initial scheme about the information content that was elaborated further in the information content workshop. The project processes are organization-specific and there are several generic project processes reported in the literature (see, e.g., Cooper et al 1998). We simplified the project process to serve as a generic process that the case study companies could relate to. Our generic process included preproject phase (ideation and preliminary study), project phase (execution), and post-project phase (operation/production, use), and decision points (gates) in each phase and between the phases.

The important information content for decision-making and goal setting purposes was investigated for each decision point through the project process. Furthermore, we identified whether the direction of the information flow was up or down. “Up” referred to information that has to be produced from the project process to portfolio level decision-making. “Down” referred to information that is required from portfolio level decision-making as an output to project level. This downward information justifies the project and its purpose, and provides the project with resources and priorities, among others. Actual portfolio-level decision points with whole portfolio considerations are positioned above the project processes of individual projects. They do not match with the timely decision points of individual projects. However, the information content derived for the timely progress of the generic project process is most relevant for these decision points concerning whole portfolios.

Organizational Model and Responsibilities

Project portfolio management process comprises decision points at different levels of organizational hierarchy. At the level of single projects, the early phases with ideation are important. Furthermore, including strategic intent to projects by involving even the early project ideas in the decision-making at the portfolio level is essential. Early top-management portfolio decisions enable alignment of projects and project portfolios with business objectives and business strategy. The case study companies considered it important that R&D project portfolios are aligned with both business strategy and product strategy, and that IT project portfolios are aligned with business strategy and IT strategy. In the short-term development schemes in the case-study organizations, reviews, and reports were considered as important supportive vehicles for appropriate decision-making and goal setting in the overall project portfolio management process.

The case study organizations considered that it is essential to organize for portfolio specific responsibilities and roles for effective project portfolio management. Such responsibilities and roles include those of a project portfolio board, a portfolio manager, and a support providing party, e.g., a project support office. In piloting schemes, such responsibilities are mostly assigned to existing organizational bodies/boards by extending the current responsibility areas of individuals.

In all case study organizations, the organizational solution would be consisting of several portfolios and responsible individuals responsible for their follow-up. The decision-making would be organized in both organization unit specific and in cross-functional project portfolio groups. The top management involvement would be arranged by transparency across projects for the top management. In one of the case study organizations the organizational arrangement will probably encourage conceptually two project portfolio groups, potentially at different levels. The other group would be technically oriented, whereas the other would concentrate on operational issues for using the systems.

The relevant information content for decision-making at the portfolio management level covers information that strongly relates to project selection and prioritization criteria. The important project information and prioritization criteria in case study organizations include strategic alignment, effectiveness in terms of business purpose, benefits and opportunities, risks, and resource needs. In the case study organizations, increase of both horizontal and vertical communication was considered as a prerequisite for appropriate project portfolio management. The communication is facilitated by a project portfolio database including both portfolio level and project level managerial criteria and objectives. The project portfolio database enables transparency across the organization, with increased communication and increased awareness as a consequence. Shared information in the database implies shared objectives and procedures with effective portfolio management across the whole organization.

Future development efforts in project portfolio management in corporations are not limited only to defining portfolios and their boundaries with appropriate responsibilities and managerial practices in organizations. Companies will face the need to manage the interaction across boundaries between the portfolio and its projects, between single projects, between different portfolios, and between different corporations in business networks. Thus, the future development areas of project portfolio management must cover the following important management challenges: a) setting portfolios and their boundaries in the organization; b) integrating project management and portfolio management; c) interacting across multiple portfolios and their projects—cross-portfolio optimizations; and d) negotiating priorities in project networks and business networks (Artto et al 2001b).

The following observations from the case study companies contribute to the content of appropriate organizational model for project portfolio management:

• Need to bring new ideas to become transparent throughout the organization as early as possible. This occurs since it will be impossible to kill or change the content of ideas that have been prepared in organizational units already for months or years, thus gaining commitment locally.

• The strategic alignment of projects with business objectives is important from the very early phases.

• All companies consider the functional effectiveness of the project product (deliverable) in the operation phase as the first important issue to be evaluated already in the ideation phase.

• Life-cycle (or whole-life) considerations are important to conduct in the very early stages.

• Organizational ownership of the project and its deliverable is important, as well as careful planning or the production start with ensuring user involvement.

• The continuation in the production/operation phase must be ensured by further development plans already in the execution.

• Alternative solutions are important to consider simultaneously for potential alternative decisions.

• In all organizations, time and resource considerations tend to be very important.

• Estimating and monitoring changes in the external factors and in the environment is important throughout the project. This occurs as changes in the environment are likely to put pressure on making new changed decisions.

• Follow-up of the effectiveness of the project product in operations phase is important for feedback and learning.

• Learning from the operations phase links to new project ideation.

• New projects must be carefully matched against existing systems and products in the operations phase, which makes it worthwhile to include considerations of portfolios of already executed projects. For example, new ideas of new IT systems must be compared against existing IT systems.

• There is a need to have already executed projects—e.g., IT systems in operation phase—in the portfolio, also because they require resources for their support.

Project-Based Organization of the Future

Every organization can be considered as a project-based organization. This occurs as development and investment projects are always necessary for renewing products, processes, or facilities. Typical project types are technology development, product development, business process development, IT/system development, and delivery projects. Portfolios of such project types are typically positioned under governance of organizational units or responsibility areas. This implies that there are several portfolios even for each project type, each portfolio positioned under different responsibility area. The company management model for multiproject environment differs from management of a company concentrating only on repetitive activities. In a simplified form the management model can be considered to comprise: a) organizational development and strategy process, b) project portfolio management process, and c) project process. Management processes above projects link projects to business goals and assist in reaching or exceeding the expectations set by company strategy. Such management processes emphasize decision-making, project prioritization, and allocation of company's limited resources to right projects as a whole.

The empirical analysis on project portfolio management provided insights about the directions of the management model of the project-based organization of the future. In the following subsections we introduce these insights, positioned under the following areas/subsections: organizational and management model; decision-making; communication, transparency of information and learning; important role of individuals; management of risks and business opportunities; and networking. However, in the following we first discuss the project-based organization of the future in the light of literature on organizational models and recent literature on project portfolio management.

The five central design policies of organizational design, presented by Galbraith (1995), are strategy, structure, processes, rewards, and people. Accordingly, the managerial impacts through these elements are: 1) strategy: direction; 2) structure: location of decision-making power; 3) processes: flows of information (the processes are the means of responding to information technologies); 4) rewards: motivation; and 5) people: mind sets and skills (people policies/human resource policies influence and frequently define the employees’ mindsets and skills).

Project-based organization of the future emphasizes managerial processes that ensure organizational learning. Artto (1999) introduces the learning, innovation, and creativity loop in the management of a project-based company. The loop emphasizes the crucial importance of the ability to foster self-regulating and innovative aspects of its activities.

Brown and Eisenhardt (1997) studied management of multiple-product innovation projects in six firms in the computer industry, and some of their findings are briefly presented here as an example of successful project portfolio management. The study reports three major characteristics of successful portfolio management. First, successful multiple-product innovation blends limited structure around responsibilities and priorities with extensive communication and design freedom to create improvisation within current projects. Second, successful firms rely on a wide variety of low-cost probes into the future, including experimental products and strategic alliances. Third, successful firms link the present and future together through rhythmic, time-paced transition processes. In the management of companies with successful projects, rather than just communicate, managers combined limited structure or “semistructures” (e.g., priorities, clear responsibilities, formal meetings) with extensive freedom to improvise current products. The semistructures balance between order and disorder. Successful companies had clear priorities and responsibilities, but most of the design process was not well specified. Some firms with poorer success employed an overly structured development process with highly structured project management processes. Compared to all this structure, in contrast, the more successful firms had clear priorities and responsibilities embedded in their system but the work itself was more ad hoc and iterative. While communication was associated with successful project portfolios, purely organic structures, such as fluid job descriptions, loose organization charts and few rules, were not. Much of the communication occurred in formal meetings. One firm used weekly, cross-project engineering meetings and a Thursday product-planning meeting that was a cross-project review. The emphasis is on cross-project communication.

The study conducted by Toney and Powers (1997) reported findings with companies that argued that organizational levels currently serve as communication filters that hinder the top management to build a cross-functional communication bridge to communicate its vision and goals to project leaders. The study suggested organizational arrangements for enhancing the vertical and horizontal communication across the organization. For similar problems, the Brown and Eisenhardt study suggested semistructures that would ensure responsibilities, ownership, prioritization, and communication. Semistructures relate to quasi-formal structures (committees, teams, task forces, information exchange relationships and arrangements) introduced by Schoonhoven and Jelinek (1996). The quasi-formal structure falls between formal and informal structure.

Hameri and Artto (2002) compared two project management cases with complex high-technology projects and concluded that decentralized organization seemed to outperform centralized organization. According to Brynjolfsson and Hitt (2000), those United States corporations that had the highest market values had a decentralized organization structure with a simultaneous application of information and communication technology in their production. The participation of individual employees to managerial decision-making and reward systems are important structural issues in an organization that serve as means to improve productivity. Bresnahan (1999) and Brynjolfsson and Hitt (2000) argue that the demand of products and services often affect the organizational structure and adaptation of information and communication technology. In successful corporations, information and communication technology, flexible organization with authorization of employees responsible for manufacturing operations, and development of new products and services are the major [interrelated] drivers for success. Mintzberg (1979) suggests that centralized organizational models with direct supervision and standardized work processes are applicable for stable and simple dynamic environments. Furthermore, decentralized models are effective for complex stable or dynamic environments, for diversified markets and for facing challenges in local environments. In decentralized structures the standardization may be applied to skills and/or outputs. However, in decentralized structures there is high power and authorization located with individuals.

In internal and external project networks information sharing plays an important role. The managerial effort should be directed towards management of the boundaries between projects, companies, external environment, and other entities; rather than mere management of the project or entity work content within the entity itself (Ikonen and Artto 2002). Also the study of Brown and Eisenhardt (1997) concluded that managers of successful project portfolios linked current and future projects. The study on the company of the future by Cairncross (2002) emphasizes the impacts of communication, information sharing, and Internet to the business. The studies of Dietrich and Artto (2001) and Dietrich (2002) provide insights via examples of how practical web-based project portfolio management applications help companies in implementing appropriate communication, transparency, and openness in their overall portfolio management applications. These studies raise not only the issue of sharing information among responsible individuals with their own projects and portfolios with interrelations, but also the problem of any single project belonging potentially to several portfolios and several spheres of responsibility. This requires that communication must be well facilitated for shared opinions of any single project that is selected, prioritized, and measured with different sets of criteria related to all the different portfolios where the project belongs.

In the project-based organization of the future, the important issues are how it is organized and how its responsibilities and procedures are defined. In the following, we capture important features of the project-based organization of the future, as derived from the empirical analysis.

Organizational and Management Model

• The organization and its procedures are designed for management of networked business environment.

• Responsibilities and power are decentralized.

• The organization has strong project culture and systematic procedures to conduct project work.

• Activities are supported by effective information sharing and learning schemes.

• Projects and project-related information are reviewed in various board meetings and executive/management meetings.

• Information management is well organized to support decision-making and continuous goal setting.

• The management culture emphasizes flexibility, innovativeness, creativity, and the role of individuals.

Decision-Making

• Communication and decision-making are supported by well-defined processes with clear responsibilities and procedural instructions for managerial decision-making in, e.g., sessions and meetings.

• The decision-making structures are well defined.

• Decisions are based on knowledge and information that is gathered systematically.

• Communication and the role of individuals are emphasized in decision-making.

Communication, Transparency of Information, and Learning

• Transparency of information is ensured both by meetings between individuals and decision-makers, and by IT tools utilizing modern information and communication technology.

• Communication and information sharing is effective both horizontally (over extended project process with preand post-phases and between different projects) and vertically (across organizational levels and across portfolios).

• Well-defined and systematic processes and information contents filter essential information from unessential.

• Organizational and individual learning occur with the support of effective communication and information sharing.

Important Role of Individuals

• Skills and knowledge in individuals are in central position. The decentralized organizational structure emphasizes the meaning of individual skills and encourages taking of responsibility at the individual level.

• Tacit knowledge in individuals is important.

Exhibit 1. Two Companies with Networked Projects and Portfolios. There Are Cross-Organizational Processes in the Shared Network at Strategic, Portfolio, and Project Levels.

Two Companies with Networked Projects and Portfolios. There Are Cross-Organizational Processes in the Shared Network at Strategic, Portfolio, and Project Levels

• Innovation and creativity are in central position as new successful business solutions are based on creativity rather than perfecting the known.

• Trust, motivation, and commitment among individuals are significant enablers.

Management of Risks and Business Opportunities

• Projects are vehicles for producing future business solutions. This requires that management of risks and business opportunities is systematic and effective. Creativity and high tolerance for taking risks plays an important role. The focus is on active management of future events.

Networking

• The project-based company belongs to partner networks, where management model is based on mutual trust and on pursuing business benefit simultaneously for all parties in the network.

• Knowledge and information are shared with network partners by applying similar management principles as in internal activities. (See Exhibit 1.) This means that openness and transparency through information sharing is effective among the parties, and, e.g., joint meetings with joint project prioritization in the meeting agendas, among other issues.

• Common strategies relative for the whole network and shared project portfolio views for joint projects are in place, supported by IT tools utilizing modern information and communication technology. (See Exhibit 1.)

• Openness, trust, and solutions based on mutually agreed incentives are important.

Conclusions

The paper expands the project portfolio management content towards the wide area of management of a project-based organization. The emphasis is on management of the multiproject environment with strategic alignment of projects to business objectives, and on the management of complex interactions between projects and between subsets of the whole corporate-level portfolio.

Future development efforts in project portfolio management in corporations does not limit only to defining portfolios and their boundaries with appropriate responsibilities and managerial practices in organizations. The business interactions of multiple projects across different corporations combine the individual projects to entities of whole networks of interacting projects and corporations. Companies will face the need to manage the interaction across boundaries between the portfolio and its projects, between single projects, between different portfolios, and between different corporations in business networks.

The study employs empirical data from project portfolio management research and development schemes in four organizations. Based on the empirical study and on the literature analysis, the paper expands the project portfolio management content and derives important management content of the project-based organization of the future. This future management content provides directions for future research on project portfolio management. The project-based organization of the future emphasizes the importance of decentralized management with authorization, decision-making according to the purpose of the project, information sharing, effective application of information and communication technology, and learning and creativity. Information sharing and communication are important for effective cross-project, cross-portfolio, and cross-functional views.

The management model of the project-based organization of the future was introduced through issues included in the following important managerial areas: organizational and management model; decision-making; communication, transparency of information and learning; important role of individuals; management of risks and business opportunities; and networking.

Management of project-based operations varies according to project type, but also the differences in industry specific and application area specific differences imply that project portfolio management varies among industries. This occurs due to the different management cultures, among other issues. Understanding the industry and project type specific management procedures and models is a challenge for future research and development of project-based business. Such understanding serves as a prerequisite for successful managerial applications at the local industry and corporation levels. We believe that many new application procedures and models must be developed to match the differences in projects and in project environments.

Furthermore, the management of projects and portfolios across company borders in the networked business environment sets its challenges in future research and development. New, more generic management models and shared procedures between companies need to be developed on top of various company cultures and their specific operational procedures.

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