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Knowledge Management for IT Project Portfolio Ulysse Rosselet, Yannick Jolliet, Maia Wentland HEC Lausanne, University of Lausanne, Switzerland [email protected] [email protected] [email protected] Abstract: The actual global economical and social instability, coupled with the financial volatility, has further increased the dynamics of the business environment. Remaining in business requires, nowadays and more than ever, aiming at moving targets. Although this situation is, in the authors’ opinion, partly due to the massive introduction of Information and Communication Technologies (ICT), the authors share the belief that an adequate use of Information Systems (IS) can help (i) capitalize and disseminate expertise and ad hoc information – well managed knowledge being a business critical success factor – and (ii) align short term stakes with long term sustainable strategies. With this in mind the authors designed, for one of the global FTSE 100 companies, an IT project portfolio management (ITPPM) process coupled to a Knowledge Management (KM) system to achieve alignment between corporate business strategy and IT strategy and operations. The identification and evaluation of projects as well as portfolio balancing activities emerged as the most knowledge intensive phases of the ITTPM process. The authors hence focused on knowledge assets related to these phases and on how to address issues regarding the structure, type, physical form, place, time and quality of these assets. This analysis led us to define a KM system to support the matching between business needs and innovations or transformations that are made possible thanks to new technologies. As an adequate management of risks linked to individual project as well as to the portfolio of projects is found critical for value creation, a knowledge base for positive and negative risks at both levels allows for risk mitigation while exploiting potential detected synergies. Finally, an expertise base and a project scheduling module support the optimal resource utilization for the process. The relationships between the knowledge assets and the KM system are considered in terms of knowledge flows. Learning and continuous improvement in the process are made possible thanks to the experience gained and captured at each iteration of the process. Keywords: IT project portfolio, knowledge management system, knowledge application, strategic alignment, project management 1

Introduction

The recent economic events increased tenfold business context uncertainty. Following (Udell 2009 ; Volle 2008 ; Sornette 2003), the authors advocate that (i) the gap between the massive virtualization and distribution of financial flows enabled by new technologies as well as (ii) the difficulty to cope with such an exponentially increased complexity are the major causes of this economic situation. From the internal organization standpoint, increased dynamics calls for a shift from standardized procedures to flexible and adaptive processes to ensure corporate performance. As stated by (Drucker 1988): “Businesses will have to convert themselves into organizations of knowledgeable specialists”, knowledge management is critical for corporate performance, as observed by (Veybel and Prieur 2003). Strategic goals must reflect the vision and mission of the organization and processes must produce results aligned with these goals. This can be achieved by combining resources to their best yield. Context requires balancing short term responsiveness (Ghoshal and Nohria 1993) and long term vision as an attractor of strategic change (Stacey 1995). With this in mind, the authors take the stance that mapping critical knowledge and competencies across processes and resources is vital for corporate success in the long run.

In this paper, the authors describe part of the work done with one of the FTSE 100 companies. The authors first detail the mapping between IT Project Portfolio Management (ITPPM) activities and the knowledge involved in this process. The authors then examine the Knowledge Management System (KMS) that the authors developed to remedy to the observed misalignment between ITPPM and business strategy mainly due to corporate amnesia (Rosselet and Wentland 2009). This KMS aims at improving corporate performance by transferring best practices (O’Dell 1998) and enabling organizational learning (Garvin 1993). 2

Knowledge analysis of ITPPM process

The ITPPM process is used to screen relevant IT projects according to their added value, risk and strategic fit. First presented by (McFarlan 1981), the portfolio approach to information systems builds on an analogy with financial portfolio management to (i) better align IS projects with corporate strategy and (ii) reduce failures by assessing and prioritizing projects in regards to their added value and risk. As shown on Figure 1, the ITPPM process consists of a set of interrelated activities organized in three groups: (i) activities contributing to strategic alignment (ii) activities belonging to the project itself and (iii) activities needed to monitor and control the portfolio (Project Management Institute 2006).

Figure 1: Synthetic representation of the ITPPM process In order to define the scope of the KMS, the authors will identify the knowledge intensive activities in the process (at which phase is knowledge most critical) and the knowledge assets that are best candidate for improvement through an IT based KMS. 2.1

Knowledge intensive activities

According to information gathered in situ, activities are evaluated according to the CommonKADS methodology (Schreiber 2000) in terms of knowledge intensiveness and significance as shown in Table 1. This analysis uncovers identification, evaluation and portfolio balancing as the most knowledge intensive tasks. Business and IT stakeholders need to share a common understanding to detect and define the problem to be tackled. Therefore, identifying potential projects implies apprehending business needs, context and IT potentialities. This is critical when designing well adapted solutions, creating strategically sound value at the business level. This phase is key for success because it is at the root of the whole ITPPM process. The evaluation of a project calls for identifying, describing and valuating its impact and risk. According to (Rosselet and Wentland 2009), the in-depth analysis of the cause-and-effect relationships between

the financial, customer, internal processes and innovation dimensions (Kaplan and Norton 2001) highlights the relevant project characteristics according to business criteria. As its results are the basis for decision making and given its impact on correct alignment (McFarlan 1981), evaluation is a critical phase. The portfolio balancing activity aims at (i) mitigating individual project risks to reduce the exposition of the portfolio of projects and (ii) exploit inter-project synergies to maximize value creation, given the constraint of resources availability. Based on an iteratively reviewed risk and impact evaluation, decision makers must apprehend the inter-project combination of risk factors and impacts to optimize the portfolio structure (Jeffery and Leliveld 2004). This phase is of significant importance because it allows strategically effective resource allocation and value creation. To be noted that although the selection activity is significant, its knowledge intensiveness is too low for it to be retained. Table 1: Main characteristics of the ITPPM process activities Activity

Performed by

Knowledge asset

Knowledge Intensive? (0-2)

Significance (1 to 5)

Identification

Customer, Responsible Team

Needs, Opportunities

2

4

Categorization

IT Center of Excellence

IT Domains

0

1

Evaluation

Responsible Team, Customer, Consultant

Impacts, Risks

2

5

Selection

Responsible Team, Customer

Strategic criteria

1

4

Prioritization

Responsible Team

Strategic criteria weights

0

3

Portfolio balancing

Responsible Team

Synergies, Risk mitigation, Resources utilization

2

5

Authorization

Responsible Team, Customer, Consultant

Resources availability

1

3

Component execution

Responsible Team, Consultant

Project management

0

1

Portfolio reporting and review

Responsible Team

Performance of the portfolio

1

3

Strategic change

Business Strategy Office Responsible Team

New strategic criteria

1

3

2.2

Knowledge assets

The different knowledge assets involved in the ITPPM process are listed and evaluated in Table 2 in regards of their structure, type, physical form, place, time and quality (Schreiber 2000). Table 2: Knowledge Assets in the ITPPM process Knowledge Asset

Possessed by Agent

Used in Activity

Needs

Customer

Identification

Opportunities

Customer, Responsible team Customer, Responsible team Customer, Responsible team, Consultant Customer, Responsible team Customer, Responsible team Customer, Responsible team Customer, Responsible team, Customer, Responsible team, Responsible team, Consultant Responsible team,

Identification

Business Strategy Office Responsible team

Selection

Responsible team, Customer Responsible team

Portfolio balancing Portfolio balancing Portfolio balancing, Authorization Project execution, portfolio reporting and review Portfolio reporting and review

Financial impact Revenues Financial impact Costs Process impact Stakeholders impact Learning & Growth impact Requirements volatility risks User commitment risks Technological risks Organizational risks Strategic criteria Strategic criteria weights Synergies Risk mitigation Resources utilization

Responsible team, Customer, Consultant

Project performance

Responsible team

Performance of the portfolio

Responsible team

Evaluation

Right Form? Yes/No

Right Place? Yes/no

Right Time? Yes/no

Right Quality? Yes/no

N

Y

N

N

N

Y

N

N

N

Y

Y

N

Y

Y

Y

Y

N

N

N

N

N

N

N

N

Y

Y

Y

Y

N

N

N

N

Y

Y

Y

~

Y

Y

Y

Y

N

N

Y

Y

N

N

N

N

N

Y

Y

Y

N

Y

Y

Y

N

Y

N

~

(N ) Y

(N ) Y

(N ) Y

(N ) Y

Y

Y

Y

Y

~

~

~

~

Evaluation

Evaluation Evaluation Evaluation Evaluation Evaluation Evaluation Evaluation

Prioritization

This analysis brings to light the phases of the ITPPM process and the related knowledge assets on which to focus when designing the KMS.

3

Knowledge Management System for ITPPM

The KMS is articulated, following (O’Dell 1998), around a KM strategy of operational excellence. It is intended (i) to capture the right knowledge to improve the ITPPM process effectiveness by keeping in the portfolio the best possible projects, and (ii) to focus the organization's limited resources on the maximum payoff areas, thereby ensuring ITPPM process efficiency, i.e. maintaining the best possible portfolio using as little resources as possible. Given this strategy, the authors need to concentrate on the highest potential improvement areas. To determine them the authors first focused on the most critical phases and then on their most critical knowledge assets, i.e. needs, opportunities, impacts, risks, synergies and risk mitigation. 3.1

Components of the KMS

The properties of KMS components are adapted to specific phases of the knowledge process – i.e. creation, storage/retrieval, transfer and application of knowledge (Alavi and Leidner 2001) – and offer support to one or more knowledge assets within these phases. Figure 2 depicts the inbuilt relation in terms of knowledge flow – i.e. knowledge as solution, knowledge as experience, knowledge as socially created (Ajmal and Koskinen 2008) – between KMS components and knowledge assets.

Figure 2: Relation between KMS components and knowledge assets The “needs” and “opportunities” knowledge assets: in addition to the existing change requests management system, the authors set up a discussion forum for business and IT project stakeholders to detect business issues and uncover potential solutions. This KMS component supports the knowledge process during:

 

creation phase by combining sources of knowledge as process owners and IT experts discuss innovative solutions for performance improvements, and transfer phase by extending the internal network business and increasing the intergroup communication channels.

Individual and organizational memories are supported by a repository of solved cases, the so-called solution knowledge base, where the outcomes of the discussions are capitalized. This KMS component supports the storage/retrieval phase of the knowledge process by providing intergroup knowledge access for business and IT staff. The “impact” knowledge asset: determining the impact of a project according to business related criteria requires expertise that encompasses business and IT competencies. Furthermore, this expertise is distributed across organizational boundaries in so far staff and external consultants are involved. The identification of the appropriate knowledge sources is made possible thanks to the expertise knowledge base, a repository of stakeholders’ competencies and experiences. This KMS component supports the creation of this knowledge asset. Information about past projects cause-andeffects relationships are also helpful in the evaluation process. Projects lessons-learned repository enables capitalizing knowledge about impact and applying it to the evaluation of new projects. The “risk” knowledge asset: identification of the appropriate knowledge sources for the creation phase of this knowledge asset is possible thanks to the expertise knowledge base. Informed decision making about the portfolio structure calls for understanding the risks at the individual project level as well as at the portfolio level (McFarlan 1981). To achieve this, the authors propose a KM framework for positive and negative risk assessment – described in a further paper – that highlights the decomposition and relationships of portfolio risks and is supported by a risk knowledge base. This KMS component supports the individual as well as organizational memory and fosters intergroup knowledge access (storage/retrieval and transfer phases of the knowledge process). These new sources of knowledge are then combined to identify risk and synergy patterns which are updated at each iteration of the risk management process. The latter are observed rules of interaction between positive risks and projects impact whereas risk patterns are the observed rules of combination of risks. Risk patterns are used to evaluate project and portfolio risk. The “synergies” and “risk mitigation” knowledge assets: Risk patterns and synergy patterns support the creation and the application phase of the knowledge process by providing a set of empirical rules for portfolio balancing. The “resources utilization” knowledge asset: In order to optimize resources utilization, a base of expertise provides information about skills and competencies of project actors. Not limited to the company's staff, it must also contain information about consultants, customers and other external experts. Coupled to the existing time sheet management system, this KMS component supports the creation, storage/retrieval, transfer and application of the resources utilization knowledge asset. It enables just in time learning, tracking resources competencies and availability, improving intergroup knowledge access and enabling workflow automation. The authors integrated the KMS to the intranet platform of the company. Portfolio managers and other stakeholders use it as a daily support for project evaluation and decision making and feel that it improves their understanding of strategy and selecting projects aligned with strategic goals. 4

Conclusion

As it combines a portfolio approach to IT projects with a KM system, this research proposes a way to balance the stakes of agility and sustainability regarding strategic alignment of IT projects. Based on a redesigned ITPPM process, the authors built a KMS to support the critical knowledge assets related to this process. This KMS is a minimal yet consistent solution to manage the knowledge related to IT

project portfolio management. Dealing with risk is a critical aspect of ITPPM which constitutes a major challenge for KM. In a further paper, the authors will present an attempt at understanding project and portfolio risk thanks to an innovative risk KM framework. As further directions for this research the authors consider:   

describing the methodological approach in a formal way, investigating the integration of the KMS with the organizational culture, a major influence factor for KM initiatives success (O’Dell 1998 ; Ajmal and Koskinen 2008), applying this approach to other companies in order to assess its transferability to other contexts.

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