Portfolio optimization is one of the core processes of portfolio management. In order for organizations to drive greater value from their portfolio management processes, they must learn how to optimize their project portfolio. To optimize means to “make the best or most effective use of a situation, opportunity, or resource (Dictionary.com).” Optimizing a project portfolio is to construct an optimal portfolio given current limitations and constraints. An “optimal” portfolio for your organization will depend upon the goals of your portfolio. Not every organization will optimize their portfolio in the same way, but there are four basic types of portfolio optimization: 1) Cost-Value Optimization: this is the most popular type of portfolio optimization and utilizes efficient frontier analysis. The basic constraint of cost-value optimization is the portfolio budget. 2) Resource Optimization: this is another popular way of optimizing the portfolio, and utilizes capacity management analysis. The basic constraint of resource optimization is human resource availability. 3) Work Type Optimization: this is a lesser known way of optimizing the portfolio, but corresponds to a more common term, portfolio balancing. The basic constraints of work-type optimization are categorical designations. 4) Schedule Optimization: this type of optimization is associated with project sequencing, which relates to project interdependencies. The basic constraints of schedule optimization are project timing and project dependencies.

1. Portfolio Optimization Overview
This presentation briefly covers key components of project portfolio management (PPM) and focuses on the four types of portfolio optimization

2. Portfolio Optimization Overview
At the highest level, Project Portfolio Management has four basic components:
All the steps necessary to construct an optimal portfolio given current limitations and constraints
Ensure value is delivered by comparing expected benefits with actual benefits; drive PPM maturity
Processes to select the right projects that align with business strategy and key criteria
OptimizePortfolio Value
Project benefits must be protected in order to deliver maximum portfolio value
ProtectPortfolio Value
DeliverPortfolio ValueThe Goal: Maximize value delivered to customers and stakeholders
Define the Portfolio

3. Portfolio Optimization Overview
Deliver Portfolio Value
Optimize Portfolio Value
Define the
Portfolio
Protect Portfolio Value
Portfolio Analysis
Portfolio Risk Management
Manage Portfolio Value
Resource Capacity Management and Analysis
Improve Portfolio Maturity
Project Monitoring
Lessons Learned
Portfolio Planning
Prioritization
Ideation
Portfolio Balancing
Work In-take
Efficient Frontier Analysis
Decision Gates
Portfolio Communication

4. Portfolio Optimization Overview
EFFICIENT FRONTIER ANALYSIS
(Cost-Value Optimization)
Constraint: Budget
CAPACITY PLANNING
(Resource Optimization)
Constraint: Human resource availability
PORTFOLIO BALANCING
(Work Type Optimization)
Constraint: Categorical Designations
PROJECT SEQUENCING
(Schedule Optimization)
Constraint: Timing and DependenciesOptimize Portfolio Value
The GOALis to deliver maximum business VALUE

5. Portfolio Optimization Overview
The GOALis to deliver maximum business VALUE
Prioritization
Capacity Planning
Portfolio Balancing
Project Sequencing
Cost-Value Optimization
Resource Optimization
Work Type Optimization
Schedule OptimizationMATUREADVANCED

6. Portfolio Optimization Overview
Project Priority 1
Project Priority 2
Project Priority 3
Project Priority 4
Project Priority 5
Project Priority 6
Time Now
Resource Priority
(Resource Managers, Team Members)
Schedule Priority
(Portfolio Steering Team) Priority Types