Project management looks at individual projects and how each one should be organized, led, and how each one fits into the overall strategy of the organization. The biggest difference between this and portfolio management is the lens that is used. Portfolio management looks at a grouping of related items and their management, so even when comparing project portfolio management specifically, there is a broader group of items being considered and managed. Essentially, project management is a more fine-tuned, or specific, tool in relation to project portfolio management.
Project portfolio management looks at a group of interrelated projects to achieve business objectives (Oliveira & Rozenfeld, 2010). While project management aims to manage intraspecific project features to further business objectives, project-based portfolio management aims to manage the interspecific project related features. From this main difference between the two, there exist many other smaller subtleties that can be explored and analysed.
In terms of their use under the broader umbrella of innovation management, they have slightly different purposes towards forwarding business objectives, as well as different ways of approaching problems to accomplish objectives. Portfolio management is often performed by managers in the research and development (R&D) sector of organizations, necessitating a higher-level thinking to achieve a balanced group of projects, technologies, and products that best suit the needs of the company (Igartua et al., 2010). The field requires open and flexible attitudes which are supported by strong management, and there are many matrixes and frameworks which can be adopted to aid with these big-picture decisions (Igartua et al., 2010).
On the other hand, project management deals more with the on-the-ground, gritty details of projects and how to best implement changes to forward organization strategic goals. There are generally high levels of risk associated with projects, especially those that are directly dealing with innovating projects or processes for an organization (Igartua et al., 2010). The specifics of implementing projects can be multifaceted problems which require the individuals who manage them to think on their feet, be strong change leaders, motivate their project team members, and deal with a multitude of issues and perspectives at the same time.
Having said this, project portfolio management and project management are incredibly interrelated. This becomes even more apparent when discussing innovation management which encompasses both project and portfolio level management. If reviewed from a hierarchal standpoint in terms of scope, project management would be at the bottom as it has the smallest scope. Next up the ladder would be portfolio management – specifically project portfolio management – as it uses a broader scope which looks at managing the interrelations of projects rather than at the management of specific projects. Finally, innovation management would be at the top of the hierarchy, as it employs both project and portfolio management among other tools and techniques in its quest to achieve business strategies and the goals of an organization.
Both project management and project portfolio management are important drivers of innovation (Igartua et al., 2010). When both management techniques are employed together as a holistic system, they can be used to achieve the full potential of innovation within businesses. Employed consistently across projects in a company, this will aid in achieving a fully realized and systematic innovation culture, which will in turn help firms to grow.
Project management and portfolio management can, and should, be used in combination. For example, portfolio management is used to organize projects and help project managers and upper management in deciding which projects to pursue. Portfolio management is responsible for the prioritization, selection, and termination of projects, and it encompasses both projects that were initiated formally through strategy formulation as well as projects which evolved more organically and may not initially be as aligned with the overall company strategy (Kopmann et al., 2017). Project management can influence the decisions in portfolio management through guiding the direction of projects to ensure that they align with the strategic objectives of the organization. Without proper project management, projects that were chosen because they originally appeared to be aligned with an organization’s strategic goals, may get off-track throughout the lifespan of the project and end with a solution or final product that does not align at all with the organization’s long-term goals.
Portfolio management and project management can be used in conjunction to address the different levels of success related to projects. There exist three levels of success with regards to projects. These are: project management success which addresses whether the project was done right, project success which addresses whether the right project was done, and consistent project success which addresses whether the right projects are done right on a consistent basis (Stratton, 2011). Whether a project is done right – or project management success – as well as doing projects right consistently, falls under the jurisdiction of project managers and their use of project management techniques and tools (Stratton, 2011). On the other hand, ensuring that the right projects are done – or project success – and ensuring the right projects are done consistently, falls under the jurisdiction of portfolio management (Stratton, 2011). Portfolio management is a relatively new field of research in the world of projects compared with research on project management (Stratton, 2011).
One last key similarity between project and portfolio management exists in their need for governance (Stratton, 2011). This is a key similarity because having some form of governance to approve which projects get moved forward and how projects will be run guarantees that there is always a ‘watchdog’, if you will, to ensure that projects are performed properly, meeting organizational goals and forwarding strategies (Stratton, 2011). The actual form of governance for project and portfolio management may differ, however.
In project management governance may come in the form of a project manager, whose role it is to lead the team members through the project to achieve a specified objective (Dixon, 2000; The Standish Group, 2013b). Project managers may also have oversight from higher levels of management with directives on the purpose of projects and what strategic initiatives they are trying to achieve. For portfolio management, governance can come in a variety of forms, based on the organizational context and structure, the types of projects being assessed, and the role the governance body is supposed to perform within the organization (Stratton, 2011). Examples of governance forms that can be used in companies for assessing project portfolios are committees, review boards, project or organization sponsors, or general governance boards (Stratton, 2011).
In SMEs, the reality of interrelation between project and portfolio management is equally important, and in fact, the lines between the two may be more blurred. Since SMEs have fewer resources, both financially, physically, and in terms of employees (OECD, 1997), they may end up with overlaps in management, and in departments and their roles. Also, as SMEs are more often entrepreneurially minded (Semrau et al., 2016), they rely more on innovations and therefore projects and the various forms of management associated with projects to forward their businesses and achieve market share and success for their organization (S. S. Erzurumlu, 2017).