Executive Summary
Competitive global pressures and growing consumer expectations make innovation a requirement for today’s
leading companies to be able to survive and grow. The ability to adapt quickly to changing market conditions and
global opportunities - and repurpose resources adeptly - becomes more challenging every year. Without a
consistent and comprehensive view of the innovation portfolio, and without tools to quickly model new
information, innovators are now at a disadvantage with their competition.
In his highly acclaimed book, Portfolio Management for New Products, Stage-Gate International founder and
industry expert Dr. Robert Cooper outlines the tools, guidelines, and strategies that corporate executives need to
effectively manage product portfolios, optimize R&D investments, and prosper in the competitive environment of
product development. However, to this day, portfolio management often remains a struggle for organizations to
execute in practice.
Planisware offers both the requisite tools to aid innovative organizations in managing their strategy, portfolios,
and projects, as well as practical guidance to help organizations actualize these best practices. With Planisware’s
portfolio management tools and guidance, organizations are able to:
Make fact-based decisions using transparent, knowledge-based data
Show impact of risks on future project and portfolio values
Define the strategic and high value projects
Gather high quality, consistent data across projects
Allocate resources to prioritized projects
Report objectively and consistently across projects
Support the portfolio process with trusted information
Maximize return on investments
This white paper outlines the logical path an organization can take to instantiate and then improve portfolio
management practices utilizing Planisware. This journey relies on practical, adaptable steps where value is added
every step of the way.
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Figure 1: The journey to portfolio planning excellence begins with an
accurate list of portfolio projects and data.
BARRIERS TO SUCCESSFUL PORTFOLIO MANAGEMENT
The race to develop and deliver viable new products is more competitive than ever. For organizations to keep pace and ensure
that only the best mix of projects proceeds along the development chain, they must implement strategies and solutions that
allow them to quickly evaluate all ideas and potential projects.
When consistent data is collected for each project in the portfolio, organizations can build accessible business cases that
provide the backbone for objective portfolio evaluation. Inputs such as project scores, financials resource requirements,
market opportunities and supply chain risks, provide invaluable insight at both the project and the portfolio levels.
However, when such information exists only in silos - as is often the case - portfolio managers are left with an incomplete
picture, often resulting in the sub-optimal allocation of resources. This can mean resources are underutilized or else spread
too thin, which can in turn cause slippage in launch dates and a downturn in the quality of execution for new product
development. Departmental thinking and siloed information can also obscure the vision of strategic versus non-strategic
projects, resulting in poor execution against long-term strategy.
This document outlines a practical path your organization can take to standardize the business case for projects, and build an
effective prioritization and selection process. When supported by effective governance processes, these tools and adoption
path can help organizations excel in portfolio management.
THE PATH TO MATURITY IN PORTFOLIO
MANAGEMENT
The path to fully optimized portfolio management is not an
easy one. The subsequent sections of this white paper
outlines incremental steps an organization can take to
improve their processes, and increase their confidence in
decisions. Each step provides value in and of itself and
serves as a building block to enable the next step.
Step 1: Obtain an accurate view of new product
development projects
The objective of this step is to be able to gather all
existing projects and new potential opportunities in a
single system. In order to provide any value, however,
organizations must first define and communicate
guidelines necessary for thoughtful evaluation.
Step 2: Gain an accurate view of the current portfolio
Once all projects and potential projects are gathered in a single system, the next step is to view the information in its
entirety to understand what the organization is working on, and how the organization is currently doing. The value
gained in this step is a comprehensive and objective view of the entire portfolio, and an understanding of portfolio health
and progress.
Step 3: Maximize portfolio value
When an organization has achieved an accurate depiction of their current portfolio and a clear view of potential new
projects, the next step is to assess how the value of the portfolio can be maximized. At this point, projects can be
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compared against each other according to the criteria and metrics at hand. This section will describe tools that can use
this intelligence to aid in the evaluation of potential investment scenarios to maximize portfolio value.
Step 4: Balance the portfolio
In addition to maximizing portfolio value, it is important to take a step back and inspect the balance of the portfolio.
Planisware provides diagrams and assessment reports that enable organizations to understand how the portfolio is or is
not balanced, and shed light on how the portfolio makeup might be re-arranged to target long term success.
Step 5: Account for corporate strategy
Key to organizational success is the inspection of portfolio make-up with respect to the dictates of corporate strategy.
Planisware enables organizations to define and communicate strategy in no uncertain terms, and then empowers
organizations to analyze how the existing portfolio, as well as potential investment scenarios, would stack up against the
organization’s goals and targets.
Step 6: Analyze the Book of Business
In this final step, organizations are recommended to regularly review the book of business as a whole. Planisware
includes the right toolset to provide additional insights into strategies for optimizing the portfolio.
The result is an organization well-equipped to select the optimal mix of projects to feed the project pipeline.
STEP 1: CONSISTENT EVALUATION OF PROJECTS
Building a Business Case
Many organizations struggle to standardize business case development; financial models can be tweaked to better fit a
business case, and scoring and ranking criteria are not uniform across the entire portfolio. As a result of subjective and non-
standard variances among projects and opportunities, portfolio managers struggle to choose the right ones to prioritize.
Projects must be properly evaluated on an even plane so that organizations can choose the right projects to best fit corporate
strategy, and to justify continuation of projects within the development pipeline.
Planisware enables organizations to gather the same information about each project and each potential project in a single
system, so that they can be evaluated consistently. The first step is to establish standard portfolio definitions and project
evaluation criteria – both within the system, and throughout the organization. The system can then be utilized to help users
build and assess the business case for each project in qualitative and quantitative terms.
Defining Portfolios
Portfolios can be defined in a variety of manners. Diverse ways to define portfolios include considering product line,
business unit, division, project type, market segment, and region in any combination. Because portfolio definitions change
quickly in today’s fast paced environment, Planisware enables the ability to define your portfolios, and then refine these
definitions over time so that organizations can adapt in real-time to market events and opportunities, and communicate the
results automatically in a transparent environment.
The next step is to define and communicate the qualitative and financial criteria for evaluation.
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Figure 3: Financial factors provide key quantitative KPI used for cross
project evaluation. Here, revenue and investments have been entered.
Financial modeling equations in Planisware compute the company P&L.
Figure 2: Scorers enter values for projects according to pre-defined
criteria. In a multi-scorer environment, values are averaged, and
may be corrected to produce a final score. Clearly defined scoring
criteria are used across the board to determine the qualitative KPIs.
The scores for a particular opportunity or project can be viewed
against the portfolio average as a point of reference.
Qualitative Scorecard Evaluation
Planisware allows individuals, groups, and committees to score new ideas and projects based on pre-defined qualifiers. This
ensures that all options are scrutinized and evaluated according to the same standards before any development costs are
incurred. Each score card is comprised of customer-defined key criteria that can be adjusted for each organization.
Criteria include factors to determine the business strategic fit, probability of commercial and technical success (PCS, PTS),
reward, and leverage. These scores can be compared both intra-opportunity (how did a subject matter expert score this
opportunity compared to my score?) and inter-opportunity (how did a project rank against all the others?) to help achieve a
uniform scoring approach and provide transparency through an organized ranking system.
While departments often require one-off specific criteria, a standard set of cross-organizational criteria can often be
determined. Such criteria must be clearly defined and clearly communicated with context across the organization, for
successful scoring to occur.
Quantitative Valuation
Using Planisware, organizations can define and track key factors determining project valuation. For instance, factors like
sales and revenue (market size and share, unit price, cannibalization, and patent expiry), development costs (schedule,
resource, and cost), and recurring costs (cost of goods sold (COGS) and advertising) are often considered in the valuation
process.
Once the proper data is entered in the system for a given
project, a set of key performance indicators (KPIs), such as
net present value (NPV), expected NPV (eNPV), internal
rate of return (IRR), return on investment (ROI), and
profitability index (PI) are automatically computed by the
solution based on the company's desired financial models.
Organizations may also choose to risk-adjust each
development phase based on the estimated probability of
technical success (PTS), perform a sensitivity analysis, or
use techniques such as the productivity index or options
pricing theory to further refine valuations. Note that after a
project has been started, sunk costs can be removed from
project valuation reports.
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Figure 5: Dashboard views are valuable tools in assessing
portfolio health and tracking progress of projects.
Creating Scenarios and Managing Risk & Uncertainty
Before defining the final business case to publish for review,
users may first choose to test various scenarios for different
outcomes, to exercise prudence in building the best business
case for a particular opportunity. Through Planisware’s what-if
capabilities, users can create multiple versions of an
opportunity with which to apply various assumptions.
For example, organizations may find it useful to test the effect
of a variety of revenue distributions or risk profiles on the
eNPV. The review of the different scenarios can be used to
support decision-making and provide insight as to the key
success factors.
Organizations with well-defined risk profile definitions can also take advantage of Planisware’s Monte Carlo Simulation
capabilities, entering risk profiles and running simulations to generate confidence intervals on selected KPI, like eNPV. Such
investigation at the project level helps organizations define strategy on a project by project basis at the operational level, but
also enlightens portfolio managers at the portfolio level, to understand the risks inherent in the makeup of the portfolio.
STEP 2: GAINING AN ACCURATE VIEW OF THE PORTFOLIO
Insight from a Comprehensive View – What are we doing? And how are we doing?
Gathering key intelligence on each project in the organization’s portfolio of work can be a daunting notion and a time-
consuming endeavor – but one worth the effort. The standardization of the business case definition process, financial model
and scoring criteria within Planisware brings all defined opportunities and projects to a unified framework. The ability to
view the entire portfolio of projects in real-time, within a single system, provides the foundation for effective portfolio
management, and for some firms, provides a major step forward.
To answer the second question, “How are we doing?” Planisware provides dashboards and reports that offer a
comprehensive, global view. Dashboards that monitor the portfolio help organizations to understand the full body of the
organization’s work, and assist them to understand both the health and the progress of the current portfolio.
Monitoring Portfolio Activity
Planisware offers basic monitoring dashboards to help organizations
follow the progress of portfolio activities. They give a general
overview of the progress of the active portfolio, and provide insight
into potential trouble areas, buying managers more time to pursue a
proactive course of action before risks become issues.
Such dashboards allow managers to manage by exception, focusing
immediately on areas that need attention. Once a view of what
projects are in the pipeline has been achieved, the next logical step is
to ask, what projects should be in the pipeline.
Figure 4: Different scenarios can be tested within the system. To the
right, several scenarios testing different project assumptions are
considered and then created as versions in Planisware. Below, the
resultant cash flow of a selected version is compared with that of the
base case.
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Figure 6: Planisware provides evaluation reports to illustrate the
economic potential of portfolios and portfolio scenarios. For
example:
An area chart can provide information on the value of the current
portfolio over time. This is commonly viewed in a variety of
dimensions, such as: project type, market, business unit, division,
product line, etc.
A pipeline funnel shows the value of the NPD portfolio by project
stage in order to assist in identifying gaps in the NPD funnel.
Profits and growth are compared to target revenues for short and
long term targets. Launched projects are green, current-blue,
opportunities-orange, while the target is a blue line. By changing
the selection of opportunities to include, users visualize the
outcome of different investment scenarios.
STEP 3: MAXIMIZING PORTFOLIO VALUE
Insight from a Comprehensive View – What are we doing? Versus what should we be doing?
A comprehensive view of the portfolio also affords organizations the ability to make more effective project selection and go-
no-go decisions. Once data has been entered for active projects and project proposals, an organization is armed with the
proper information for objective portfolio evaluation. A single source of truth allows managers to understand the full demand
on resources, and how resources are really being utilized. For some companies, again, to simply understand all of the work
that is currently being done within the organization can be highly enlightening and lead to important questions. Where did all
these pet projects come from? How did this potentially economically rewarding project get killed? The next step is to assess
which pieces of work are most worthy of investment.
During the project selection process, organizations can compare and contrast alternative investment scenarios within
Planisware and weigh the outcomes to help with portfolio decisions. Investment scenarios are easily created in Planisware by
selecting the mix of projects and proposed projects to inspect as a potential portfolio. The potential investment portfolios can
then be viewed and assessed in a series of dashboard reports and diagrams. Example reports will be described in the
subsequent sections of this document.
Measuring the Portfolio’s Economic Value
For most organizations, the first goal of portfolio management is to maximize the value of the portfolio of new product
development projects. However, value can be considered against multiple business objectives. How should the value of a
portfolio be measured?
Organizations often place high value on key financial measures with the main objective of building an economically
attractive portfolio. Common methods for identifying financial portfolio value are accomplished by inspecting KPI such as
NPV, ECV and PI. Planisware provides dashboards and reports that illuminate the economic return of your current portfolio
of projects, and enable you to envision the returns of alternative investment portfolios, with a view over time.
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Figure 8: The demand of an investment scenario on resources is
considered during project selection. Bottleneck analysis identifies
areas where resources would be understaffed or poorly utilized.
Figure 7: Opportunities and projects are compared visually against each
other by qualitative (Total score, via PTS, PCS, Reward) and
quantitative (NPV, IRR, ROI) KPIs.
Prioritization and Ranking by Multiple Objectives
However, the value of a portfolio can be measured along any number of other relevant business objectives. For example,
qualitative considerations provided by scorecard criteria measure other key aspects such as strategic importance, ease and
speed, probability of technical success and other desirable
project characteristics.
At this point of the journey, quantitative and qualitative
measures have been defined and qualified for each project,
so the evaluation process can be relatively straight-forward.
Providing a variety of portfolio assessment reports,
Planisware enables decision makers and managers to
compare projects along consistent data points and valuation
measures gathered through the business case building
process.
Planisware supplements portfolio assessment reports with
a number of techniques that facilitate the ranking process,
including forced rankings, cross-functional scoring, and
the ability to relate different portfolios (corporate vs.
business unit or division) with particular ranking and
weighted scoring models.
Such tools enable multi-dimensional views of the portfolio, and empower organizations to focus on multiple business
objectives (profitability, acceptable risk, attractive market, etc) concurrently. Due to the configurability of the tool, the set of
client-defined metrics for project selection can be incorporated into customer-defined views to ensure that the ranking and
selection process is both seamless and effective for the organization.
By properly prioritizing and communicating project priorities – whether absolute, or by tier – leaders know where to invest
their resources and when, and teams know they are working on the right things.
Considering Portfolio Limitations
Without the complete picture, organizations are prone to
engage in too many projects, overburdening their resources,
and producing poor results. All too often, lack of tough Go-
No/Go decisions results in too many projects in the pipeline,
with valuable projects poorly staffed.
It is important to take a hard look at organizational limits to
determine how many, and which mix of projects can
reasonably execute successfully. Once a list of high value
projects have been ranked and prioritized, the viability of the
portfolio should be inspected by considering one of your
organization’s key delimiting factors - resources.
Efficient frontier views inform which projects may not make the cut when targeting particular objectives in the ranking
process, while resource bottleneck reports with drill-down capabilities illuminate when resourcing issues will occur.
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Figure 9: Diagrams are used to
illustrate portfolio balance along
different dimensions.
STEP 4: BALANCING THE PORTFOLIO
During the portfolio evaluation and review process, a first cut at project selection that focuses on maximizing value can be
enhanced by a second round that inspects balance in the portfolio.
Organizations often fall prey to tendencies that lead to imbalances in the portfolio – for example, accumulating portfolios
skewed toward short term achievements, or inadvertently favoring particular business areas over others. A balanced portfolio
includes projects that can sustain the long term growth of the company, and serves to manage risk by diversification.
While the means and goals of achieving balance vary from company to company, Planisware provides diagrams that can alert
organizations to imbalances within the portfolio.
STEP 5: ALIGNING THE PORTFOLIO WITH STRATEGY
Communicating Strategy and Tracking Alignment
The alignment between corporate objectives and portfolio execution is a challenge many organizations face. In previous
sections of this whitepaper, you have seen how organizations are able to qualify proposed projects against corporate strategy
through scorecards and test balance in accordance with general company objectives by analyzing portfolio balance reports.
However, without a means to clearly define strategic objectives in terms of time and investment objectives, portfolio
management organizations are at a loss for measuring strategic compliance. Further, without the ability to communicate
product strategies, organizations are not able to make real comparisons between strategy and execution, which makes it
difficult to identify the source of the gaps. Planisware can help organizations address these challenges through roadmapping
and strategic bucket functionalities.
Roadmaps
Planisware’s roadmapping feature helps organizations clearly articulate strategic intent within the context of time. An
important step toward achieving a well-balanced, healthy pipeline is to define and communicate the Strategic Roadmap for
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the organization. Which kind of acquisitions should be made? What markets should we target and when? What countries
should we expand to? What is our recruiting plan? It is important for an organization to answer to these types of questions to
provide direction and influence portfolio evaluations. Planisware’s quick-to-build roadmapping user interface, featuring drag
and drop functionality, enables upper level management to create strategic roadmaps directly in the system, and then share
them with portfolio management, marketing and product leads, in real time.
Once a Strategic Roadmap has been defined and communicated,
portfolio management, marketing, and R&D leads can use these
targets to inform project and portfolio decisions, structure
optimal product roadmaps and eventually use these to measure
development performance.
Defining visually clear, concise product roadmaps in the system
enables management to both report “up” to executives, as well
as articulate timeline objectives for R&D teams. When a project
is in development phase, synchronization and tracking features
close the loop by offering transparency between original
objectives and progress of execution.
Strategic Buckets
Management can define clear budgetary objectives by defining strategic buckets, or budget envelopes, across dimensions
such as project type, business unit, or therapeutic area. The definition of clear budgets within the system provides portfolio
management clear guidance to consider in the portfolio selection and optimization cycle.
The utility of top-down strategic buckets becomes apparent when viewed in comparison against the aggregation of the cost
estimates of a selected portfolio of projects. First, the multi-dimensional resource and budget constraints should serve to
guide the project selection process. Then, the comparison of resultant portfolio estimations against objectives provides a
measure of adherence and alignment with corporate goals as projects progress. Views comparing objectives vs. active
portfolio values available within Planisware alert portfolio managers to potential problems, and can indicate the necessity of
the re-evaluation of a project, or portfolio of projects. See Figure 11 in Project Selection and Ranking for a visual
representation of top-down, bottom-up strategic buckets.
A successful portfolio must align with the high-level strategic
objectives of an organization. While senior-level managers may have
insight to the strategic vision for their organization, portfolio
managers may not know how their opportunities fit within corporate
business initiatives.
Roadmaps and Strategic Bucket functionality within Planisware
enable upper management to clearly define corporate strategy to
portfolio managers, facilitate further communication both top-down
and bottom-up, and measure, anticipate and understand discrepancies
between strategic vision and project execution.
Figure 10: Roadmaps provide a visual means to quickly convey
scheduling information. In this product roadmap, key milestones across
R&D, Regulatory, Marketing and Manufacturing, including product
launches and patent expiries can all be seen at a glance.
Figure 11: Pie charts comparing the allocation of currently
selected projects (bottom) with the strategic vision (top) for
three different dimensions. The comparison of portfolio
estimated costs versus budgeted costs against the various
buckets identify strategic alignment compliance or
discrepancies.
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STEP 6: ANALYZING THE BOOK OF BUSINESS
Maintaining a Healthy Portfolio
These days, Go-No/Go reviews of live projects in the course of development are standard practice, and it is becoming
increasingly apparent that continual reviews of the portfolio as a whole contribute greatly in nurturing a healthy portfolio.
Rather than aggregate data and evaluate the portfolio as a part of a time-consuming yearly or quarterly event, organizations
that upkeep project data in Planisware are able to rely on the real-time availability of transparent data in order to facilitate the
re-evaluation process on a regular basis.
An analysis of the book of business as a whole lets portfolio managers understand progress toward strategic goals, and
enables them to continually improve portfolio management processes. Through book of business analysis, managers can
inspect alignment between portfolio progress and business objectives, and check that projected spending, work, and activities
are line as well. As new facts emerge from the marketplace, and as underlying data and assumptions are fine-tuned for
maturing projects, portfolio reassessments highlight emerging issues and identify room for improvements.
Testing Investment Scenarios
The portfolio evaluation and re-evaluation processes are made possible through a variety of portfolio assessment reports that
visually compare projects and opportunities against one another, and also compare the results of potential investment
scenarios as a whole, against each other.
These reports, as described in steps 3-5 aid in the
assessment of portfolio value maximization, portfolio
balance, and strategic alignment.
However, during evaluation, questions may emerge that
can be difficult to answer without understanding the
operational impact of decisions.
Planisware provides portfolio simulation capabilities that
enable portfolio managers to test different assumptions and
envision the impacts in a sandbox environment, before
committing to a direction.
Through use of portfolio simulation tools, portfolio
managers can manually play with different mixes of
projects, different timings, and set different financial
assumptions to discover how resource levels, strategic
alignment, and investment returns will be impacted.
Figure 12: Planisware’s capability to perform multi-level analysis across
multiple dimensions, while factoring constraints such as resources and risks,
provide for valuable analysis all from a single tool
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Figure 13: The Efficient Frontier engine plots out step percentage
changes and displays the projects that produce the maximum NPV
with each incremental budget allowance.
Utilizing Optimization Tools
Stakeholders are often tasked with considering alternative
strategies to potentially improve the book of business. This
evaluation can be difficult without the proper tools in place to
effectively examine all possibilities. Traditionally, inspection can
be achieved through a variety of methods such as chart plotting,
performing sensitivity analyses, and running maximization
Solver functionality in standalone tools, like Microsoft Excel.
Assessment by these methods can be time-consuming: difficult to
set up and tedious to transfer the data. Planisware provides
preconfigured screens and capabilities to address these various
needs - within a single tool.
Sensitivity Analysis functionality offered in Planisware, such
as the Efficient Frontier and the Tornado Chart, are designed
to facilitate portfolio optimization.
Efficient Frontier functionality can be used to compute a list of
projects that maximizes a specific factor, given a specific
constraint. For example, a user may ask the system to compute
the list of projects to maximize the NPV, taking into account a
specified budget or the current organizational staffing limitations.
For each additional increment of the constraint, or budget, the
system computes the list of projects that will add the most value.
The Tornado Chart computes the optimized list of projects under
multiple constraints. In addition to an optimal project list, the
Tornado Chart highlights the most important, or sensitive,
constraints on the portfolio and illustrates how an incremental
change on each constraint can affect the portfolio value.
In the end, Planisware’s sensitivity analysis tools help stakeholders gain confidence that the selected set of projects will
achieve the best portfolio value given organizational limitations. These tools provide insight as to the best strategy for
adjusting variables to get the most bang for the buck, further maximizing portfolio value.
Figure 14: The Tornado Chart takes into account constraints
whilst calculating an optimized portfolio set. Here, bolstering
Manufacturing resources will pay off by improving the Total Score
of the portfolio; supplying too few resources for Support will
quickly become detrimental.
Planisware is the leading global provider of world-class product and
project portfolio management solutions. Planisware’s acclaimed
configurability accommodates the company’s global customers across a
variety of industries and empowers users to align the solution with key
business programs and portfolio management processes.
With more than 250 customers worldwide and a 99% customer retention
rate, Planisware has been recognized as an industry leader by several esteemed analysts and has achieved Stage-Gate Ready© and SAP®
integration certifications.
CONCLUSION
No matter where your organization is along the portfolio management maturity curve, Planisware can support your portfolio
management needs as they evolve. For organizations that are just beginning to put processes in place, Planisware’s portfolio
management tools enable you to establish basic portfolio definitions and create common business case criteria.
As ideas and projects are compiled in the system, the benefits of a global, transparent view become instantly apparent. By the
end of the first step, organizations have gained an improved understanding of what is really being done within the
organization and which resources are doing what. When data is consistently updated, the organization can continue to track
progress and understand portfolio health.
Organizations whose portfolio processes are evolving toward standardized, structured project prioritization can leverage
Planisware to support scoring and ranking exercises. The tool also offers dashboards and simulation capabilities to aid
organizations in weighing the value, balance, and strategic alignment provided by different investment scenarios. Finally,
advanced simulation and risk assessment capabilities offer value to organizations that require additional portfolio
optimization techniques.
Regardless of where an organization starts, Planisware provides the framework and functionality to help improve portfolio
management processes.