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Implementing Portfolio Management Successfully

Develop a common basis to evaluate opportunities & initiatives based on contribution to business objectives

Quantitative financial gauges used alone are not enough, as they are lagging indicators that often fail to capture future short-term benefits of certain business initiatives properly . Rather, translate the company strategy into 7-10 business drivers and prioritize the drivers using conjoint analysis (pair wise comparison analysis) to determine their weighted importance. Next, determine the impact of opportunities on business objectives, and mathematically derive a strategic score allowing one opportunity to be compared to another. Aligning opportunities and initiatives to business strategy creates a visible link between the scope of the commitments being proposed and their intended benefits. It also allows all opportunities and initiatives to be compared to each other based on a common denominator.

Prioritization of the portfolio should be based on the degree to which each component supports organizational goals (strategic value). However, it is unlikely that the optimum mix will consist simply of those opportunities and projects that rank highest. In order to optimize a portfolio, organizations should look to maximize the total strategic value their portfolio can yield in relation to its constraints on resources. It is taking such a collective view of your initiatives and projects that underpins a portfolio approach: choosing which projects to undertake on a project-by-project basis, rather than at a portfolio level, ignores the impact that projects have on one another. The end result is too many initiatives and projects with a bias towards short-duration, relatively low-value and low-risk efforts. When a large project does get started, available resources often get sucked into the big one, leaving other projects high and dry. The portfolio approach enables management to weigh the impact that initiatives have on one another and maximize the collective value of the portfolio as a whole.

Do an Inventory

Perform a detailed inventory of all the projects in your company. Doing Portfolio Management well relies on the availability and intelligent use of sufficient, accurate and timely data to describe the items in the portfolio – be they candidate, planned or ongoing investments. Portfolio Management also means having a place to store all this data – a central source that is regarded as being the single source of this data and under change control. Having a single source for reporting also eliminates double counting that may otherwise arise if each program is permitted to use different sources of data and measures for its reports.

Simply creating an inventory can be a revelation. The initial inventory almost invariably uncovers redundancy and duplication which can be eliminated relatively quickly, creating immediate savings for the organization.

Use Proven Portfolio Management Tools

Portfolio Management tools are mandatory; they can determine failure or success in the adoption of Portfolio Management! A robust decision support tool can help do the following:

  • Prioritize projects by their mathematically derived business value
  • Optimize against budget and resource constraints to select the best portfolio
  • Conduct “What-If” analysis
  • Drill down into reasons why your portfolios are not on the Efficient Frontier - the combination of components in a portfolio that creates the maximum value given resource constraints
  • Enable communication and sharing
  • Provide graphics and representations that are easy to understand and modify to reflect the ongoing changes in the portfolio
  • Enforce and expedite a scalable governance (gate-keeping) process through workflow management
  • Nimbly change the algorithms as corporate goals and market conditions change

The complex tradeoffs of value (both financial and strategic), cost, resources, and risk require software that can mathematically weight, balance, and optimize a portfolio in a seamless manner. Ensure that you choose a Portfolio Management tool that actively supports the deployment of a standardized process, yet is highly configurable. You need process and analytical consistency from the beginning, but you can always add rigor progressively as the organization gains maturity.

Monitor Portfolio Execution and Benefits Realization

Monitoring initiatives after they have been launched is one of the most critical parts of ensuring a successful Portfolio Management process. Portfolio agility, or the ability to stay current with your investment status and respond to changes, is a key driving force. With stricter audit and compliance rules, portfolio transparency is not only a luxury but an essential part of awareness that leads to corrective actions. With robust Portfolio Management in place the organisation has the ability to ensure that funding turns into the desired business results. It provides an “early warning system” to develop corrective measures and responses to potential issues. You can’t complete initiatives just because you started them: the decision to continue with them should be a decision based on regular reappraisals of the performance and ongoing alignment with strategic objectives.

Monitoring the portfolio becomes particularly important in the face of changing corporate strategy or shifting market imperatives. Active monitoring and adjustment of your portfolio enables you to re-balance your portfolio by putting on hold or cancelling those initiatives that no longer align with shifting goalposts – or adding initiatives that fit better with the new organizational priorities.

Avoid the All or Nothing Approach

Keep the process simple at first: winning and maintaining executive sponsorship and buy-in is never easy, so identify areas that can benefit most from a Portfolio Management approach and demonstrate the immediate improvements on a small scale to begin with. Don’t wait for everything to be perfect before starting: Portfolio Management is an iterative process – and a good tool will be highly configurable, allowing you to improve/adapt your approach as you go along. Done right, Portfolio Management can deliver tangible benefits within 90 days - eliminating redundancies and freeing up capital for more value-adding activities.

Primavera Portfolio Management (PPM)

PPM offers a world-class Portfolio Management tool for business and government. It enables solutions that drive the planning and control for all types of business or technology investments, deploying objective, auditable processes and metrics, while facilitating collaboration among all stakeholders. PPM’s customers achieve rapid results including rationalization of current spending, optimization of support for the business, and active governance to obtain the highest possible realization of their goals.