Portfolio Management
Optimizing your portfolio and mode(s) of operation.
Not all projects are the same. You can't compare them with the same criteria. First: segment them by mode.
Let us help! Two days can untangle some pretty complicated prioritization!
Portfolio Management: Methods & Models
PPM is:
Maximize return/effectiveness/impact on investment. (Maximize Value)
Find the right mix of investment areas
Ensure that highest value is delivered (in line with our purpose & strategy)
Via:
o Proper selection (resource allocation, contribution Do the right things
o Timing of delivery (coordinate dependencies, reduce delays) At the right time
o Size of solution delivered (Positioning, size of market, size of problem/opportunity)
o Efficiency/ methodology and Do them the right way.
Where do we start?
Take all of the initiatives in your backlog, strategic retreats, wishlist, etc.
Weed out the junk. (Stuff you know you won't get to - or don't really need to do.)
Start to organize around themes.
Why? - To have fewer drivers of priorities.
Pick ONLY ONE innovation project. Commit sufficient resources to it, don't go halfway. (Maybe you can do two next year.)
Segment the rest of the work by Type (Lights-on, Growth/Improvement, Compliance) to prevent dropping critical work.
This is a bottom-up approach. It’s not ideal, really – but it’s often the reality – because the knowledge that exists about business opportunity comes from granular intelligence. It rarely comes from a predilection or omniscient vision.
These are not goals - they are themes. (Goals come after this.)
These are not (necessarily) Lines of Business. That’s similar in purpose, but LOB is market-driven, and themes are purpose-driven.
This might be what you want to structure your portfolios around. (Or maybe not. Don't let a model dictate it to you. Use the model to help you make the decision you want to make.)
Determine allocation of budget to those themes. (How do you determine those budget allocations? YOU figure it out. ;-) Data is how. Until then, it’s educated guesses, refined over time to be more educated.)
Stick to it (the allocations.) If it needs to change, change it formally. That is, take your best guess on how to allocate funding and don't stray from that decision, unless you are taking a large step backward to replan. Consistency and measurement is the foundation for improving this process.
Strategy
How are we positioning ourselves to be successful? (Win a market, a category, an account, return, …)
What void are we filling & exploiting?
Where are we going to spend money & for what ends?
Governance
How do we execute that strategy?
the methodology used for portfolio management.
GET THE RIGHT PEOPLE IN THE ROOM.
> We need agreements from the top-down on what we value and what we want to accomplish.
> We need clarity about where we’re spending our money and who’s doing what.
Performance
How do we learn from execution to feed back into optimization?
Using data to optimize the portfolio & increase its valueReallocate when needed
Increase investment
Fix processes
We don’t want reports, we want insights.How are we going to govern differently as a result of knowing new information?
measure performance using the same unit of value as we use to select the projects in the portfolio.
Risk
Example of Portfolio Segmentation:
Strategic, Discretionary, Nondiscretionary
Determine how much is allocated to each category overall. This can be the basis for establishing individual portfolios OR can be categories within a portfolio.
S = Strategic – New or transitioned revenue streams, New investments in technology, R&D. New customers, new revenue, new markets, new technology, and revenue migrations/replacement.
D = Discretionary – Maintain markets - Parity, keep current customers happy, renewals and retention.
N = Nondiscretionary – Lights on - Maintenance, critical bug fixes, platform currency, keep the lights on and the product running.
R – Regulatory.
Make sure you hold to your investments. Don’t steal budget from Strategic to pay for Discretionary projects.
Asymmetrical Bets – Overinvest in strategic projects.
For Productivity & Optimization Projects (to execute better, faster, cheaper) - Use lower-cost, available resources.
Don’t blend resources. Make sure teams know what their priority is. Provide focus on those priorities.
Project Modes
When defining major projects, the 'mode', i.e. the way of working, should be different depending on the type of project.
Neutralizers
Product enhancements to have parity with the competition. Developing these product features neutralize the competition's power. "Our product has that too."
Do these as quickly as you can. You do not need a high-fidelity solution here - just something to disarm the competitor's advantage.
Differentiators
What is the unique value of your product? How can you make it "untouchable" (i.e. prevent the competition from neutralizing it) ?
Do a lot of testing and learning with these projects. Find out what really excites customers. What takes a unique ability to deliver? What are you the best in the world at?
Spend real money on this. This is where investment counts most, and where the hardest work comes in.
Productivity
How can you use your time and investment dollars more effectively?
Solve the problems that are most costly to your operation. What causes delays in delivering monetizable value?
Use idle resources or inexpensive contract help for these.
Regulatory
These are projects you wouldn't do if you didn't have to. So do the bare minimum to meet the requirements. Regulations are typically vague. Often, regulations can be met with manual processes.