Saturday, May 26, 2007

Why do I need Portfolio Management?

If your IT shop is blamed for not being responsive to the needs of the Line of Business, or getting in the way of progress, or saying no all the time, or not delivering all projects that are wanted, then you really need to push for the adoption of Portfolio Management in your company. It is the single most important practice in my RunITbiz Framework to manage demand. And managing demand is the key to having a successful journey in managing supply. Think about it...............managing demand is the key. In fact, if you could only master one critical elements out of the 12 critical elements that make my RunITbiz framework, Portfolio Management would be the one.

So What is Portfolio Management?

Portfolio Management are the processes, practices and specific activities to perform continuous and consistent evaluation, prioritization, budgeting, and final selection of investments that provide the greatest value and contribution to the strategic interest of the organization. Through portfolio management, the organization can explicitly assess the trade offs among competing investment opportunities in terms of their benefit, costs, and risks.

So why are so many companies today still not doing this methodically and with better tools?

Perhaps because the different interests of the status quo get in the way. It is amazing to me to hear the stories from so many of my peers of what goes on and how many investments get justified without any or little analysis in their companies. Billions of dollars are invested in the wrong priorities every day in the world. Can we fix that? Sure. All it takes is executive sponsorship, discipline, some investment, and work.

Successful Portfolio Management practice requires serious top down focus on the following:
1 - Optimizing the Business/IT Alignment Process
2 - Managing the IT Portfolio using a centralized governance process
3 - Maximizing interaction between budget officers, line of business managers, and IT managers

Many companies claim to do Portfolio Management, but they lack a well documented integration and decision making process with integrated tools that feed information from the ERP and project management tools. Hence, most companies never reach a true optimized portfolio.

How do you optimize the Business/IT Alignment Process?

If you don't have a process, you have a create one. But most companies already do have a process, albeit an informal one. It may be that the process managers across the Line of Business and IT already collaborate without a formal process due a good company culture. Or it may be that the senior managers do so and command their teams to do the same. Either way, there is plenty of room for improvement in formalizing a process that everyone is part of, agrees with, understands, follows, and/or embraces.

The key about achieving alignment is to collaborate in the creation of the purpose, goals to achieve, processes, and the selection of the tools. It is also fundamental to have corporate strategic goals to guide the criteria for your alignment and selection process. So, if the company does not have a strategic plan and it is investing millions of dollars every year, then how does the company know that it is investing in the right things to further enhance the well being of the company? get my point. Can you think of any examples? ..................Yes, I know that you can come up with too many examples.

How do you manage the IT portfolio using a centralized governance process?

Your company needs a centralized IT governance process that forces transparency and accountability to optimize the IT resources and investments with the desired technology needs of the Line of Business and customers.

See, I am yet to meet an IT executive that was against more work, more gadgets, and more projects. In fact, I have no problem with managing ten to twenty times more of what I manage today. The key question is, can the company afford it? Affordability is the right focus. Not blaming IT for not delivering on every not well thought out and justified project in the company.

So, the first thing to do is to centralize the IT purchasing processes to capture all requests into one coordinated bucket. Second, the company must incorporate its project management selection methodology to the budget approval process to streamline the investment activity process for the entire company. Third, the company must have a steering committee process where IT and Line of Business Executives come together to choose, justify, fund, and sponsor the right projects to invest in together.

One of the biggest learnings from this, over the last five years, for me was when I demanded that all IT projects needed to have a Line of Business Executive as sponsor or co-sponsor. This single act proved to be the most significant success element in our nationally recognized successful transformation. The business driving IT is the only way to go.

How do you maximize the interaction between budget officers, Line of Business managers, and IT managers?

Meeting regularly is key. We found that having by-monthly or monthly steering committee meetings helped to accelerate our progress. Especially, knowledge transfer and trust building among executives and managers. Having multi-channel platforms to achieve culture change on this topic are very important. Weekly reports, regular team meetings, newsletters, and visioning sessions are a few of the mechanisms that we use to achieve transparency and accountability. However, the most important of all is having executive sponsorship and championship, which provides top down focus on aligning resources to achieve the strategic direction of the company.

In my humble opinion, Portfolio Management is truly fundamental to the achievement of company greatness.


Anonymous said...

great write up!! It really made my day!

Portfolio Manager said...

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I gain some knowledge of this post

Thanks for this information post

Portfolio Manager