Finding the right balance

"Show me your portfolio and I’ll show you your strategy”. How much better it would be if the strategy drove the portfolio content so that you could “show me your strategy” and from it I could describe what projects I would find in your portfolio!

It can be done that way round, but there have to be some changes to the way things normally get done. First, you do need a scale of values so that you can rank projects in order of value; nothing too sophisticated, though, it’s a means, not an end. Getting a corporate consensus is good, though less common than you’d think, simply because it’s extremely difficult. It does mean moving away from “I want it”, to a measure of desirability. Secondly, you need to find out what’s actually do-able within the constraints of your organisation. The way to do that is to make the maximum possible use of your scarcest resources, which means adopting tactics other than making sure everyone is busy — the rather Victorian, “least idle time” measure. Thirdly, it is sensible not to have too many of the projects all depending on the same thing, whether it’s your favourite supplier, your pet market, or even SAP.

The trick is to balance the desirable with the do-able, and that can be harder than it looks. Even moderately-sized candidate lists for next year’s portfolio present large numbers of combinations, of which only a few offer best value-for-money from the portfolio investment. If you have just eight candidate projects, there are 256 different unique portfolios; one comprising all eight projects, eight with seven, and so on. If you have 28 candidates, you now have a staggering 256 million choices of portfolio! Add the complicating factor of interdependent projects and it is no wonder that portfolio selection committees get
it wrong, especially when someone wants to add “just one more”!

There are some tools available, but most are awkward to deploy, or harder to apply than using native
intelligence. Those that started from a financial management system tend to focus on the management and flow of capital expenditure, which distorts and limits their usefulness. Those that have grown out of project scheduling and monitoring betray their roots by treating portfolio decision-making as being driven from the bottom-up, employing aggregating algorithms that again distort and limit their usefulness. Those that have been written from some other basis display their immaturity by providing uneven support for the end-to-end process of managing the portfolio.

There is one though, supported by a tried and tested process, that is good! Developed by CITI in collaboration with clients, it provides excellent support to those who need to make choices and manage their firm’s project prioritisation. It allows for mandatory and dependent projects, and takes into account financial and strategic value, risk and resource availability. Contact us today for a demonstration of what can be done.