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Portfolio Definition, Strategy Alignment and Ideas Management

The portfolio definition process is where you define the terms, scope, domain and definition of your portfolio, and gain agreement on your basic portfolio model. It is essential to keep in mind that the portfolio framework is a collection of projects and resources that you are managing as a group in a way that maximizes the total collective business value.

Defining the Portfolio

The types of variables that need to be considered for defining the portfolio are:

1) Domain or scope of organisational coverage i.e. which business groups, units, division departments, teams to include within the portfolio. Understanding the total scope will enable you to set up more multiple portfolios that are more manageable, you may wish to set-up a portfolio definition of each major business unit or division.

For example:

Organizational -Wide Portfolio

a) Division and Departmental Portfolios
b) Multiple Portfolios per Organization
c) Smaller Portfolios Based on Scope of Work

2) Scope of work included within the portfolio and definition of categorisation scheme. In other words does the project supports business processes and administration such IT, finance, or contral services. Directly grows the business such as sales and marketing and / or drives the business such as R&D or new product development.

3) It is important from the out set to define the portfolios key performance indicators (KPIs) and types of scoring models. It is impossible to compare apples to apples if each project has a justification based on conflicting different models. You need to understand the models that your organization wants to utilize and make sure all projects are justified using those models. Most organizations are driven by financial or cost measures, such as Profit, Sales, Net Present Value (NPV), Internal Rate of Return (IRR), or Economic Value Added (EVA). Although financial metrics are extremely important and directly impact the bottom line, other key criteria should be included balanced score card, cost benefits analysis, checklists. The choice of model is also important and will depend very much on the type of organisation, and the compostion of the portfolio(s).

Defining Strategy Alignment

Decisions on project selection and prioritizing cannot be done without knowing what the company or organization feels is important. The value that a project brings to your business is based on the cost/benefit implications and how well it aligns with your organization’s goals and strategies. Therefore the definition process needs be to carefully embedded and reviewed against a series of short, medium and long-term strategic objectives.

What are strategic objectives? In there simplest form strategic objectives are high level statements that describe what your organization is trying to achieve and how you plan to achieve it. If you do not have organizational goals and strategies, you cannot evaluate projects for alignment. Moreover, if the project does not help you accomplish your goals, you may be wasting your resources.

Defining your businesses objectives and strategic alignment criteria is typically achieved by looking at where your organization is today “Current State Assessment” and where you want to be in the future “Future State Vision”, then determining how best to get there “Gap Analysis”. This process results in the validation (or creation) of your mission, vision, strategy, goals and objectives. In particular, your strategy and goals will provide the high-level direction that will help align and prioritize all the work for the coming business cycle.

Defining your business goals and strategies can be typically achieved by implementing the following process:

1. Current state assessment or “what is”: Without a clear understanding of your organization today, it is very difficult to put the other pieces into place. Current State Assessment tells you about your organization today, its describes your organization mission, vision, work processes, products, services, customers, stakeholders, values, etc.

2. Future state vision or “what should be”: This includes asking the same types of questions about where your organization should be in five years in terms of its capabilities, culture, products, services, etc.

3. Gap analysis or “how to”: This forms the basis of the portfolio selection process and determines those projects that will be for consideration. Gap analysis highlights all the necessary steps to get from your current state to your future state. The result of the gap analysis is a short-term and long-term strategic plan that describes the things that need to happen to move you toward your future state. These initiatives give you the foundation that you need to make rational decisions on the things that are important and the types of work that are more valuable than other work. One of the purposes of the Gap Analysis is to define a set of projects to close the gap and move you toward your desired state.

Ideas Management
Carving the future vision of your organization is inexorability linked to the development of new ideas for new produces and services, however brining them to market is extremely challenging. PPM has become the essential management discipline to enable organizations to create frameworks for idea generation – whether this is adding new or re-scoping old projects. The PPM process needs to have the capabilities for systematic idea management and concept (or business case) evaluation in order to continually evolve the future state vision of the business and also to ensure mis-alinged projects are able to be replaced by new initiatives. The PPM process harnesses this by enabling the business to ideas, assess their impact on your existing pipeline, create multiple what-if scenarios to determine the optimal impact on portfolio, and balance overall demand for resources across the entire portfolio.

When new ideas surface the typical steps for managing this process includes:

1) Creation: Capture suggestions and ideas for new products from all possible touch points (sales, service, resellers, partners, customers, consumers, marketing, and so on.
2) Categorization: Ensure idea follow-up and assessment by the appropriate business owners, such as the business developer for a specific category.
3) Consolidation: Develop a repository to collect documentation and information related to the product idea.
4) Exploration: Share ideas and undertake feasibility assessments with relevant project stakeholder.
5) Strategic Fit: Ensure business idea fits into the overall strategy and is feasible in terms of legal considerations, standards, and time and resource restrictions.
6) Business Case: Identify project, components, constraints and risk. Outline financials, assign deliverables, roles and processes for delivery.
7) Commercialization — Identify appropriate set of skills, partners, channels and teams.
Technology - Identify technical feasibility of proposed project.
9) Project Registry: Include ideas as part of the overall project portfolio inventory.
10) Submission: Feed ideas into to Project Portfolio plan for selection and prioritization.

Ideas management creates and prepares new initiatives by using a process that captures idea submission, classification, evaluation, consolidation, business case and feasibility development.

Next week Resource and Business Capability Analysis