Element 1: Portfolio Management.
In this series of blog posts, we will be examining the seven elements required to not only build a successful strategy, but to ensure that that strategy is successfully put into action.
These seven core elements – pictured below as a hub and six surrounding spokes, are all essential to achieve portfolio success. And it is only when all those ingredients are present that real competitive advantage can be achieved.
These elements are not only vital, but more importantly, must all work together to form a cohesive unit. There is a need for a constant feedback loop so that data, information, knowledge, and understanding can flow through and connect the whole process.
We will start by exploring the central hub, Portfolio Management. Portfolio Management is the most important, least understood, and most commonly mismanaged aspect of business today. Portfolio Management is the central part of the framework. The portfolio of initiatives, projects and programs is the embodiment of what strategy an organization is actually pursuing. If we need to look anywhere to determine what strategy will emerge – it is the portfolio. If we need to change the direction of strategy, or to prioritize delivery or fit to resource constraints – the portfolio is where we must look to as our reference point.
The Portfolio Management process is key to the decision-making process and ensures that projects are aligned to the strategy.
Achieving the right portfolio balance requires a combination of processes, software and skills to select the collection of projects that bring the greatest contribution to the organization. Project selection is a strategic choice; the projects you select today will determine where you will be tomorrow. In short, strategy is simply the collection of projects that you decide to resource. The portfolio management process, and the tools that you use for this process then ensure the delivery of these projects.
When implemented properly, Portfolio Management enables you to objectively select resources, manage risk and maximise the return on your projects:
- Maximize long term value
- Align projects to strategy
- Optimize value vs risk
- Visualize entire portfolio
- See and adjust balance
- Shape future market focus
- Allocate resources effectively
The latest Portfolio Management tools will incorporate a strong business case and be aligned with your business strategy, considering investment, customer need, likely return and risk level. It will ensure that there is a good balance of your whole portfolio allowing you to allocate resources accordingly. Businesses that use Portfolio Management tools have a far better balance of projects and resources, both in the short term and long term, all of which successfully mirror the business strategy. Flexible and powerful tools ensure you can make more informed decisions, at gate meetings and portfolio reviews. These tools bring objectivity to what can otherwise be a diffuse and cloudy task
The best Product Portfolio Management tools will also incorporate extensive project management tools, such as effective gates, scorecards, productivity index, road mapping, risks and issues log, and timescales. You can access interactive live data, integrated resource management and financial assessments, as well as document management and team collaboration. All of which will help you select and prioritized your projects, reduce costs and time to market and increase revenue.
However, the portfolio is not where the process starts. In our next post we will be exploring Element 2 – The Innovation Process.
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