Thank you to all those who attended our most recent BTN event, hosted by Annapurna recruitment and Alan More, an independent strategy, transformation and innovation consultant. These are the thoughts taken from that event held at the Soho Hotel. All of our discussions are held under ‘Chatham House Rules’, hence this summary only outlines the discussion, omitting specific company details, individuals and experiences. The following text is written by our host for the night and outlines some of the main discussions.
‘Having previously tackled thorny questions such as how to build an effective change practice and then measuring the success of change, the most recent meeting of the Business Transformation Network turned its attention to the issue of Enterprise Portfolio Delivery.
“I want significantly better returns and I want to spend 20% less year-on-year …”. It might not have been the exact words of my FD the last time I was asked to introduce a portfolio approach, but the sentiment was pretty much the same.
Broadly speaking, ‘Enterprise Portfolio Delivery’ is about delivering the best outcomes from a limited set of inputs. Typically we find ourselves with multiple pieces of work – some in-flight, some needing to start, some which probably ought to be stopped – and there are never enough hours in the day. Or people to do the work. Or money to pay for the equipment. Or some other constraint. So businesses must find some way to cut their cloth appropriately and identify which initiatives should get the ‘green-light’, and which must wait their turn. Portfolio approaches provide one method for starting this conversation. I say start the conversation because, as our discussion illustrated, the practice of enterprise portfolio management is significantly more difficult than it sounds.
Organisations arrive at the need to introduce portfolio approaches for a number of different reasons and their general level of experience around change management techniques varies widely. Some, with significant change portfolios and experience may look to introduce portfolio measures to improve the overall quality of their governance and delivery quality, or to search out cross-unit synergies. More often, organisations turn to portfolio approaches when they face serious constraints – either on the investment or resource side.
Often the experience of introducing portfolio techniques is a painful one – accurate source data are notoriously hard to come by, and once captured they quickly lose relevancy as projects start to evolve and their requirements become better defined or markets conditions alter their value to the enterprise.
In these early days it can be extremely difficult to maintain momentum and engagement around the process. As many practitioners will testify, business participants on portfolio working groups can find it tough going reviewing and then re-reviewing endless lists of projects, arguing over which one is most important.
Whilst it might be painful, particularly the first time, this process itself can yield some valuable insights for the organisation. It forces an explicit discussion about business priorities – something that often results in some surprises as implicit assumptions about where a firm is headed and what activity is actually being undertaken get aired for the first time. More than one business sponsor has suffered the indignity of a red-face after asking, “Who on earth owns a project with that sort of return?” and getting the response, “You do!”. A portfolio discussion can bring true engagement with a company’s strategy, and ensure real alignment to those goals. With the firm’s ‘north star’ re-expressed, any subsequent realignment of the portfolio should be that much easier.
But prioritising large portfolios of work can be challenging, so practitioners commonly employ some method of classification to help distinguish between projects and stratify their portfolio. Higher priorities tend to be assigned to projects that have some kind of regulatory component, or are business critical (like the integration of a business acquisition, or response to a disruptive new market entrant). Discretionary initiatives on the other hand tend to be ranked lower and often find themselves being either squeezed into the gaps in a portfolio where resource permits, or squeezed out altogether.
Of course these classifications, whilst giving the appearance of objectivity are themselves open to interpretation. Abuse and gaming of the categorisation as departments and business units vie for limited resources are common – after all, my projects are always ‘mission critical’, ‘mandatory’ or ‘regulatory’. But with reasonable debate and discussion the imposters can usually be weeded out – as one of our participants recounted about the £500k compliance programme whose regulatory component actually turned out to be less than 10% of the total initiative value.
So a great deal of effort can be expended in going through the process and establishing the portfolio in the first place. There is however, an almost inevitable disconnect between the annual financial planning cycle and portfolio delivery – after all, very few projects run neatly from start to end of a financial year, or are fully and accurately costed at conception. And, as we noted earlier, the world doesn’t stand still. Portfolios tend not to reflect reality almost immediately after the point of being agreed, (and some even beforehand), as the environment around them and the projects themselves change and evolve. Projects will run behind schedule, sponsors will move departments and investment hurdle rates may change as the market context shifts. So today’s ‘critical’ project may become tomorrow’s ‘discretionary’ or worse still, not be needed at all.
Many organisations therefore periodically review their portfolios – ensuring priorities still look correct and the overall mix of benefits is in line with expectation. The more this cycle is repeated the more organisations ‘get comfortable’ with the process, a shared language is established and the effort required to re-cut the portfolio decreases (although even in these more mature scenarios, the effort required shouldn’t be underestimated).
Whether high quality data really assists companies in better portfolio planning is questionable. Getting that extra precision can take a lot of effort without necessarily improving decision-making (the Pareto principle operates here like nearly everywhere else). Ultimately the decision to pursue greater accuracy and timeliness of portfolio data may come down to the culture of the organisation in question – if you operate in a data-centric, analysis-heavy firm then really robust statistics may be the only way to gain organisational support. But in a more creative, entrepreneurial environment the same tactic may kill the approach stone dead.
Ironically, as people’s exposure to data-driven portfolio methods increases and the organisation gains greater appreciation of the techniques, the actual decision-making process may evolve from the apparently rational to a much more subjective approach.
One of our panel suggested that his company had given up on the quarterly review and only re-assessed its portfolio when it really needed to – i.e. when there was a significant shift or event that the organisation needed to react to. In their example, the company moved away from endless disagreements around classifications and data quality to a conversation-led approach. They agreed its priorities up front, ensured they had a mix of big and small projects (to ensure some flexibility in their pipeline) and got cracking on delivery. Projects that were initially excluded from the portfolio were sent to limbo for at least two financial quarters so the constant discussion and re-submission of ‘pet projects’ was stopped. When an issue came up the business leaders got round the table and agreed what needed to change in the portfolio and then focused back on delivery.
Whilst my experience of enterprise portfolio was never quite as smooth as our panel member’s appears, it certainly resonates. Once business leaders have a better understanding of the shape of the overall portfolio (and the pressures which surround it) it is certainly possible to shift the emphasis in portfolio conversations from the minutiae of the process and the quality of categorisation to a much more valuable conversation around what makes most sense for our business and our people – if sufficient trust and rapport can be built amongst the participants.
That atmosphere of trust (or mistrust), frequently comes down to the kind of sponsors involved with the portfolio. At previous BTN meetings we have discussed at length the vital importance of leadership in the delivery of change. Some enlightened organisations have gone so far as to actively train their senior executives in the sponsorship of change, or required them to lead initiatives as part of their learning and development programmes.
Even with great leaders involved in the portfolio, access to sponsors is a critical factor in successful enterprise portfolio management. Frequently access to time with sponsors, even well intentioned ones, can be the real resource constraint in effective portfolio management and optimisation. Our panel’s experience echoed this point, emphasising that senior management bandwidth was a major influencing factor in successful outcomes for portfolio approaches. Access to well-positioned and informed leaders allows contentions to be managed more effectively, removes political roadblocks and generally allows things to move more rapidly. More specifically, however, our experience suggests that the quality of decision-making is just as important as good sponsorship itself. Quality decision-making is a tough nut to crack, requiring good information at the right time with informed and experienced leaders. But get it right and the benefit to the business can be substantial.
One of our participants is trying to instil this throughout their organisation and organically grow their next generation of change leaders. They are experimenting with empowering their change teams to act semi-autonomously – self-correcting elements of their overall portfolio in real-time at the working project-level. This has the advantage of removing the decision-making bottle-neck around senior leaders, and builds confidence and experience on the ground. Clearly the success of this kind of initiative will only be seen over time. It will require a very clear, shared vision of company priorities and a culture where lessons are learned from the inevitable mistakes and teams are supported through the process. It’s a bold step which will need some strong co-ordination, but I’m looking forward to hearing how the experiment has worked in a few years time.
It was evident from our lively debate that enterprise portfolio delivery can reap significant benefits for an organisation, but there isn’t a one-size fits all approach. But for me the key take-aways from our discussion would be:
Having clarity over the priorities of the business is critical
Introducing enterprise portfolio approaches can be painful, but if nothing else it can serve to provide much better clarity around the total portfolio and who really owns what
The exact methodology applied, the rigour, precision and positioning required is largely dependent upon the maturity and culture of the individual organisation.
The best defence for gaming and internal politics tends to be transparency and continued dialogue amongst participants
Work-level resourcing and scheduling is extremely difficult without significant systems investment – it’s often better to try and avoid major resource clashes at the planning stage, mobilise delivery and deal with ongoing contentions as they arise
Sponsorship is critical
leaders must know what is being delivered on their behalves;
compensation should be aligned to optimal delivery of the portfolio;
good sponsorship is more than support: quality, timely decision-making is critical
It also appears that perseverance with portfolio approaches really can pay dividends – and occasionally, just occasionally, it might even help you please your FD!’
About the author: Alan More is an independent strategy, transformation and innovation consultant. He previously held strategy director and CIO roles with the global energy company Centrica plc; and was a consultant in London and Australasia with A.T. Kearney.
