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The Strategic Value of Portfolio and Program Management

Oct 20, 2011
By

Faisal Hoque






Regardless of its size, one of the keys components of strategic investment management in any organization is portfolio and program management (PPM). PPM provides enterprise-wide focus on defining, gathering, categorizing, analyzing, and monitoring information on corporate assets and activity as they relate to technology implementation and management.

PPM offers top managers a centralized and balanced view of various business technology projects and lays out the benefits and risks of each. In order to be effective, PPM is only realized by focusing on organizational structures, processes, information, and automation -- in the process, bringing order to chaos.

If a business has any hope of transforming its technology management, it must first structure and organize all of the disparate pieces of information held by the organization. It’s really no different than anyone trying to organize hundreds of photos on a hard drive or clean out a basement. Management must discover what it has, sort it into logical piles, and assess the value of the individual items against some larger goal.


Business technology portfolio management is essential. Managers of financial assets, for example, would not presume to act without a full understanding of all their holdings. Portfolio management is widely applied in other management functions as well, including strategic planning and new product development. Most business technology executives know of it, and many practice some form of it, but it has not often been granted the strategic role it deserves.

Many companies don’t reap the full rewards because they see it only in financial terms, think of it as a software tool, or view it as a tactical approach for managing projects. At its best, however, PPM takes all of a firm’s assets and activities into account. It is truly a more effective means of giving an entire company better information to develop strategies, manage risk, and execute plans.

PPM unites an organization’s efforts at every level. It is a completely different way of seeing, assessing, and planning the business -- somewhat analogous to financial portfolio management. For example, in finance, an investor identifies and categorizes all assets to form a portfolio, which provides aggregated views of individual investments. The investor might see that the portfolio is weighted too heavily in one industry, has redundant exposure to one type of security, carries a certain level of risk, and promises a certain level of return.

The investor can set a strategy and construct a portfolio likely to achieve an appropriate balance of risk to return. In much the same way, business technology assets portfolios reveal what technology a company owns and what its various arms are trying to accomplish. Management can use a portfolio approach to decide which activities are more likely to support the enterprise business strategy.

The strategic role of PPM is nothing short of providing an enterprise (regardless of size) with a tool for better aligning its technology spending with current and future business needs. PPM creates information and insight to help management make such decisions as:

  • Defining business improvement options and scenarios.
  • Analyzing implications and impacts of potential initiatives.
  • Setting target allocations for investment categories.
  • Evaluating and making decisions on project requests.
  • Evaluating the health of business and technology assets.
  • Determining appropriate sequencing of major programs.
  • Managing risk mitigation across the enterprise.
  • Identifying and resolving critical project-related issues.

Through its centralized view of all technology projects, a good business technology portfolio will make it easy to ensure that investments are well balanced in terms of size, risk, and projected payoff. Used wisely, it will actually increase the value of technology by exposing projects that are redundant or risky while revealing how to shift funds from low-value investments to high-value strategic ones.

The way it is

PPM improves the allocation of resources and reduces project failures through creation of a “single view of truth” about an enterprise’s operation. It generates a common vocabulary and metrics. It permits a comprehensive set of decisions to be made before action is taken, identifying and resolving conflicts. It allows strategic direction flowing down to meet suggested courses of action flowing up in a formal management process.

PPM is, in fact, continuous. Strategic planning informs portfolio managers, who reassess programs and projects. Information on the status of corporate assets, risks, and financial performance likewise influences subsequent strategic planning.

PPM provides information that links business needs with business technology activities -- enabling a converged viewpoint that is simply focused on business outcomes, rather than advancing the interests of one group versus another. PPM allows an organization to get beyond the incomplete approach of computing the ROI of individual projects.

With a portfolio viewpoint, the payback of a project can be evaluated within the context of many projects contributing to a goal. The merits of individual projects are not seen in isolation but in consideration of their contribution to business capabilities that enable a strategy. Through a PPM implementation, no one group or project’s interest will advance at the expense of another.

Faisal Hoque is the founder and CEO of BTM Corporation. A former senior executive at GE and other multi-nationals, Faisal is an internationally known entrepreneur and thought leader. He has written six management books, established a non-profit research think tank, The BTM Institute, and become a leading authority on the issue of effective interaction between business and technology. His latest book, The Power of Convergence (AMACOM, May 2001), is now available.

 


Tags: IT management, PPM, BTM Corp., CIO Leadership, Portfolio Management,
 

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