In order to stay in business and to remain competitive, a company will inevitably invest in business change projects and programmes. And whilst the pot of money a company can set aside for this purpose is limited, the demand on it rarely is. So how does a company decide which projects and programmes to invest in? And how do you ensure your portfolio is not filled with pet projects, those where there is either a conscious or unconscious biases that favour some projects over others? Is it science or is it art?
Building the Portfolio - Bottom Up and Top Down Planning
Building your portfolio from the bottom up, whereby functions are asked what projects they want to do and to provide some justification for them is almost certainly going to give you with a good view of the perspective of where they want to take that function or the problems they are facing that need to be resolved. Although this approach will expose potential pain points and inefficiencies raised by the people who are closest to it, it is unlikely to give you a coherent portfolio that moves the business forward in the same direction.
This is the insight that a portfolio built top down will provide, with projects and programmes driven by a company’s strategic ambition, often described in a Target Operating Model with a roadmap of changes that fill the gaps between what a company does now and where it wants to be in the future.
It is just as important to take this approach when a company’s strategy in the near term is to introduce efficiencies and reduce costs.
A Balanced Portfolio
Any portfolio needs to balance initiatives, projects and programmes that fall into the following categories:
- Mandatory (regulatory and legal compliance)
- Strategic (initiatives for the future)
- Emergent/Reactive (responding to market changes and specific customer demands)
- Innovation (assessing creative ideas, new technologies or ways of working)
- Run the Business (maintaining systems and services that keep the core business working)
Ignoring any one of these over a number of years of investment would be problematic, but it will be the company’s own drivers that determine where the priorities for any given year will sit.
Prioritising the Portfolio
Clearly if a company is going to invest in a change initiative it needs to have a good reason to do so. There often needs to be some financial payback (growth, efficiencies) or avoidance (risk of fines, lost revenue), but there are likely to be other values that a company will determine as important with a non-financial benefit (such as improved customer experience, reputation).
One of the problems that a portfolio will wrestle with is the small initiative that never get off the ground as they sit in the shadow of larger projects and programmes. So whilst they often provide no significant benefit, they still have value.
Conversely focusing on improvement initiatives means there will be less money to spend on strategic initiatives that potentially make a real difference to the future of the company.
Prioritisation therefore needs to balance a number of factors that would later be expanded on as part of the business case, but initially will consist of rough approximations to enable comparisons to be made:
- Why are we doing it? (i.e. the motivation giving rise to the initiative)
- Do we have to do it? (i.e. is it Mandatory or Keep the Lights On?)
- What is its value to the company and when would the benefits be realised?
- What is the investment needed and over what period of time?
- How easy will it be to implement?
- How large an impact will there be on the company, services or customers?
- What is the risk profile?
Dynamic Portfolio Planning
Whereas a budget is typically set at the start of each financial year, a strong portfolio plan should be dynamic so that it can successfully respond to changes in the environment. This means that the decision to Start, Continue, Delay or Stop projects will not only be made at the start of the investment year, but regularly as the year progresses.
The bottom line
Portfolio planning is an important aspect of a company’s transformation journey and is one that needs to carefully balance the need of a company to meet customer expectations and resolve current commercial and/or operational challenges, whilst enabling the company to move forward.
Contact Us
Whether you are just getting started or are already on your change journey we will be happy to discuss your particular needs with you and provide you with a tailored proposition. Contact us to schedule a call and learn how we can help.
Simon and Zoe each have over 20 years’ experience working on business transformation programmes for some of the UK's most well-known and established private and public sector companies across a range of industries