A few months ago, I shared a video about what Recharted Territory considers to be the Portfolio Essentials. The video covered eight elements to include in an enterprise portfolio management system. Building out these essentials often requires creating new habits, and investing in people and tools.
How many of your new year’s resolutions have you stuck with? In life and business, changing habits requires time, energy, and dollars before you see a return. Is investing in portfolio management worth it? Will it leave you with better outcomes? More resources to invest back into achieving your goals? Here are 12 ways that it can ultimately help your wallet (and one case where it won’t).
Avoid excessive costs caused by problems when vision meets reality
As Nilofer Merchant shares via anecdotes in her book “The New How,” a strategy created without clarity of how it will be executed can end up being extremely expensive. Misalignment, lack of buy-in or accountability, and assumptions about execution feasibility can lead to confusion and delays. You can avoid a lot of these headache-inducers with a transparent and collaborative process for gathering info, debating strategy, and building roadmaps with stakeholders. All of these activities help the teams move faster by clarifying a shared purpose and vision before starting execution.
When a lot of people are working on the same mission, it’s easy to duplicate efforts. It can happen throughout your product lifecycle, from initial analysis through implementation. That means multiple research projects that uncover the same insights. It means building similar requirements in multiple systems, requiring extra people, time, and artifacts to maintain. All while other areas go unexplored, problems stay unsolved and opportunities unrealized. With clarity into current portfolio investments, you can more easily spot redundancies and build the training, knowledge, or processes to avoid them in the future.
Pivot away from projects faster
With regular reviews of your portfolio you can also spot, address, and pivot projects that have run their course, are overcome by events, or are no longer delivering value. Using a value framework and metrics, you can have more productive conversations about dealing with work that’s no longer contributing to your goals.
Avoid expensive bets
Experimentation at the portfolio level tests large investments or business model changes. This can happen long before anyone buys a tool, tasks developers, or launches changes to the existing business. The results of these time-boxed experiments might suggest that this path isn’t worth continuing down. Even so, with a fast feedback cycle and cheap tests, you’ll be able to explore multiple directions within the same budget and timeframe as a longer release cycle.
Make your investments work for you
A value framework based on your goals helps promote regular conversations about the relative impact of initiatives. By looking at goals, projections of value under uncertainty, and the benefit of gathering extra info, you can make better decisions about which costs are more likely to reap rewards or enable future opportunities.
Avoid stockpiling and acting upon stale information
Detailed customer insights, business cases, and solution plans can quickly become outdated if the market preferences or technical trends shift. This is why lightweight business cases coupled with portfolio analysis are helpful. Each research pass quickly reveals the known state of the problem and solution space, which you can reference and update over time as you uncover new information. Rapid research and just-in-time revalidation help maintain insights that are actionable.
Invest in the legacy-creating projects
High-risk, high-complexity, and high-reward projects will help your company stand out, inspire others, and be seen as a leader. Portfolio analysis identifies and defines those projects. With a portfolio allocation strategy you can balance risk by maintaining a mix of these game changers and simpler improvements.
Avoid business process breakdowns and reputation costs
Sometimes a change to one part of an enterprise can cause critical issues somewhere else. Business process problems and data issues can cost a business both immediately while they fix the problem, but also long-term by impacting customer service and the business’s reputation. While the company is recovering, customers could turn to competitors, further hurting the business. Portfolio analysis coupled with systems engineering helps to identify dependencies and sequence work so that you minimize adverse impacts while adding value incrementally over time.
Improve recruitment and training
Employees connected to the vision and empowered to make it happen will be more excited about their work. Higher morale and connection to purpose means less employee turnover, reducing recruitment and training costs. Engaged employees are also more likely to recommend your organization to others, helping you attract talented team members who can help create more value. Many of the artifacts created for portfolio analysis are useful for providing enterprise context to new employees.
Make informed decisions about opportunity costs
Spending money on certain projects means you’ll miss out on others. Continually scanning within and outside the enterprise for problems and opportunities can help you stay aware of more valuable options you might be overlooking.
Attract donor and investor funds
For companies who are judged by certain metrics in order to attract funding (notably non-profits), portfolio management helps to connect projects to desired metrics and focus everyone on actions that move the needle.
Maneuver around known hits and position yourself for wins
The way you sequence projects can make a huge difference to your bottom line. Both to the short-term costs and the long-term profits you can gain. Factoring in the impact of delaying an item while prioritizing the backlog and building roadmaps can help avoid unnecessary losses or reach your goals faster.
When portfolio management won’t help your wallet
Portfolio management won’t have the positive effects listed above if you aren’t executing. It helps avoid the drawbacks of both traditional planning methods and shoot-from-the-hip execution, but without execution then there’s honestly no reason to focus on portfolio yet. Consistent action and delivery of value are critical for realizing the full benefits of a portfolio management process.
Portfolio management is a system that needs to be designed, built, and operated. However, with the right elements that complement each other, it can help you save money, seize opportunities, and more effectively use what you already have to achieve your mission.
The system is also more sustainable when deployed in a certain order, which we help organizations with via our Path to Portfolio™ program. If you’re interested in portfolio management support for your organization, go here to learn more about working with Recharted Territory.