Is your portfolio reactive or proactive?

Is your portfolio reactive or proactive?

You’ve got your coffee and have fired up your laptop. What do you tackle next? How do you personally manage your life?

  1. Your mantra is “inbox zero” and you diligently track, prioritize, and deal with every request for your attention.
  2. You contemplate your life goals and break them down into yearly targets, projects, and tasks, adding them to your calendar before anything else.
  3. Something in between.
  4. Neither.

 

The choice for portfolio management in an enterprise is similar:

  1. Follow a reactive approach to get a handle on incoming requests and keep things moving.
  2. Be proactive and set a compelling vision, break it down into components and allocate resources to them.
  3. Something in between.
  4. Neither.

 

Working with organizations to design their portfolio management strategy, I’ve noticed that they tend to gravitate toward a reactive process at first. Some may incorporate more proactive elements over time. However, there are also some leaders who are either against a more proactive approach or just don’t see the value in it.

Both approaches have their pros and cons, so we’ll dive into each.

 

Reactive portfolio management

A notification splashes across our phone so we immediately swipe to check what’s new. We are constantly taking in new information and adapting our behavior accordingly. Reacting to stimulus helps us to both stay safe and take advantage of opportunities. It’s a fundamental part of how we live, and how we can manage our portfolio of work.

A purely reactive portfolio management strategy means that the Portfolio Team only evaluates what they’re investing in when confronted by outside forces. Those triggers could be feedback or ideas from vocal users, employees, or influential players in the industry.

Many companies start out with a reactive portfolio strategy. They have a mandate and a set of resources to complete the work. Having power and influence means they often get requests from multiple people. With a barrage of emails, lack of visibility, confusion about priorities, or misaligned expectations, companies are looking for a solution to help control the chaos.

Practically, a reactive portfolio management strategy helps to control the inputs into the process. It provides a forum and method for ranking the requests so that the team can focus energy on the ones that rise to the top. And perhaps more importantly, identify what you won’t work on right now. You can communicate the status of requests, including where they are in the product life cycle. Maybe going further by organizing the work by stakeholder and category to report on how you’re investing resources.

This approach is accessible to portfolio managers who may have less enterprise-wide knowledge, authority, vision, or innovation management experience. There’s less work involved and it’s relatively fast to set up and operate.

Another pro is that it can be great for encouraging anyone to submit ideas. More successful reactive portfolio strategies encourage input from stakeholders, customers, employees, and partners. If your case is strong enough, there’s potential that the enterprise will invest in it. Some companies also allow public voting on ideas, for even more crowdsourced information.

Besides reducing some stress, a reactive approach is also often associated with being more “agile.” Since we can pivot direction given any new input, we’re better able to adapt to changing circumstances. In theory, requests will come in if they are important enough at that time. In contrast, some leaders think that a proactive approach involves excessive research, visioning, and planning.

A reactive process can be a great starting point for building out the foundation of a portfolio management system. However, there are some cons to a passive style that a more proactive approach can address.

 

Proactive portfolio management

Portfolio Teams with a proactive strategy actively review the business and market. They ask for feedback around specific topics. They reverse engineer where they ultimately want to end up, so they can make decisions in the short term that build toward the vision. All of this activity happens without requiring outside triggers.

While crowdsourcing can lead to new insights that might not have otherwise been revealed, companies that don’t also include a proactive portfolio strategy are at a risk of allowing their legacy to be determined by others.

A reactive strategy can turn into “order taking” without a lot of questions asked. That means items are implemented as requested if they’re deemed to have high enough relative priority. Which can be a problem when each incoming request is a change to a broader enterprise or system.

Why? Requesters and users submit requests based on their view of the system. They’re basing it off of what they know or perceive, and importantly, also what they don’t know. Plus they might not be able to accurately describe what they truly need. That means that either local optimum solutions are found or the true root cause of problems remains undiscovered.

In addition, without a clear mission or strategic goals to work from, a reactive portfolio can lead to a mix of smaller projects that don’t propel the company forward in any particular direction. Companies with a reactive strategy may look up a year later and wonder why they’re not making progress on key goals. A reactive strategy is also a quick way to end up with a “Frankenstein” system that is confusing and harder to refactor.

On the other side, proactive management can help you build shared services. A reactive strategy would address a problem raised by an individual business unit as it came in. But what if multiple units had the same problem? Or what if the underlying core issue could be resolved by a shared service instead of multiple point solutions? A proactive strategy encourages a holistic systems viewpoint.

Finally, if you base your portfolio strictly off of requests, you’ll likely get a lot of ideas that address short-term needs and changes to existing processes. If you want to crowdsource broader ideas, then you need to ask for them, which means making a proactive decision. Proactive management helps the company improve the current business while preparing for evolving its role in the future. It can provide a wider and longer-term systems view to complement the feedback you’re receiving through a reactive strategy.

 

The sweet spot

Every organization will probably need a mix of reactive and proactive portfolio management. There will be emails you need to deal with and overlooking ideas from outside of the Portfolio Team can be short-sighted. But without proactive portfolio management for guidance, you’ll probably end up going in multiple directions instead of making sustained progress toward your big goals. The sweet spot lies in a mix of both. Start with reactive, then add proactive elements to create a vision and some draft plans for getting there. Evaluate how incoming requests relate to your plan or inspire adjustments.

If you’d like custom guidance for your organization, creating a transition plan is part of what we offer to clients building out their portfolio. Check out our services and book a consult here if you’re interested in learning more.

 

Is your portfolio management reactive, proactive, or a mix? Where are you stronger or weaker?

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