Balancing a portfolio is not an easy job. Incoming demands and capacity&capability supply are rarely in equilibrium. It depends on the organization's digital maturity, culture and external factors.
A portfolio is a collection of projects, programs, subsidiary portfolios, and operations managed as a group (Portfolio Management) to achieve strategic objectives. Organizational strategies and their objectives serve to establish and guide an organization's decisions, direction, purpose and resource allocations to achieve targeted values. These values can be broad or narrow depending on organizational mission and vision. External values may be market, social, political and environmental, internal values such as competency, talent, culture, growth, development and competitiveness are also important considerations. Determining organizational strategy is a difficult iteration based process but achieving result is sometimes even more challenging and complex.
Achieving results involves numerous challenges, with the primary ones being the alignment of strategy and execution, securing and retaining support from senior management, balancing feasibility with essentials, identifying both short- and longterm benefits and objectives, managing resources such as capacities and capabilities, and maintaining the ability to execute effectively. Essentially, organizations must avoid wasting valuable resources and should strive to "undertake the right projects at the right time in the right manner." Portfolio management offers a structured approach to attain strategic outcomes.
Basic assumptions is, that your organization have IT, Business and Digital Strategy.
Fundamental principles to handle IT portfolio:
Tip #1 - Strive to achieve excellence in strategic execution
Value is the primary focus of portfolio management. It is defined as the entire quantifiable and qualifiable benefits, worth, and usefulness of the organization - the total sum of all tangible and intangible elements. Tangible: monetary assets, shareholder satisfaction and utility. Intangible: reputation, brand recognition, public benefit, legacy, patents, and trademarks. In connection of programs and projects, Earned Value Management (EVM) helps here - make sure that Cost Performance Index, Schedule Performance Index, Cost Variance, Schedule Variance are in the right value range in the realization. For portfolio Value Creation Index (VCI) could show results.
Tip #2 - Enhance transparency, responsibility, accountability, sustainability, and fairness
Portfolio Managers often plays a number of important roles, quite often those of architect, enabler, and facilitator of portfolio management principles, processes, and practices, as well as the role of a portfolio analyst. To balance the portfolio, basic needs are to have objective data, clear data resources, a prioritized risk register, an iterative and psychological safety environment and a respectful culture.
"Culture eats strategy for breakfast." – Peter Drucker
Tip #3 - Balance portfolio value against overall risks
Objective value performance, and qualified/quantified risk measures helps here to balance the portfolio. Portfolio can be reviewed by short term vs. long term, risk vs. return. Portfolio needs to be aligned with strategic stakeholders, and being negotiated/agreed by executive management. Project prioritization, governing rules, specific directives for components, and improvement of portfolio practices are also important - to make sure that the intended value is delivered to the organization. Portfolio execution has the same cannibalization / synergy effect when we decide between investments - risk could arrive from interrelated impacts of project/programs.
Tip #4 - Ensure that investments in portfolio components are aligned with the organization's strategy
I do not need to mention, if a strategy changes - the portfolio changes too. Alignment and re-alignment helps here - portfolio managers also sequence portfolio components to account for portfolio component dependencies and their effects the balancing of constrained resources and other organizational considerations. For instance regularly communicating information and recommendation for governing actions, such as deciding when program and projects should proceed, be reprioritized, be changed to adapt to strategic changes, be terminated, or be suspended before the originally planned completion dates. Also organizations can undergo strategy redefinition as a result of stakeholder pressure for greater profitability or changing market conditions.
Tip #5 - Obtain and maintain the sponsorship and engagement of senior management and key stakeholders
Regular alignment with Executives especially in Rolling wave planning is imperative to keep proper engagement of stakeholders. They need a detailed view of utilization, constrained resources, it's impact on portfolio delivery and recommended solutions to the challenges. This also helps to exchange info how the portfolio is related to the organizational vision, mission and strategic goals, and about the business value delivering by the portfolio for the organization's objectives.
Tip #6 - Exercise active and decisive leadership for the optimization of resource utilization
Taking a proactive approach to evaluate, prioritize, and allocate resources effectively across various initiatives. Portfolio Managers must assess portfolio with organizational goals, make data-driven decisions, and ensure transparency in prioritization processes. Standardization of Demand & Resource management helps here to understand subsidiary's resource difference or to identify special resource needs. Demand can be satisfied with group resources instead of local resources, or with a simple throughpot analysis we could determine the average execution speed. Reordering - resequencing different activities can help here.
By fostering collaboration among stakeholders, they drive efficiency and adaptability while balancing risk with realized value. Decisive actions ensure that high-value projects receive the necessary focus, enabling optimal resource utilization and achieving strategic objectives within time and budget constraints.
Differentiating recurring activities and projectized activities could also helps to understand more the picture.
Tip #7 -Foster a culture that embraces change and risk
Usually in big corporates, where culture that embraces change and risk is rare. The reason is that it needs diverse, gender-balanced teams, psychological safety environment where employee can ask, challenge and can fail too. Of course humble and stewarding leadership is necessary too to serve the organization's culture improvement. Divisional organizations has the greatest risk to implement this culture because of the silod operations and because of the divisional competition. Also disadvantages in legally diversified groups (decentralized governance), where the leadership is shared, and where the authority of decisions are not controlled by the dominion contract. These corporates trying to implement more agile frameworks and operational models which pushes the organization into more matrix and more agile direction. Do we think that more agile culture could extend the capacity? I do not think so. Check your Schedule Performance Index or Cost Performance Index of your projects, or ROI / ROAC formulas, or just the content of sprints - dig down. More the changes, more capacity burns. In my opinion the more agile organization needs the more diversity, inclusion and empathetical leadership. This is hard work too even in recession times where you often hear layoffs, reorganization and simplification projects.
Culture also contains innovation, which gives a proper reaction to industrial changes, applied key technologies for instance AI, RPA, LLMs. Continuous up-skilling and retention of top performers are also needs to be part of Culture of today's organizations.
Tip #8 - Navigate complexity to enable successful outcomes
In complex situations we need to set up our target aspects, which derived from the organization's strategy and we need to list pros & cons of each situation/decision point. Based on this analysed and assessed picture a Portfolio Manager could assess the interrelation of Project and Program execution, and can facilitate architectural or even business decisions. In these situatiuons PMIS (Portfolio Management Information System) consists of the tools and techniques used to gather, integrate, visualize, preserve, and disseminate the outputs of organizational portfolio management. It is used to support all aspects of portfolio management, may be integrated with business management tools (enterprise resource planning system, business process management system, tools to measure/optimize business process, modeling tools) and may be a manual or automated process depending on the needs and maturity of the organization.
Tip #9 - Capability development
Organizations continue to assess and evaluate their environment to identify new capabilities in line with business strategy and market conditions. After we understood the current state of the organization, we identified gaps between the existing and desired capabilities, and received fact-based early warnings of the potential roadblocks of the portfolio, we could develop evidence based recommendations to address these capability gaps. The challenge for any organization is to build capabilities before the competition do, however often drivers could motivate organizations to create new capabilities or extend their existing capabilities. These are the organization's culture, customer demands, long-term shifting markets trends, response to urgent external or internal events. Balancing does not mean the maximization of capacity to achieve the capability, the goal here is not to minimize the capability gap without regard the other factor. Balancing involves the integration of strategic plans, process assets and environmental factors too. Dynamic capability and capacity is crucial to innovation.
Summary
Organizational demand management, capacity utilization and capability management is not a trivial task. The full organization has effects on portfolio execution. Think strategically and ask yourself: "Are we doing the right thing?" More precisely, it means assessing whether the right thing is being done using three key requirements:
a profound understanding of the associated environments
full alignment of all portfolio components with the vision and values of the org.
creativity in developing effective responses to forces and changes that affect the fulfillment of or that purpose.
Source: Standard for Portfolio Management - 4th Edition and own experiences
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