Download Effective Portfolio Management: Making Strategy a Reality

wipro.com
Effective Portfolio Management:
Making Strategy a Reality
E
xecutives have constrained
and
limited
assets,
and to make informed
investment
decisions
they
must understand the impact,
dependencies and risks that are
associated with each initiative.
An understanding
of these
relationships allows them to make
informed investment decisions on
initiatives with appropriate levels
of risk and reward. Broad-base
categorizations of the type of
investments within a portfolio are
to run, grow and transform the
business. Companies that pursue
business excellence do so through
a combination of great strategy
and powerful execution. Portfolio
management is the bridge
between the two, i.e. making
strategy a reality.
is to make sure that products,
services, projects or programmes
that organizations are delivering
are focused on meeting strategic
objectives and delivering benefits.
Essentially, portfolio management
is about doing the right “things”
with the right benefits, irrespective
of whether those “things” are
products, services, projects or
programmes. If they are not
“right” then they should be closed
or stopped, as assets need to be
allocated appropriately.
Portfolio
management
has
become increasingly important as
companies face shorter product
lifecycles, rapidly transforming
technologies and greater global
competition. How businesses get
return on their money invested
is paramount to the growth or
survival of that company. As a
process, portfolio management
•Provides a decision framework to
senior managers and executives
on investments
Portfolio
management
helps
realize maximum business value
as it
•Enables achievement of the best
return from total investment in
assets
•Helps with the “right” services
being delivered, products being
developed and programs and
projects being undertaken
Broad-base
categorizations of the
type of investments
within a portfolio
are to Run, Grow
and Transform the
business.
2
Effective portfolio
management
Effective portfolio management
provides a mechanism to make
sure that the organization is doing
the right “things” and achieving
appropriate benefits. In many
organizations, there could be
hundreds of such programs and
projects running across different
functions with a geographically
dispersed setting. This complexity
causes organizations to struggle
with doing the right “things” and
realizing appropriate benefits.
The outcome is that organizations
receive a poor return from
their investment by failing to
unlock the full value of their
capital investments.
The following are the key elements
for
portfolio
management
to be effective through a
combination of great strategy and
powerful execution.
Governance
Governance
for
portfolio
management includes giving
directions when looking for
benefits being greater than
investments, and how risks and
interdependencies come into
play across services, products,
programmes
or
projects.
Portfolio Management enhances
executive decision-making based
on company specific criteria,
and key decisions are made at
governance forums.
Strategy alignment and risk
tolerance
Successful
executives
have
realised that portfolios represent
where they are today in their
current operations (catalogue)
and what they will be in the future
(pipeline). As the strategy and risk
tolerances change, portfolios will
need to change. Portfolios have
a direct line of sight with strategy
and risk tolerances to be effective
in making strategy a reality.
3
High
D
E
K
Re-evaluate
Accelerate
Economic Value
C
F
Y
M
Stop
N
A
Execute
B
X
Low
Low
High
Strategic Alignment
Figure 1: Value map of services, products, programs or projects (a, b and so on) showing the level of strategic
alignment and the executive decisions (stop, re-evaluate, execute, accelerate) for portfolio management
4
Portfolio office
Portfolio office is established
to provide timely and accurate
information to all structures,
processes and information. It
is required to enable effective
decision making and portfolio
delivery success.
Capability and asset allocation
When
doing
portfolio
management, pipeline gridlock
needs to be avoided with
appropriate
asset
loading,
be it people, infrastructure,
or applications.
of working together as one team.
In addition, the portfolio change
initiatives must have senior
management commitment.
Challenges
There are few challenges to
running an effective portfolio
management
within
an
organization. The underpinning
issue that organizations struggle
with is keeping their portfolio,
irrespective of whether it is a set
of services, products, programs
or
projects,
under
control
and relevant.
Engaging the organization
Success in portfolio definition and
delivery is only possible if people
are engaged, focused on the
appropriate goals and get a sense
Taking a risk-based approach to
the challenges leads to some key
portfolio management risks.
CHALLENGES
RISK
• Effective decision making to stop poorly performing
• Inefficient resource allocation
services, products, or projects
• Extended timelines and missed deadlines
• Unrealistically determined benefits
• Ineffective sequencing, creating problems in delivery
• Ineffective conversion of strategy into action
• Unclear portfolio strategy alignment
• Failure to achieve business objectives
• Lack of sufficient experience and capability within
• Inefficient delivery and execution with inconsistent
portfolio management functions
portfolio management
• Organization’s inability to absorb change due to lack of
• Delays in the delivery and increased costs
asset capacity
• Ineffective monitoring, reporting and aggregation tools
• Lack of effective actions due to slow identification
of key issues
• Inconsistent portfolio data across business units or
functions
• Differing decisions leading to inconsistent outcomes
of portfolio management
The way forward
Organizations
that
have
successfully
implemented
effective portfolio management
have seen improvements in
strategic alignment of initiatives,
return
on
capital
invested,
resource allocation, and overall
performance.
6
About the
author
About Wipro
Dr. Roma B. Mohanti is the Management Consultant, Process Excellence,
Wipro. He has over 25 years of industry experience in areas of Portfolio
Management, Program/Project Management, Operational Excellence,
Governance, Risk and Compliance, Organization Strategy and Balanced
Scorecard, Agile, Lean Six Sigma, and Service Management. He is a key
contributor on engagements with leading UK FTSE 100 clients. Roma
received his Doctorate from the North Carolina State University, USA.
Wipro Ltd. (NYSE:WIT) is a leading information technology, consulting
and business process services company that delivers solutions to enable
its clients do business better. Wipro delivers winning business outcomes
through its deep industry experience and a 360 degree view of “Business
through Technology.” By combining digital strategy, customer centric
design, advanced analytics and product engineering approach, Wipro
helps its clients create successful and adaptive businesses. A company
recognized globally for its comprehensive portfolio of services, strong
commitment to sustainability and good corporate citizenship, Wipro has
a dedicated workforce of over 160,000, serving clients in 175+ cities
across 6 continents. For more information, please visit wipro.com or
write to us at [email protected]
7
DO BUSINESS BETTER
© Wipro LTD 2016
CONSULTING | SYSTEM INTEGRATION | BUSINESS PROCESS SERVICES
IND/PMCS/JUL2016-DEC2016
“No part of this booklet may be reproduced in any form by any electronic or mechanical means (including photocopying, recording and printing) without permission in writing from the publisher,
except for reading and browsing via the world wide web. Users are not permitted to mount this booklet on any network server.”