Proper Investment Management Does Not Discriminate Against SizeBy Faisal Hoque | Posted 2012-02-15 Email Print
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Portfolio and program management (PPM) provides enterprisewide focus on defining, gathering, categorizing, analyzing, and monitoring information on corporate assets and activity as they relate to technology implementation and management.
Technology is the factor that enables entrepreneurs and small enterprises to compete and succeed against entrenched enterprises. Never before in the history of business or economics has technology played such a critical role in leveling the playing fields.
In the 21st century global economy, a small business has the ability to reach across oceans to source products and sell goods with nearly the same efficiency as a large multinational enterprise. The truth is that if a small enterprise can identify a genuine need, technology exists to fulfill that need both locally and globally. The heavy lifting comes in creating an appropriate business model.
Most startup companies fail in large degree because they are unable to correctly assess their market opportunities, develop a strategic plan and exercise discipline in execution. The same is true for technology implementation: Many technology projects either fail in execution or fall short of their full potential because they were never holistically managed as a piece of the business. These instances lack a logical approach to identifying and evaluating the critical elements required within a project.
In this article, I’m going to focus on portfolio and program management (PPM), which provides enterprisewide focus on defining, gathering, categorizing, analyzing, and monitoring information on corporate assets and activity as they relate to technology implementation and management.
Centralized, Balanced View
PPM offers top managers a centralized and balanced view of various business-technology projects—a view that lays out the benefits and risks of each. Effective PPM is realized only by focusing on organizational structures, processes, information and automation and, in the process, bringing order to chaos.
If a business hopes to transform its technology management, it must first structure and organize all the disparate pieces of information held by the organization. It’s really no different than anyone trying to organize hundreds of photos on a hard drive or clean out a basement. Management must discover what it has, sort it into logical piles and assess the value of the individual items against some larger goal.
Business-technology portfolio management is critical. Managers of financial assets, for example, would not act without a full understanding of all their holdings. Portfolio management is widely applied in other management functions as well, including strategic planning and new product development. Most business-technology executives know of it—and many practice some form of it—but it has not often been granted the strategic role it deserves.
PPM unites an organization’s efforts at every level. It is a completely different way of seeing, assessing and planning the business—somewhat analogous to financial portfolio management.
In finance, an investor identifies and categorizes all assets to form a portfolio, which provides aggregated views of individual investments. The investor might see that the portfolio is weighted too heavily in one industry, has redundant exposure to one type of security, carries a certain level of risk and promises a certain level of return. The individual can then set a strategy and construct a portfolio that’s likely to achieve an appropriate balance of risk to return.
In much the same way, portfolios of business-technology assets reveal what technology a company owns and what its various arms are trying to accomplish. Management can use a portfolio approach to decide which activities are more likely to support the enterprise business strategy.
Aligning IT Spending With Business Needs
The strategic role of PPM is nothing short of providing an enterprise (regardless of size) with a tool for better aligning its technology spending with current and future business needs. PPM creates information and insight to help management make good business decisions by:
· defining business improvement options and scenarios;
· analyzing the implications and impacts of potential initiatives;
· setting target allocations for investment categories;
· evaluating and making decisions on project requests;
· evaluating the health of business and technology assets;
· determining the appropriate sequencing of major programs;
· managing risk mitigation across the enterprise; and
· identifying and resolving critical project-related issues.
Through its centralized view of all technology projects, a good business-technology portfolio will make it easy to ensure that investments are well-balanced in terms of size, risk and projected (anticipated) payoff. Used wisely, it will increase business-technology’s value by exposing projects that are redundant or risky, while revealing how to shift funds from low-value investments to high-value strategic ones.
A Single View of the Truth
Portfolio and program management improves the allocation of resources and reduces project failures by creating a “single view of the truth” about an enterprise’s operation. It generates a common vocabulary and metrics. It permits a comprehensive set of decisions to be made before action is taken, thereby identifying and resolving conflicts.
PPM allows strategic direction that’s flowing down to meet suggested courses of action that are flowing up in a formal management process. PPM is, in fact, continuous: strategic planning informs portfolio managers, who reassess programs and projects. Information on the status of corporate assets, risks and financial performance likewise influences subsequent strategic planning.
PPM provides information that links business needs with business-technology activities—enabling a converged viewpoint that is focused on business outcomes, rather than advancing the interests of one group versus another. This allows an organization to get beyond the incomplete approach of computing the ROI of individual projects.
With a portfolio viewpoint, the payback of a project can be evaluated within the context of many projects contributing to a business goal. The merits of individual projects are not seen in isolation but in consideration of their contribution to business capabilities that enable a strategy.
In forward-thinking companies, business and technology portfolios become inseparable from other portfolios—R&D, product management, mergers and acquisitions—and become just another component of a business initiative. Through a PPM implementation, no one group or project’s interests will advance at the expense of another. For a small to medium size business, that safety net is invaluable.
Faisal Hoque is the founder and CEO of BTM Corporation. An entrepreneur and thought leader, he was named as one of the Top 100 Most Influential People in Technology. A former senior executive at GE and other multinationals, Hoque has written five management books, established a research think tank, the BTM Institute, and become an authority on convergence, innovation and sustainable growth. His latest book, The Power of Convergence, is now available. © 2012 Faisal Hoque