Proper Investment Management Does Not Discriminate Against Size

Technology is the factorthat enables entrepreneurs and small enterprises to compete and succeed againstentrenched enterprises. Never before in the history of business or economicshas technology played such a critical role in leveling the playing fields.

In the 21st centuryglobal economy, a small business has the ability to reach across oceans tosource products and sell goods with nearly the same efficiency as a largemultinational enterprise. The truth is that if a small enterprise can identifya genuine need, technology exists to fulfill that need both locally andglobally. The heavy lifting comes in creating an appropriate business model.

Moststartup companies fail in large degree because they are unable to correctlyassess their market opportunities, develop a strategic plan and exercisediscipline in execution. The same is true for technology implementation: Manytechnology projects either fail in execution or fall short of their fullpotential because they were never holistically managed as a piece of thebusiness.  These instances lack a logicalapproach to identifying and evaluating the critical elements required within aproject.

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 theyrelate to technology implementation and management.

Centralized, Balanced View

PPM offers top managers acentralized and balanced view of various business-technology projects?a viewthat lays out the benefits and risks of each. Effective PPM is realized only byfocusing on organizational structures, processes, information and automationand, in the process, bringing order to chaos.

If a business hopes totransform its technology management, it must first structure and organize allthe disparate pieces of information held by the organization. It?s really nodifferent than anyone trying to organize hundreds of photos on a hard drive orclean out a basement. Management must discover what it has, sort it intological piles and assess the value of the individual items against some largergoal.

Business-technologyportfolio management is critical. Managers of financial assets, for example,would not act without a full understanding of all their holdings. Portfoliomanagement is widely applied in other management functions as well, includingstrategic planning and new product development. Most business-technologyexecutives know of it?and many practice some form of it?but it has not oftenbeen granted the strategic role it deserves.

PPM unites anorganization?s efforts at every level. It is a completely different way ofseeing, assessing and planning the business?somewhat analogous to financialportfolio management.

In finance, an investoridentifies and categorizes all assets to form a portfolio, which providesaggregated views of individual investments. The investor might see that theportfolio is weighted too heavily in one industry, has redundant exposure toone type of security, carries a certain level of risk and promises a certainlevel of return. The individual can then set a strategy and construct aportfolio that?s likely to achieve an appropriate balance of risk to return.

In much the same way, portfoliosof business-technology assets reveal what technology a company owns and whatits various arms are trying to accomplish. Management can use a portfolioapproach to decide which activities are more likely to support the enterprisebusiness strategy.

AligningIT Spending With Business Needs

Thestrategic role of PPM is nothing short of providing an enterprise (regardlessof size) with a tool for better aligning its technology spendingwith current and future business needs. PPM creates information and insight tohelp management make good business decisions by:

?       defining business improvement options andscenarios;

?       analyzing the implications and impacts ofpotential initiatives;

?       setting target allocations for investmentcategories;

?       evaluating and making decisions on projectrequests;

?       evaluating the health of business andtechnology assets;

?       determining the appropriate sequencing ofmajor programs;

?       managing risk mitigation across theenterprise; and

?       identifying and resolving criticalproject-related issues.

Through its centralizedview of all technology projects, a good business-technology portfolio will makeit easy to ensure that investments are well-balanced in terms of size, risk andprojected (anticipated) payoff. Used wisely, it will increase business-technology?svalue by exposing projects that are redundant or risky, while revealing how toshift funds from low-value investments to high-value strategic ones.

ASingle View of the Truth

Portfolio and program managementimproves the allocation of resources and reduces project failures by creating a?single view of the truth? about an enterprise?s operation. It generates acommon vocabulary and metrics. It permits a comprehensive set of decisions tobe made before action is taken, thereby identifying and resolving conflicts.

PPM allows strategicdirection that?s flowing down to meet suggested courses of action that are flowingup in a formal management process. PPM is, in fact, continuous: strategicplanning informs portfolio managers, who reassess programs and projects.Information on the status of corporate assets, risks and financial performancelikewise influences subsequent strategic planning.

PPM provides informationthat links business needs with business-technology activities?enabling aconverged viewpoint that is focused on business outcomes, rather than advancingthe interests of one group versus another. This allows an organization to getbeyond the incomplete approach of computing the ROI of individual projects.

With a portfolioviewpoint, the payback of a project can be evaluated within the context of manyprojects contributing to a business goal. The merits of individual projects arenot seen in isolation but in consideration of their contribution to businesscapabilities that enable a strategy.

In forward-thinkingcompanies, business and technology portfolios become inseparable from otherportfolios?R&D, product management, mergers and acquisitions?and becomejust another component of a business initiative. Through a PPM implementation,no one group or project?s interests will advance at the expense of another. Fora small to medium size business, that safety net is invaluable.

FaisalHoque is the founder and CEO of BTM Corporation.An entrepreneur and thought leader, he was named as one of the Top 100 MostInfluential People in Technology. A former seniorexecutive at GE and other multinationals, Hoque has written five management books, established a research thinktank, 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