In order to execute strategy, change programs have to be delivered. Managing portfolios of programs and projects is a complex task that involves many different roles, and prompts strong emotional feelings of attachment for senior managers and other stakeholders.
The underlying principles of portfolio management are developed for each of the three portfolio management process groups: Defining, Aligning, and Authorizing and Controlling Process Groups.
A portfolio is a collection of programs, projects, or operations managed as a group to achieve strategic objectives. Its components may not necessarily be interdependent or have related objectives, but they are quantifiable, they can be measured, ranked, and prioritized. A portfolio exists to achieve one or more organizational strategies and objectives and may consist of a set of past, current, and planned components. An organization may have more than one portfolio, each addressing unique organizational strategies. Proposed initiatives are structured as portfolio and components are identified, evaluated, selected, and authorized.
Managing Change requires a clear vision of the future state. Strategic initiatives frequently involve a combination of one or more of the following: New products, new business models, new capabilities, new markets, new channels, new value creation opportunities, breakthrough platforms.
All relevant stakeholders need to be involved in the development and execution of the individual components of the portfolios. A portfolio analysis where dependencies and potential conflicts are identified needs to be incorporated in a portfolio roadmap that provides high-level strategic direction. A clear path from the current state to the future state with chronological data and dependencies enables the management of the portfolio. The portfolio roadmap needs to be frequently reviewed and updated to ensure alignment when changes occur.
Portfolio management is most concerned with the definition and evaluation of the results of change initiatives. The result of these changes is assessed on a continuous basis at the portfolio level.
All subportfolios, programs, and projects involve some degree of change, spanning from minor or evolutionary, such as the set-up of a new reporting system, to revolutionary change, such as a merger with or acquisition of another company or replacing internal IT servers with a cloud-based solution.
Organizations and people have a limited ability to absorb change over a given period of time. Frequently, in addition to dedicated personnel, a significant contribution may be required from day-to-day operations. When people are also asked to change the way they perform their work, three major factors come into play: Ability of the people to absorb the change, potential resistance to the change, unintended impacts of the change.
Portfolio management can be classified as either tactical or strategic. Tactical Portfolio Management addresses unique organizational strategies and objectives. The unrelated projects and programs are often classified as subportfolios. Tactically, organizations need to work on the right projects, allocate resources in an optimal manner, and ensure projects are on schedule and budget.
Strategic Portfolio Management is used to determine whether the selected projects, subportfolios, and programs align with the organization’s strategies and realize the expected values. The strategic portfolio is continuously evaluated to determine whether the organization is undertaking the right initiatives based on its current strategy.