Portfolio Agility– From Elusive Imperative to Practical Reality:

Portfolio Agility– From Elusive Imperative to Practical Reality:Seven Dimensions of a World-Class PMO Roadmap

WHITEPAPER

by Gil Makleff

I. AGILITY: FROM DECISION TO DEPLOYMENT

II. EPMO 2.0

III. SEVEN DIMENSIONS OF THE ROADMAP TO SUCCESS

ONE Architecture

TWO Process and Governance

THREE Visualization

FOUR Capital Projects

FIVE Financial Integration

SIX Technology

SEVEN Change Management

UMT Consulting Group Portfolio Agility–From Elusive Imperative to Practical Reality 2

He who has thorough knowledge of himself and the enemy is bound to win all battles. He who knows not himself and the enemy is bound to perish in all battles...

The essential factor is speed: taking advantage of others’ failure to catch up, going by routes they do not expect, attacking where they are not on guard.

- The Art of War, Sun Tzu (China, ~300 BC)

I. AGILITY: FROM DECISION TO DEPLOYMENT Perhaps the greatest challenge business-leaders face today is how to stay competitive amid constant turbulence and disruption. The capacity to identify and capture opportunities (and dodge threats) with assurance and more quickly than rivals do is at the heart of organizational agility (Sull, 2010). Effectively making strategic decisions and quickly deploying their derivatives within the organization to affect rapid operational, resourcing and business-level changes is crucial to the long term survival and competitive advantage of any enterprise. However, both are fraught with difficulties. The process of strategic decision-making is contingent on the quality of the supporting information. Knowledge of one’s own organization as well as knowledge of other organizations on the market battlefield is needed to compete successfully (Citroen, 2009). Numerous frameworks have been proposed to represent the assessments of the organization (internal) and the industry/market (external) contributing to strategy formulation; Porter’s Five Forces and Value Chain models are a good representative example (Porter, 1998):

Irrespective of the model, in a complex enterprise, it is a critical yet non-trivial, top-down and bottom-up exercise to gather and aggregate complete, accurate, and timely information and industry knowledge, internal and external to the organization and effectively present it to stakeholders in a way that matches their operational needs. From an execution perspective, mature organizations are mostly optimized for efficiency rather than for agility (Kotter, 2012). Recent examples abound with companies that, like Borders and RIM, recognized the need for a big strategic move but couldn’t pull themselves together to make it and ended up sitting by as nimbler competitors ate their lunch. One of the top reasons for an organization’s lack of preparation for change is misalignment between their strategic intent and operational execution. Organizations that best, most quickly, align strategy with execution, benefit from up to a 6% better EBITDA margin than their least aligned peers. Because organizations are forced to execute their strategies as quickly as possible, they often mistakenly embed poor practices and misalignment within the organization that can result in operational inefficiencies and extended time to market (Singh, 2014).

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MARGIN

MARGIN

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY

PROCUREMENT

INBO

UND

LOGI

STICS

OPER

ATIO

NS

OUTB

OUND

LOGI

STICS

MARK

ETIN

G&

SALE

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SERV

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RIVALRY AMONG

EXISTING COMPETITORS

THREAT OF NEW ENTRANTS

THREAT OF SUBSTITUE PRODUCTS OR SERVICES

BARGAINING POWER OF BUYERS

BARGAINING POWER OF SUPPLIERS

STRATEGY

DECISIONS

PRIMARY ACTIVITIES

SUPP

ORT A

CTIV

ITIES

Internal Assessment (Porter Value Chain) External Assessment (Porter’s Five Forces)


Thus, the old ways of setting and implementing strategy are failing us. The organizational processes we have used for decades to run and improve our enterprises are no longer up to the task of winning in this faster-moving world. Companies used to reconsider their strategies only rarely. Today any company that isn’t rethinking its direction at least every few years—as well as constantly adjusting to changing contexts —and then quickly making significant operational changes is putting itself at risk (Kotter, 2012). However, less than half the organizations surveyed recently felt that they could quickly translate important strategy and operational decisions into action (Neilson, Org DNA Profiler® Survey, 2014). And, while almost 80% of global CEOs recently surveyed expected to transform their organizations, only about half were satisfied with their ability to execute on their strategic vision (McLean, 2013).

II. EPMO 2.0 When companies fail to execute on a strategy, the first thing managers often think to do is restructure. On the other hand, research shows that improving information flows is more effective than any other approach to enhancing execution (Neilson & al, The Secrets to Successful Strategy Execution, 2008). It is perhaps for this reason that in the past decade, enterprise program/portfolio management offices – EPMOs – have gone from being “as rare as unicorns” to being encountered frequently in large organizations that see the need to be responsive and effective in the face of changing conditions (Fitzgerald, 2014). In the early years, PMOs were simply defined as a project management office and widely understood to be a central pool of project managers and a repository of project reports and documentations. (Schoen & Fitzgerald, 2014). Today, the most common mandate given to an EPMO is that of reporting on the health and progress of various high-visibility initiatives in operation across the enterprise. More mature organizations, however, also leverage these structures to ensure that initiatives actually support strategy and that planned benefits are actually realized (Fitzgerald, 2014). This top-down exercise focuses, at each level of the organization, on answering difficult key questions such as: are we currently aligning our internal capital and expense dollars with programs that support executive’s strategy? What immediate changes need to be made in the organization at the micro day-to day-level in order to support the strategy? Are there missing initiatives that should be considered and budgeted for? This wider scope of responsibilities highlights the value of the PMO in both gathering information about the current state of the business that helps drive strategy, and as a device to deploy it at all levels of the organization. Building this formal foundation integrates tactical and strategic decision-making with execution and can accelerate and enhance the precision of change at the grass roots level. Great leadership alone cannot overcome the huge logistical aspects of strategy deployment. A properly designed, implemented and operated “EPMO 2.0”, when deployed as a robust command and support center for the entire enterprise, top-to-bottom, is able to take on this role in a systematic and comprehensive way. It should be mandated with the responsibility for achieving agility, in particular with respect to effectively and quickly shifting resources in support of new business strategies, i.e. portfolio agility (Sull, 2010).

STRATEGY

DECISIONS

DEPLOYMENT

EPMO 2.0

RIVALRY AMONG

EXISTING COMPETITORS

THREAT OF NEW ENTRANTS

THREAT OF SUBSTITUE PRODUCTS OR SERVICES

BARGAINING POWER OF BUYERS

BARGAINING POWER OF SUPPLIERS

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY

PROCUREMENT

INBO

UND

LOGI

STICS

OPER

ATIO

NS

OUTB

OUND

LOGI

STICS

MARK

ETIN

G&

SALE

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SUPP

ORT A

CTIV

ITIES

EXECUTION

PRIMARY ACTIVITIES

MARGIN

MARGIN


Ultimately, the EPMO can become integral to changing the very DNA of the enterprise; the complete transformation of the core business model a la the “dancing elephant” known as IBM under the leadership of Louis A Gerstner (Fitzgerald, 2014). A “business transformation office” of this nature will either directly or indirectly combine the totality of the necessary structures and disciplines that may have been key to successful, yet more narrowly-scoped, PMO implementations in the organization’s past; these should be re-used in the construction of the EPMO 2.0. It will have formalized reporting; great portfolio management; resource, finance and collaboration management practices; and, most importantly, a strong program management function. However, any transformative effort of this type requires a clear understanding of the importance of the PMO and sponsorship at the most senior levels of executive management.

III. SEVEN DIMENSIONS OF THE ROADMAP TO SUCCESS Clearly, this more prominent and strategic manifestation of the EPMO 2.0 can unlock disruptively more business value, with tangible impact on corporate revenue and profit. But, it is also significantly more integrated into the organization’s fabric; this web of information flow spanning the enterprise’s capabilities is a lot more challenging to design and implement successfully. People, process and tools need to be considered in a holistic manner. The piecemeal approaches of yore need to morph into a single framework for managing information and decision making that will put the organization on the right track towards enhanced agility. Developing, maturing and focusing on the following seven distinct dimensions can provide a maturity roadmap to success.

DECIS

IONS

AND

REP

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CREATE SELECT PLAN MANAGE

PORTFOLIO MANAGEMENT

RESOURCE MANAGEMENT

FINANCIAL MANAGEMENT

PROGRAM MANAGEMENT

COLLABORATION MANAGEMENT

PMO Disciplines

Demand Management

Capacity Planning

Resource Planning & Tracking

Time Management

Schedule ManagementProject Tracking & Status

Task Management

ADRI Management

Document Management

Communication Management

Portfolio Selection

Budget Formation

Benefits Planning

Budget Execution

Benefits Realization

Portfolio Tracking & Status

Portfolio Reporting


ONE: Architecture In most large, complex organizations, multiple PMO layers will be required, working in a synchronized approach and passing information and data for decision making and performance measurement between them. Questions like, “How many PMOs does the company require? At what levels? What information will each level provide and how will the roll-up of information work?” need to be answered and continuously evaluated. For example, a local- or country-level PMO might support budgeting, prioritization and management of initiatives in a particular country while a higher level PMO for each line-of-business would roll up relevant inputs from the country-PMO. A centralized EPMO could then roll up information from each line of business-PMO. By correctly developing the architecture and associated information flow rules and governance, more relevant data can be made available in a timely manner for effective business decision making at each level of the organization. Designing and constructing the Enterprise PMO hierarchy must consider the organizational span of control and be proportional to maturity. Style and substance are equally important. Rather than adopting a monolithic ‘big bang’ approach, an iterative one where PMOs are tailored to support immediate organizational needs first and at a level the organization can embrace and benefit from is highly recommended. The most important pertinent capabilities should be included in the initial iteration; as PMOs and the organization mature, additional capabilities can be added and functionality enhanced. Failure to do so results in PMOs that delivers little value (Schoen & Fitzgerald, 2014). TWO: Process and Governance A structured approach to translating strategy into execution will most likely include well-known business process mapping (BPM) and architecture techniques. PMOs can ultimately be charged with orchestrating this activity; most of it will typically take place at the line-of-business level. Core capabilities, once identified, can be compared against newly deployed strategies, and analyzed to determine whether operational shortcomings have been exposed or, more rarely, whether wholesale capability gaps need to be remedied to maintain strategic alignment. For example, an insurance company could identify “selling of insurance” as an immutable, core capability. The strategic approach to it, however, has clearly evolved over the past decades, from selling door to door, through retail centers, and lately online. Transforming from one go-to-market strategy to the next drives perceived structural, operational and technological changes that form the basis for new programs, which in turn feed the initial phase of portfolio governance – the demand management phase for prioritization. Modern PMOs will typically embrace the ubiquitous portfolio governance model encompassing demand management, analytics and selection, roadmap management and benefits realization, often known in shorthand as the ‘create’, ‘select’, ‘plan and ‘manage’ phases. THREE: Visualization Effective visualization is critical to leveraging information in consistent decision-making by non-technical stakeholders. Modern program and portfolio management theory and practice suggest that superior insights are obtained when the business’s strategy is integrated into the data management, analytics, and visualization implementation. Effective data-driven business decisions can made by assessing performance via metric-driven analytics if the data is structured in a strategically aligned model and subsequently presented for insight generation via intelligently designed visualization, i.e. a top-down approach. A potential data dump is transformed into a valuable resource, and unfocused reporting into delivery of real, contextualized meaning that can be drawn at a glance (Ahmed, Balachander, Kniazeva, Kumar, & Venkatakrishnan, 2014). A well-crafted analytical plan is one which can turn data into a specifically directed report within a few clicks. It can transform decision-making by allowing stakeholders to more easily consume and understand insights. Intelligent design of data analyses and KPI visualizations strongly depends on the questions being addressed and the demands and station of the consumer. Thus, COOs, CFOs and line-of-business leads need to see different insights despite viewing the same data.


FOUR: Capital Projects Portfolio optimization and governance of complex, multi-year, multi-million dollar capital project investments pose a unique challenge in the context of rapid strategy alignment and agility and require dedicated attention, particularly when mixed in with more tactical, shorter term, lower cost projects. To make effective capital planning and investment control (CPIC) decisions, executives must provide, at an early stage in their portfolio’s life cycle, a long-term vision combined with effective planning and execution. The balanced capital investment portfolio needs to take into account risks, returns, and business goals and relies on a solid repeatable process and the gathering of accurate and complete data. This is especially true in regulated environments such as government, healthcare, banking, insurance and utilities, where judicious marriage of standards and agility is required. Methods to dynamically reallocate capital spending from project to project throughout the year and across multiple budget cycles can also be invaluable in insuring strategic and effective stewardship of capital budgets. FIVE: Financial Integration Successful strategy deployment and execution is predicated on alignment with an organizations’ financial management activities as led by the office of the CFO. Traditionally conflicting perspectives make this a non-trivial exercise. Larger programs, capital investments and transformational initiatives tend to lend themselves to a ‘horizontal’ view; a shared services model that spans organizational structures. CFOs tend to view the world through a ‘vertical’ lens that aligns with those traditional organizational structures. This discrepancy in management style manifests itself in the underlying IT as well: program and portfolio management (PPM) systems are nominally horizontal; enterprise resource management (ERP) systems more vertical in nature. Budgeting and financial tracking of programs and portfolios needs to complement both views; initiatives that are funded across functions need to be managed in a manner that is insightful to both operational and financial executives at all levels of the organization. SIX: Technology A solid information technology framework is essential to achieving a high performance PMO and is an integral part of the strategy decision and deployment equation. The search for a tool that meets the entirety of a PMO’s needs will be undoubtedly fruitless. There are, however, enterprise-grade software platforms in today’s market that can provide a strong foundation and the necessary tight integration between a wide scope of functional PPM capabilities. Investing in those, vs. a disparate collection of separate tools, will allow organizations to identify and support their tactical and longer term requirements with a broad set of functions that can be adjusted and customized to their specific needs and integrated into the overall enterprise architecture (operational and financial), visualization paradigms, and IT deployment models (cloud or otherwise) effectively. SEVEN: Change Management Just as deploying strategy requires a measured and systematic approach, thus managing the structural, operational and technological change required to successfully transform the organization into an agile machine with world-class PMO capabilities requires a strong eye and adept hand. Building and evolving a framework that is readily adopted by all stakeholders is the necessary hallmark of a PMO transformation that succeeds where other standardized methodologies have failed. Implementing agile environments requires a strong dedicated effort to change the way employees at all levels in a company think and operate at the day to day level. It requires a keen understanding of culture and avoiding monolithic, cookie-cutter approaches than are likely to fuel resistance. Ultimately, adoption is the single most important dimension of a successful roadmap: it is possible to deal with functions that underperform and fix them over time; it is all but impossible to succeed with a framework that no one is using!


Breaching maturity challenges is, of course, more easily said than done, and one should be cautioned from making overly superficial assumptions about the difficulty of succeeding in the above dimensions. Organizations are typically more mature in some areas and less in others; the key is to identify the maturity of each dimension and build on the success of the current framework to enhance its maturity to the next level as a central connecting theme.

SUMMARY Agility is the elusive executive imperative of the day; long term success or failure depends on an organization’s skill at identifying and capturing opportunities faster than rivals do in this volatile and global business environment. More efficient and effective setting and implementing of strategy can be potentially achieved by leveraging a new style of PMO that is more comprehensive than in the past. Bridging the gap between strategy and execution and facilitating better decisions and deployment requires a non-ad-hoc, comprehensive roadmap to laying an enterprise-wide web of information sharing and structural change that is adopted at all levels of the company. To request a complimentary assessment of your organization’s PMO roadmap maturity, please click here or email [email protected]. To read more thought leadership pieces from UMT, visit our blog: umt.com/blog or sign up for our newsletter here.

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REFERENCES Ahmed, I., Balachander, N., Kniazeva, T., Kumar, K., & Venkatakrishnan, S. (2014). Intelligent Data Management and Visualization. UMT Consulting Group. Citroen, C. L. (2009). Strategic Decision-Making Processes: The Role of Information; Doctoral Thesis. University of Twente. Fitzgerald, D. (2014). Use the Four Styles of the EPMO to Evolve from Visibilty to Transformation. Gartner. Hanford, M., & Mieritz, L. (2014). Market Guide for PPM Service Providers. Gartner. Kotter, J. P. (2012, November). Accelerate! Harvard Business Review. McLean, J. (2013). Global Performance Alignment Survey Database. Price Waterhouse Cooper. Neilson, G. L. (2014). Org DNA Profiler® Survey. Strategy& (formerly Booz & co). Neilson, G. L., Martin, K. L., & Powers, E. (2008). The Secrets to Successful Strategy Execution. Harvard Business Review. Porter, M. E. (1998). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press. Schoen, M., & Fitzgerald, D. (2014). PMOs: One Size Does Not Fit All. Gartner. Singh, M. (2014). Closing the gap between strategy and execution. Price Waterhouse Cooper. Sull, D. (2010). Competing through orgnizational agility. McKinsey Quarterly.

Portfolio Agility– From Elusive Imperative to Practical Reality:

Leadership & Management

Transcript of Portfolio Agility– From Elusive Imperative to Practical Reality: