In today’s digitally charged business ecosystem, almost every organization has abundant ideas, innovations, and projects. Of course, those ideas can’t execute themselves — nor can they create value if they’re piling up without anyone taking the initiative actually to deploy them.
But that’s easier said than done. After all, you can’t walk through every open door simultaneously. That leaves many organizations paralyzed by the abundance of compelling opportunities, unable to decide which path to take because they can’t tell which will deliver the best results. They’re afraid to act — and if they do, they spend time second-guessing themselves or trying to split strategic asset allocation in too many directions. They’re also unsure how to pivot if a program begins to fail, lacking the transparency and data to reallocate resources quickly.
The good news is that there’s a way to harness your creativity and turn it into something you can rely on — something that opens doors and tells you which one to walk through. Today we’re discussing the solution that makes it possible: Strategic portfolio management in the program and portfolio management space.
A look at the program management space
Before we dive into program management and the strategy execution involved in juggling risk, resources and capabilities, let’s take a step back to better understand the playing field.
Managing a portfolio, understanding risk, and executing in an ever-changing competitive landscape isn’t easy. For starters, 45% of businesses admit they don’t fully understand those details or how to execute them effectively. It certainly doesn’t help that major players like Google and Tesla make it seem so easy. These strategy giants push out large-scale innovations quarterly and capture significant portions of markets that didn’t even exist before their products splashed onto the headlines. So, how do they do it?
It requires an ability to merge business strategy — a massive, overarching set of objectives, goals, and tools — with the execution layer of your programs, initiatives, and products. That merger requires you to see both the forest and the trees, demanding that you balance big-picture approaches and granular details. Ultimately, it’s mission-critical that your organization can marry strategy, investment, and execution in a constantly evolving business landscape.
Project portfolio management (PPM) has been the final word in risk management and strategic alignment for a long time. 89% of high-performing organizations have already adopted PPM strategies, and those that leverage PPM see higher success rates at a 2.5x lower overall cost.
But there’s a problem. PPM may help you understand the context of projects as they apply to strategy, but you also need to do this in a world where priorities shift, resource allocation is ever-changing and even the definition of success is fluid.
In 2017, Gartner predicted that enterprises that dedicate resources to ensuring strategy is executed across projects will be 80% more likely to be industry leaders. However, many organizations are outright failing to win with PPM. So, what’s happening? Why are success rates still low in a world where PPM has taken hold of many organizations?
The answer is simple: PPM needs a touch more strategy and flexibility. In other words, strategic portfolio management (SPM) is the secret sauce that’s helping winning enterprises execute smarter, faster and with more agility than their competitors.
But let’s not get ahead of ourselves. First, we need to understand where SPM gets its roots, which requires a deep dive into PPM.
What is project portfolio management?
What is a project? A single objective that an organization undertakes is usually to produce a product, service, or benefit within a specific timeline.
What is a portfolio? A higher-level collection of projects, programs, or products in a business’s pipeline.
Project management is a critical component of any modern enterprise. Projects, which are the lifeblood of innovation and revenue, require careful resource allocation, strategic priorities, and top-down alignment to succeed with any level of predictability.
We consider project management the first layer of execution. It revolves around the strategy layer, primarily dealing with how to do projects correctly. Successful project management is more closely defined through SPM by preventing cost overrun, reducing failure rates, and increasing project profitability. Companies with well-oiled project management teams save 28x more money on execution than those that come to the table without a game plan.
The Project Management Institute breaks successful PPM down into five steps:
- Define the appropriate portfolio scope and choose projects accordingly.
- Build strategy execution and management into the DNA of your projects from the very beginning, considering risk, capability, resource allocation, pain points and more.
- Make a solid business case for your projects.
- Close the gap between project execution and strategy goals.
- Create an efficient measurement process for strategic priorities.
Project portfolio management aligns execution with a strategy to define the best possible project portfolio for your business that meets budgets, visions, missions, goals and current environmental conditions.
But, like just about everything in the project management space, there’s more to the story. As customers become more demanding and tech solutions grow increasingly complex, modern businesses are realizing that PPM doesn’t always provide all the right answers — especially when it comes to project selection.
That’s where strategic portfolio management comes in.
What is strategic portfolio management?
Over the past few years, businesses have rushed to inject innovation into their core business models. Terms like “incubation chambers” and “innovation labs” have hit the mainstream, partially fueled by fear of digital extinction. But this isn’t just about keeping up with the latest trends. Traditional business models are threatened by all kinds of outside forces, from rising customer expectations to pricey supply chain pressures and lingering COVID-19 impacts — which means the fear of being “left behind” is real and only growing.
To facilitate this need for innovation, companies naturally gravitate toward projects. Perhaps they form ambidextrous teams to tackle innovation and “the core” simultaneously, or maybe they’re pushing innovation into small business chambers. Either way, projects (and portfolios by association) have become increasingly dense and sporadic.
Here’s the problem: 80% of digital projects fail. This puts companies in a tricky position: The odds are against them, but the rest of the world is willing to take that chance in the name of innovation — which means customers will view stragglers as slow, antiquated and maybe even boring. To make matters worse, the old fallback — PPM — has a built-in flaw.
The problem with PPM
The truth is that PPM is heavily focused on the strategy-to-execution side of project management. It makes the assumption that the outside world will remain stable and unchanged during the execution layer — but it won’t. Unless you can wrap everything up in two weeks, there’s a very real (almost certain) chance that the outside world will impact the risk, value, strategy, execution and, eventually, even the value of your idea.
In the digital age, simply understanding the value of a portfolio in a brief moment isn’t sufficient. PPM, which certainly includes strategy, doesn’t account for rapid changes in the digital ecosystem. It’s a mid-horizon process that primarily focuses on discovering which projects to work on, not on which projects to continue working on.
The solution is strategic portfolio management
Where PPM fails, strategic portfolio management saves the day. SPM enables continuous delivery and data-fuelled metrics and outlooks into the PPM process.
If project management is doing projects correctly and PPM is doing the right projects, SPM handles the right portfolios at the right time based on continuous evaluation, metrics, and strategy execution. It’s all based on the underlying understanding that you may need to cut, redefine, and adjust details during the portfolio execution lifecycle.
SPM helping companies adapt during COVID-19
There’s a lot of overlap between project management, portfolio management, and their offspring, PPM, and SPM. Let’s look at an extreme example to see all the details in action.
Say your organization used PPM to identify 10 unique ideas to focus on. One of these ideas is a new technology for your on-site employees, completely integrated into your company network. Your program managers and teams bust out the Kanban boards and start to execute this plan over a two-year timeline.
Unexpectedly, six months later, COVID-19 hits. Just like that, half of your workers are remote, and the on-site program you’re running will launch in a bare office.
With traditional PPM, you did everything right. You picked the highest value project based on available information, used the right strategies, and executed it under budget and on time. But the idea still failed.
You could blame the black swan event, or maybe you could blame the initial PPM phase — but the problem isn’t either. The only thing you did wrong was failing to adjust your project execution to evolving world events.
Leveraging an SPM solution, you would have identified an initial issue during the first few weeks of COVID-19 and adjusted your portfolio of investments to deliver value remotely or, at the very least, scrapped the project momentarily due to changes in the value proposition.
The takeaway: Aligning business strategies with achievable program goals
Here’s the big secret: Most changes that happen over the lifecycle of a program are small and continuous. No idea begins and ends in the same ecosystem. Implementing an SPM solution enables you to identify ecosystem changes and continuously optimize your portfolio of investments.
Strategic portfolio management focuses on continuously managing the right programs. Almost every organization has abundant investment options, which means it can be difficult to figure out which ideas or products deserve time, people and resources. You can have the most efficient, proven program management strategy in the world — but how do you know the optimal set of investments?
The easiest way to think about strategic portfolio management is that it aligns detail management with top-level business strategies and constantly evaluates investment against results.
Understanding SPM in the context of PPM technology
Strategic portfolio management isn’t new. Organizations have adopted agile practices and interactive methodologies to PPM for the past few years. Instead, SPM puts a term to the language of PPM, helping organizations uncover meaningful technology that appropriately tackles their modern portfolio management needs.
Deloitte famously said modern PPM practices must go beyond the question, “Am I doing things right?” Instead, they should answer, “Am I doing the right thing right?” SPM takes this a step further. You must know if you’re “doing the right things right at the right time and place.” It’s the next evolution of PPM, and technology vendors are taking notice.
Traditional PPM platforms primarily focus on “viewability” and portfolio architecture. They may combine financials and some data feeds to give you a great overview, but they fail to deliver one key component: real-time, data-driven decision-making.
Modern strategy-to-execution alignment requires beyond-the-grain insights. You need a constant feed of real-time data from all your systems to make informed decisions. These aren’t just decisions on which programs to fund initially; they’re decisions that help you determine which programs to pivot, fuel, and (in some cases) eliminate.
According to Gartner, 50% of PPM leaders will integrate SPM technologies to help define their programs and goals. To be clear, SPM requires the fusion of technology and leadership. Achieving those mid-horizon strategic goals requires intelligent insights, plenty of actionable decisions, and a wealth of data and governance capabilities.
Adaptive project management vs. strategic project management: Two different solutions?
So, you’ve pulled back the curtain to reveal what PPM and SPM really mean. You’ve discovered their strengths, shortcomings, promises and possibilities. You know everything there is to know, and now it’s time to go forth and conquer your strategic priorities — right?
Keep in mind that SPM was developed in response to constantly changing conditions. As such, it makes sense that the conversation around SPM and PPM will continue to evolve as new needs and challenges are revealed. That means it’s up to you to keep an eye on thought leaders like Gartner as they enrich (and perhaps complicate) the definition of success in the project management space.
In 2020, Gartner released a whitepaper entitled “The PPM Market Now Supports Strategic Portfolio Management and Adaptive Project Management.” Gartner suggests that PPM tech leaders will offer strategic project management (SPM) and adaptive project management (APM) solutions as part of their PPM offering.
That leaves a big question: What is adaptive project management?
This is where things get tricky. Gartner essentially splits (or ” bifurcates”) PPM into two components. SPM is how organizations find and continuously maintain the right portfolio of investments, and APM is how organizations execute on those investments. The point being made by Gartner is that lacking either side of the coin (SPM or APM) results in an inability to transform and compete in the marketplace efficiently.
In short, there’s a whole world of definitions and discussions around these topics, and it’s easy to get lost. That’s why a single comprehensive approach is about to become your new best friend.
How Shibumi can help you realize the value of SPM
Shibumi’s Strategic Portfolio Management solution empowers C-Level, Strategy, EPPM and IT leaders with a dynamic decision support system, providing the real-time information needed to make effective decisions. Shibumi enables the alignment of execution to strategy, including dynamic scenario planning and data-driven insights that reduce organizational risk, increase agility and maximize return on investment.
Importantly, Shibumi allows you to dig deep into any portfolio based on real-time data feeds, often from your existing APM tools, providing portfolio-level reporting and governance at scale. In addition, Shibumi can manage program pipelines, investment prioritization, and the delivery of business benefits against KPIs, giving program leaders the data they need to optimize investments constantly.
Ultimately, Shibumi is a portfolio management solution that helps you execute ideas at scale using the best possible information while helping you adapt to real-world disruptions. It enables our customers to achieve their roadmap of strategic business outcomes more consistently.
Are you ready to experience the future of strategic portfolio management? Contact us today.