State of the Art IT Portfolio Management…Isn’t Good Enough Anymore

Our previous article, Order from Chaos, The Building Blocks of Value Driven IT Portfolio Management, highlighted the pervasive problem of large enterprises having more proposed IT project investments than can be funded or staffed simultaneously.  Launching too many simultaneous projects results in slow progress, project overlaps and conflicts, and ultimately a wholly unsatisfactory outcome for the business, given the level of investment that was made.

To address this problem, companies have implemented processes and tools for IT portfolio management and investment decision making.  We described the current state of practice as including the following 4 elements:

  1. An executive decision making body
  2. Portfolio management software
  3. Prioritization frameworks for categorizing & scoring proposed project investments
  4. Standardized project execution methodologies

We consider this to be a foundational capability for a large enterprise, but sadly, even the most well-adopted and mature IT portfolio management process and tool set will never let an organization maximize business performance unless a fundamental mindset is also changed.  This mindset change is nothing less than doing away with the entire concept of an “IT Project.”

The organization must shift its thinking, and realize it is not investing in “IT projects.” It is investing in “business improvement projects with an IT component.”

A little reflection makes the point self-evident.  After all, if an organization deploys only information technology, without also making related changes to the broader business system – business process, job roles, metrics & incentives, organization structure – the improvement to business performance will be far less than if the project deployed the IT along with integrated changes to the broader business system.

Some organizations have made this conceptual shift, but too many have not. The most visible consequence of this outdated mindset is the difficulty many large organizations have in achieving true alignment and understanding among the executive team about the relative priorities of the proposed project investments, even after they have fully integrated a successful portfolio management process.

In an organization with an “IT Project” mindset, decision makers will likely be asked to prioritize a set of projects whose objectives resemble these disguised real-life examples:

  1. Project A: “The purpose of this project is to migrate from the existing [vendor application] to the latest release of [vendor application] to meet the spare parts forecasting, demand planning, repair planning, and order management requirements of the business. [Vendor application] is the most recent version of the application and has been classified as a non-GxP application. This project includes the software installation, data migration, user acceptance testing, and [vendor application] transition training.”
  2. Project B: “Upgrading [vendor application] will provide increased reliability of the software and hardware used in [product line]. Current levels of technology would allow a greater measure of support, with all servers and workstations in scope for [outsourced support].  The [vendor application] software would integrate into a single system solution that is web based and generally hardware independent.  [Vendor application] is configurable so future modifications would be easier to implement.”

No doubt many executive readers have seen project charters or business cases that look similar.  Even assuming both projects require identical investments of capital, expense, and people, it’s not easy to prioritize because the connection to business outcomes is nonexistent.  This example was a simple prioritization of two projects.  When you realize that most large organizations prioritize among several dozen projects, the difficulty of achieving true understanding and alignment on the part of the executive decision makers becomes clear.

An organization that has made the shift to a “business improvement project” mindset will be asked to prioritize among two very different proposed project investments:

  1. Project C: “The purpose of this project is to:
    1. Reduce WW spare parts inventory levels by between $xxMM – $yyMM
    2. Reduce carrying costs by $xxMM
    3. Improve fill rate from 94% to 97%”
  2. Project D: “The objective of this project is to assure ongoing [product line] manufacturing operations by replacing obsolete hardware and software. The success of this project will be measured by the following:
    1. New system-related root causes for recalls, cycle time increases, non-conformances, and scrap to be equal or less than the current baseline
    2. On time and on budget installation of the new system
    3. New system to be validated and be 21 CFR Part 11 compliant.”

It’s easy to imagine a robust and valuable conversation among the executive decision makers about whether it’s more important to improve their customer field service performance or to reduce the risk of a major production outage for a product line, based on the strategic priorities & current state of the business. After that debate, and a decision reached, it’s also easy to imagine an improved level of buy-in to the priority decision, even by the organization whose project was given the lower priority.

By now, most readers will have guessed that the first and second portfolios were of the exact same projects.  The difference is that projects C and D had objectives expressed in business terms measurable against a baseline.  They were thought of as “business improvement projects with an IT component.”  Projects A and B were expressed in IT terms only, and the connection to business results was missing.

Marrying this fundamental mindset shift to a strong portfolio management and investment decision making process is the missing factor that will elevate your enterprise’s return on investment far beyond its peers.

It is neither difficult, nor costly to make this a reality for your organization, and will position you to realize greater business benefits while reducing the level of IT investment necessary to achieve them.

 

Chas Hartwig  |  TayganPoint Consulting Group  |  chartwig@tayganpoint.com  |  @chashartwig

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