Monday, May 2, 2016

“CIO Master” Book Tuning XXIII: Running a Balanced IT Portfolio

Portfolio management is about doing right things.

To reinvent IT management and maximize IT value, IT needs to become the strategic partner of the business, and it’s important to map and translate business strategy into technology projects, fundamentally every IT project should be business initiatives. Because IT is a key enabler of business capabilities underpinned by IT-glued business processes. Therefore, in order to implement strategy successfully, it is important to manage a balanced IT project portfolio to achieve business efficiency, effectiveness, and agility.

IT portfolio is a collection of programs and projects that are designed to help the organization achieve its targeted performance: They are the means through which a vision is translated into practice. Strengthen the strategic alignment of programs and projects to prevent initiatives being undertaken that do not support the enterprise strategy. Strategic initiatives are not the same thing as strategic objectives or strategic goals. They are the vehicle for achieving a strategic goal; it is focused on the “how” rather than the “what.” IT Portfolio Management plays a significant role in project delivery, portfolio optimization and prioritization. While some organizations may be excellent in the execution of project management, they may not have a mature portfolio management process in place, which causes issues with the strategy alignment of programs and portfolio. In order to make the portfolio executable, an organization needs to make sure that enough resources are available to deliver the programs and projects, also manage the interdependencies of the project.

A healthy IT program portfolio makes a good balance of “run, grow, and transform” projects:  IT should not just run the business today, but help to “grows the business” for tomorrow. The goals of portfolio management are not only the strategy alignment and value leverage; it's also a mix of short, mid and long-term projects that need to make up a project pipeline. If one focuses on short-term value too much, this might not support long-term strategy and vision in the end. If one puts too much focus on long-term value, there may be a loss of momentum and engagement. IT leaders must also have a good understanding of the projects and programs they are facilitating, particularly the objectives and benefits to be delivered. For the “Run the business projects” category: Prioritize based on the value offered or loss avoidance. These are tactical in nature. Make a special effort to fund projects with a payback of 3 years or less.  For the “Grow the Business” category: These are more difficult to prioritize. Partner with business to understand entry, exist, risk permanence and value generation strategy. For the “transform the Business” category, changing the way of business. Use of new technology, business process, partners, business model, joint product development, supplier integration and use of real-time, accurate, predictive information.

Portfolio management is about doing right things: IT has been unable to demonstrate the value in application portfolio management. It does well at a gross level but when it comes down to individual applications, it doesn’t do that well, largely because IT focuses on overcoming technology challenges, not solving business problems. What's missing in many organizations is the CIO's ability to question the business's requirements and justifications used for IT based projects. They also have to advocate for "departmental immersion" and other strategies to help IT become more integrated and aware of the organization as a whole. If you have a project or program without a sponsor, you need to take a fast, hard look at the business case that justifies the program you are engaged in, spending assets on. Focus on the decision-making process around which programs and projects should be executed based on their alignment with the goals and objectives of the organization, also focus on preventing the value leakage. It is, therefore, getting increasingly more attention with large organizations that have poor visibility and control over their project portfolio. A business case provides the description and reason for starting an initiative. What are the key drivers behind this project? What problem or event is driving the need for the project? Only CIOs put "Chief Investment Officer" hat on, he/she can scrutinize IT effort via the business lens. IT must invest in and leverage appropriate technologies and solutions to generate valuable insights to help their businesses open up new channels of revenue and monetization within the enterprise, their ecosystem, and the industry.

The CIO and IT function must be contributing to the future business strategy by leveraging technology as a means to an end, not the end itself. The three keys to presenting IT value are financial returns, return timeline, and risk. Just like any other investment. If you can present IT' project portfolio in a manner similar to an investment portfolio, it makes instant conceptual sense to board and C-level folks. Corporate IT has no choice but to embrace transformational change or literally face extinction. IT leaders need to strike the right balance of “run, grow and transform,” and from the budgeting perspective, continue to figure out what’s an ideal ratio to both “keep the lights on” and drive innovation and business growth. IT is not just a set of tools to improve efficiency, but a business solution providers moving from functioning to delight. IT can manage a balanced portfolio, design the 'measure' for assessing the potential for any improvement opportunity, feature enhancement, or initiative to offer a competitive advantage.


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