Wednesday, April 8, 2015

How to Strike the Right Balance between “Keeping the Lights on” and Growing your Business

Running, Growth and Transformation are all important stage for business’s survival and thriving.

Due to the limited budget and resource, most of the organizations, especially those legacy companies always struggle with keeping the light on and changing or transforming their business. Is “running a business” always your first priority, when is strategic execution more important than keeping the lights on? Optimally, how to strike the right balance between “keeping the light on" and growing your business?

The first thing is to accept that strategic execution is 'keeping the lights on,' but just has a longer term perspective. There’s no doubt both are important. The strategic execution has a longer term perspective, the answers are easier to find when you ask why is it more important to keep the lights on now versus making sure the lights are on next year or three years or five years from now as well. Project Portfolio Management is most effective and easiest to do when there is a consensus among the strategic management team and their reports about what is important for strategic execution and the priority versus keeping the lights on today. This is where the effective tool such as balanced scorecard to drive PPMO is highly practical and greatly simplifies the project selection process. In some industries there exists and needs to be a distinct separation from Project Portfolio Management and Operations, they have very strong gating style processes for project portfolio work before the result touches an operational environment. So it is about getting the right mix and the appropriate balance for whatever business operates in whatever industry.

The level of management consensus exists about the relative importance of projects and of operational work. A high level of consensus implies that an acceptable, transparent and credible basis for evaluating, selecting and resourcing projects exists (or can be constructed). Some elements that may help identify what factors could result in a short-term revenue generating project being set aside in favor of another considered more strategic, or vice versa. Not all projects are equal, some help to develop new products which drive revenue, others could be small system enhancements. From the perspective of project portfolio management, you need to better understand cases where day-to-day "keeping the lights on" type of work may take something of a backseat to strategic execution. The operational improvement tasks can be initiated as projects and their results commissioned into operation using phase gates that ensure the ongoing alignment of strategy, operations, and projects in terms of both strategic importance and resource availability at operational levels, as well as adhering to governance constraints.

Two dimensions of strategy execution: Keeping business running is where the money is made on a daily basis, which is then used to pay all of the employees, vendors and to invest in business growth is crucial, but it is not just about keeping the lights on, it has to be maintained and even better improved constantly. Business Growth is the dimension which deals with all the projects, portfolio management,... etc. It is the execution of short term and long term projects, and they can aim at creating value internally (by improving business) or externally (more strategic high-value projects, like an acquisition). The growth of business creates more value than running a business but is much riskier, that is where PPM comes in place. In short, to properly execute a strategy, both dimensions have to be totally aligned with them and with the objectives of the organization, otherwise, execution will not happen. And it is a very complex and challenging matter. Capital is supposed to be reinvested in order to maintain or create asset value. Things are of value if they help you get to where you want to be - which of course is expressed as your strategy. If you were to categorize all the capital investments in a typical organization's investment portfolio, they would fall into categories such as legal, regulatory & mandatory, infrastructure & platforms, product enhancements, venture, and growth. The weighting of spend in each category will be in line with the degree of freedom you have over each. In other words, a lot of simple, low risk, low-value investments and not so complex, high-risk, high-value programs. The appetite for risk and budget available for growth may depend entirely on the organization's financial health.

The challenge is balancing day-to-day operations with the resources for strategic initiatives. If there is a day-to-day operation break/fix type of issue in relation to a business critical technology, work on a strategic initiative may have to take a back seat until that is resolved. From a long-term standpoint and for the direction of the company and line of business, the strategic initiative is a higher priority, but for the customer at that point in time, an outage of a server that supports all sales or call center reporting would need to be addressed immediately. The challenge is balancing day-to-day operations with the resources for strategic initiatives when they are shared to ensure that the strategic goals for the long-term are still met. Depending on where your organization is with Resource Management, this could be quite challenging. Once you have secured some sort of valid and ongoing means of ensuring consensus on what is strategically important (long term vs short term, or any other debate), then you need to use that to drive operational policy and governance improvements as well as project portfolio management.

Agile organizations can execute their strategy a lot faster: The change direction in response to the environment is a lot easier, and they waste less time, energy and money on doing things that no longer have strategic relevance. It is important to stress the importance of establishing a relevant frequency of challenging the strategy and especially the resource distribution between different strategic themes and initiatives or make a distinction between operational review and strategy change. In the operational review, the strategy remains the same, but the way it is executed is reviewed and if necessary, adjusted. When strategy needs to be reviewed and adjusted that leads to execution changes as well. Some organizations also distinguish the three areas of Organization, Processes, and Systems in order to clarify which impact hits where. this leads to a clear road-map for those who need to execute while still seeing the connection to the formulated strategy.

Running, Growth and Transformation are all important stage for business’s survival and thriving, the point is how to leverage the resources and tools to strike the right balance, for keeping the light on, but also investing for long-term prosperity.


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