In the next few minutes I would like to give you our perspective on what Portfolio Management is about and why it is so important for the success of organisations.
All organisations start out very little. Such as this tiny plant. Many start out in very fertile soil And so they begin to grow. Fast. This happens through organic growth as well as through mergers and acquisitions. They become a jungle. Highly dense and highly complex. Hard to understand. Hard to steer and optimize. To do so they must be structured somehow. So they get organised. Into different divisions. Usually to deliver different parts of the value chain or to drive different business lines.
Typical divisions of commercial organisations are Marketing, Sales, Technology, IT, Customer Operations, Finance, HR These silos and their responsible managers have different targets. And they begin to optimize their silo to best meet these targets. The silos strive for operational excellence in their specific arena. Which is not necessarily beneficial for the organisation as a whole. The silo targets often have conflicts with one another Marketing pushes revenue growth, Sales units sold, IT focuses on stable operations and projects in time and budget, Operations on happy customers and few complaints. And so these organisations pull into different directions. In doing so they fight for scarce resources. In terms of budget and man power. Budget and resources are usually limited.
So there is a need for some sort of orchestration. From the CEO and his or her team. Like a conductor and his philharmonics orchestra. The conductor decides when which musician is supposed to play and to some extend also how. To put the silo managers on a leash is most likely not the way to go. The silo managers would be dis-empowered. They would lose the freedom to do what is necessary to fulfil the targets. And can thus not be made responsible for the results. Orchestration should happen more like at an airport. The tower watches the different steps of the process happen. For some of the steps the Tower gives the Go to continue, The tower manages the portfolio of flights, And the tower also intervenes if things go wrong. How does the process for such flights look like, Passengers check-in, the plane is being prepared, Passengers board, they buckle up, Security information, take-off, The plane flies to the destination, Landing and passengers grab their bags.
The real art on portfolio management is however, Not to manage only one portfolio. But to manage several portfolios. And to understand and consider their inter-dependencies
For instance: Projects, applications, products, services, promotions, KPIs This all seems plausible, so why is portfolio management not implemented or effective in many organisations. This is because managers have the responsibility to deliver on the targets of their division. So while understanding what would be best for the organisation as a whole. They are forced to balance this with what is best for their division. And as long as external pressure is not hard enough this will not change. Cross-divisional steering measures will be kept lean. And in many industries economical pressure has not been hard enough and oftentimes another round of silo optimization will come first. Today there is significant pressure on many industries Euro-crisis, digital transformation, Nuclear energy exit, Demanding customers, low interest rates, price erosion, new technologies demanding large scale investments. So many organisations in many industries struggle Energy, Telecom, Financial Services, Banks, Insurances, Retail chains, Travel, Business Process Outsourcers, And also the public sector is pressured by budgetary discipline. Now an external view is required, an outside-in perspective needs to be taken, Transparency and the ugly truth.Portfolio Management can be a sustainable way forward. But a concept alone is not enough. The key and critical part is implementing and establishing Portfolio Management. A major success factor for establishing Portfolio Management is the right tooling. And Portfolio Management is neither only an IT centric discipline nor is it about Projects only. It’s real strength lies in a cross-functional implementation, so a tool must be flexible and support any portfolio, for example also products, services and KPIs Here is the Good news… There is the European Center for Digital Transformation. With a strong track record in portfolio management the European Center supports you end-to-end: from vision to implementation and provides a cutting-edge tool that smoothly enables Portfolio Management in your organisation and with your very specific needs.