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What is Portfolio Management?

Written by Ben Chamberlain on June 5th, 2014 at 6:00 am

Ask ten people to define portfolio management and you’ll likely receive ten different answers. Of the various definitions, most will focus on some sort of aggregate reporting across portfolios or highlight alignment of spend with strategic priorities and selecting the optimal project portfolio under varying budget constraints.

I believe firmly that neither definition aptly describes today’s portfolio management which, at its core, is about the ability to integrate enterprise portfolios and understand their unique interrelationships and dependencies to improve business decisions.

Making better business decisions, of course, requires financial due diligence or intelligence to support them. I often speak with companies which have embarked on a portfolio management engagement (could be Project Portfolio Management, Application Portfolio Management, IT Service Portfolio Management etc.) and they quickly found themselves, unexpectedly, on a freight train hurtling out of control towards the world of Financial Management.

I would define Portfolio Management as the discipline that connects your enterprise investment portfolios to build a dynamic blueprint of your company’s operating fabric and delivers the financial transparency needed to improve decision-making.

Today, I see enterprise portfolio management being sought out by businesses for two primary reasons.    The first is that scarcity is a reality for most organizations. With demand for growth exceeding capacity, executives are struggling to fund projects to grow the business. Reduction in budgets and increasing operational costs are simply eroding discretionary spend leaving executives facing the daunting challenge of having to “Do More with Less.” In response to this dichotomy, they are turning to Enterprise Portfolio Management to rationalize operational costs to free up funds to invest in more innovation.

The second reason is that traditional PPM isn’t delivering anticipated results and that’s costing businesses by preventing them from realizing up to 46% of the planned business value from their project portfolios. PMOs are embracing Enterprise Portfolio Management to go beyond the tactical yet important project execution to digitalize their PMO and take the strategic responsibility to optimize the spend and reallocate funds throughout the year to maximize ROI delivered across the portfolio.

UMT360’s Enterprise Portfolio Management is built on a foundation of cross-portfolio relationships to integrate enterprise portfolios and drive financial transparency to improve investment decisions. The solution can be distilled into four digital Enterprise Portfolio Management principles:

1. Portfolio Integration – UMT360 maps the relationships and dependencies between your enterprise portfolios, for example business capability, product, project, application and IT service portfolios, to build a dynamic blueprint of the operating fabric of your business.

2. Financial Transparency – UMT360 utilizes these relationship to go beyond the static “chart of accounts” view provided by ERP systems to derive the fully loaded costs of projects and assets and streamline budgeting and forecasting.

3. Analysis & Roadmaps – UMT360 helps you analyze portfolios and collaborate to with stakeholders to assess trade-offs and improve investment decisions resulting in higher quality demand. Intuitive transformation roadmaps provide greater visibility across both short term and long term demand and allow executives to gauge the cross portfolio impact of proposed changes.

4. Performance & Results – UMT360 effectively extends traditional PPM systems to improve project delivery and help companies realize more ROI from their project and program portfolios. The solution also helps establish a benefits realization framework to better understand if projects delivered the anticipated results.

In my next post, I’ll look at some examples of Enterprise Portfolio Management in practice and the ROI benefits that company’s are enjoying as a result.  Want to know more about UMT360’s Enterprise Portfolio Management solutions?  Check out UMT360’s online resources for some great information about enterprise portfolio management or contact us for a free demo.

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