Portfolio management is a complex and multifaceted process that involves various activities, such as selecting investments, monitoring their performance, and making decisions. If you want to succeed at managing a portfolio, you need to understand the decision objects involved.
There are four primary internal decision objects in portfolio management, namely the business, investments, funds, and resources (see Fig. 1 below, which you will have seen in the previous blog). The business object pertains to the organization itself, including its products, services, companies, and tasks. The investments object involves project or product portfolios, while funds are the investment vehicles used to finance project execution. Lastly, resources refer to the human capital employed in project execution.
Understanding how these decision objects interact with other elements is vital to portfolio management. You need to consider decision domains, decision menu states, structure, humans, and time to comprehend their interplay. And if you want to take it to the next level, you have to understand how decision objects interact with each other.
Let me define portfolio management elements that interact with business objects (see Fig. 2):
- Decision domains: These objects exist in three decision domains or decision rooms, which help us understand where decision-making occurs and what factors influence the decision-making process.
- Decision menu (States): These objects are dynamic and continually move from one state to another. Each object has several options to transition from one state to another, such as an investment moving from an opportunity to a project or being approved or rejected. The transition between states is triggered by actions taken by humans and external conditions.
- Structure: All objects have structures. For instance, the business object is organized by products, capabilities, and processes.
- Humans: All objects involve humans who bring in behavioral biases.
- Time: Time is a significant factor that impacts the performance of decision objects and influences the decision-making process.
Understanding how decision objects interact with each other is extremely important. The business object needs to constantly learn from its interactions with customers and partners to keep up with the competition, or it’ll end up dead in the water. On the other hand, the investment object has the crucial task of generating demand, choosing the right investments, and managing the investment lifecycle smartly. By understanding these interactions, organizations can create a comprehensive list of decisions and ultimately make effective portfolio management decisions.
In the upcoming blog posts, we will shift our focus towards the remaining elements and offer you valuable insights on how they all work together to drive business success. We’ll delve deeper into these topics and provide you with actionable advice. Don’t miss out on the opportunity to learn and grow your business.