Recently, companies have shifted their attention to business transformation or optimization in order to improve their current operations and extend their opportunities. This is a significant shift, moving towards a future focus instead of attempting to get the most out of the present through disciplines like process and task optimization or reengineering.
This is a solid strategy, but for many organizations, it hasn’t succeeded. Business transformation and optimization fail at an alarming rate, a much higher rate than for process and task optimization.
Why do business transformations and optimizations fail at such a high rate? Or a better question, why do business transformations and optimizations fail at a much higher rate than process and task optimization? Further, why is there a significant disparity between these four types of investments.
Strategic portfolio management is designed to help address these issues, so, why aren’t more organizations seeing those expected benefits? What exactly is wrong with the traditional approach to portfolio management? The answers to those questions come down to two categories:
- Things that aren’t done properly.
- Things that aren’t done at all.
In every aspect of work, organizations and individuals tend to focus on processes and mathematical models. Those are the most visible elements; I like to refer to them as the items that are “above the hood”. But these models are by no means as reliable as portfolio managers believe. This is my first complaint.
These models completely ignore things that aren’t visible, that can’t be thrown into an analysis. The most obvious problem is that since the future is highly uncertain, it is useless to apply methods that super-analyze, decompose everything, and project current analysis results into the future while completely ignoring these invisible “under the hood” things that are having a huge impact.
Examples of these under the hood items include:
- Systemic constraints.
- The strategic approach.
- Systems thinking vs. analytical reductionism
- Unresolved debates around fundamentals (project- vs. product-centric for example).
- Inappropriate segmentation and distribution of investments.
These “above the hood” and “under the hood” themes build on each other, and the consequences are significantly amplified.
This analytical reductionism, based on the “above the hood”, visible things, may have been appropriate in the last century for process and task optimization investments, although, I would dispute even that. But it has no place in a business environment that is changing radically and rapidly, nor where the greatest advantage is not cost optimization, but innovation. The power of creativity and disruption blows apart existing portfolio management frameworks. And this is my second complaint.
This is the first in a series of blogs that explain the seven themes that contribute to portfolio management excellence. If the thoughts and ideas I express resonate with you, look out for more in my series coming soon. I will also be delivering webcasts discussing under and above-the-hood topics with real life examples of success – and failure.
 Hammer, Michael; Champy, James. Reengineering the Corporation, HarperCollins, 2009
 Joseph L. Bower, Clark G. Gilbert, from resource allocation to strategy, oxford university press, 2005
 Harry Robinson, Mckinsey @Company, 2019
 Blake Morgan, Companies That Failed At Digital Transformation And What We Can Learn From Them, Forbes, 2019
 Hung LeHong, Graham Waller, Digital Business Ambition: Transform or Optimize? Gartner, 2018