Use an objective approach that drives the right decisions to help orchestrate transformation
In today’s dynamic enterprise, it’s difficult to keep strategy aligned with execution. An objective approach is required to drive the right decisions that help orchestrate transformation, but which is the right approach for your organization?
Most organizations still use some form of top-down project planning, but this can be sub-optimal if demand and innovation are not aligned with strategic imperatives. Ideally, the project management execution methods that an organization uses (Agile, waterfall, or back-of-the-napkin) helps enable the PMO to more effectively align execution with strategy, organizations typically turn to one of these three investment approaches for project planning:
The most common approach to investment planning, the project-driven method has been used for many years to support traditional annual planning processes.
It involves defining and prioritizing business strategy with the key stakeholders, which often occurs in silos. During the annual planning window, project requests are captured across the enterprise, typically in silos and disconnected from the strategy. A business case is completed, including an impact assessment against the prioritized strategies, and semi-sophisticated techniques are then used to prioritize, optimize and select the best portfolio under varying budgetary constraints.
This approach is fine as far as it goes, but it does have one main frailty. The execution is generated disconnected from the strategy, and the strategy was only used to select what was considered to be the best of whatever was teed up. In this situation, there’s really no way to know with certainty whether the right demand has been identified. In essence, this process simply selects the best of what could potentially be a bad list of projects.
This approach relies on the systematic decomposition of corporate or strategic objectives into actionable and measurable business strategies.
Programs are created to deliver on the corporate strategy and further decomposed into the underlying execution (projects, epics, etc.). Programs are independent investment entities, created independent of – but completely integrated with – the underlying execution. These provide a natural bridge between strategy and execution. This model is commonly used as a way to govern the bi-modal reality. A program could be 100% agile, 100% traditional, or a hybrid of both.
This is a better approach than project driven planning. In this model you can say with some certainty that the execution was derived from the strategy.
This most advanced approach provides a framework in which an organization can most effectively orchestrate business transformation.
As shown in the graphic, this approach introduces the concept of business capabilities, which represent the people, processes, and technology that are responsible for enabling each of these core operating functions of a business.
Mapping the relationship between a strategy and the key capabilities needed to realize each strategy, it’s possible to generate the right demand and/or execution. For example, if there is a strategy that has no supporting business capability, then a new capability can be introduced by funding a program. If a strategy is dependent upon a poorly performing capability, then projects and programs can be funded to enhance that capability and knock it out of the park.
This the most transformative approach to aligning strategy with execution. Capability-driven planning truly acknowledges and connects the business, IT assets and products that all execution is funded to transform.
Any type of change can have major repercussions. For example, an IT portfolio manager can engage the business in a discussion around improvements they wish to make to each capability, revealing the supporting IT environment – apps, services or technology – that automates each capability, making it possible to drive the changes needed to deliver on business requests. In this scenario you can more quickly cost out the impact and quickly make trade-off decisions.
Capability-driven planning is by far the best approach. All of these approaches are often discussed as distinct and separate from one another. In reality, the capability-driven approach is a superset of all three. It provides the best framework for keeping strategy aligned with execution, as continuous planning throughout the organization changes projects and programs.
There will always be bottom-up demand generated throughout the year - this model gives you a more expansive framework to validate and triage that demand and assess both its relevance and redundancy. The program-driven approach is built into the framework and can be used to harmonize execution across the enterprise, and across different project execution techniques.
To master strategic portfolio management you must first acknowledge these key imperatives: