Today’s competition is getting more fierce. In addition, product life cycles are becoming shorter, and never-ending change emphasizes the importance for companies to deliver on strategic intent efficiently. In fact, it is not acceptable to waste time and money to achieve objectives. Delivering low-quality products is not a solution.
How can organizations reach their strategic goals and implement their visions by managing the company’s resources effectively? Some companies use strategic portfolio management to make critical choices about which activities to implement to deliver their visions.
Effective portfolio management helps organizations optimize their resources in order to support the most important and strategic projects and programs.
What is strategic portfolio management?
Strategic portfolio management is a process that helps determine where best to focus an organization’s limited resources in order to meet strategic objectives.
Basically, this requires making difficult choices on what not to do by focusing resources on fewer activities and better activities. Essentially, the activities that are most aligned with strategic success.
In this way, once the portfolio has been defined, attention goes to execution. In fact, to ensure that operations and strategy remain aligned, it is important to constantly monitor performance with metrics in accordance with the strategic goals.
Who is responsible for strategic portfolio management?
Strategic portfolio management requires that people within the organization decide if the projects and programs for execution align with the organization’s strategies.
In fact, whereas program and project management is about “doing things right,” portfolio management is about “doing the right things.” To be successful, an organization clearly needs both.
Unfortunately, what sometimes happens is that portfolio management remains at a level in the organization where it does not align properly with the strategic direction of the business.
For this reason, it is the responsibility of the senior management team to align and integrate strategy and operations.
Portfolio management benefits
Project portfolio management allows companies to improve communications and cooperation between people who define the strategy and those involved in executing it. In fact, this can be particularly useful in an organization that has functional silos, which usually produce a lack of communication and collaboration.
“Portfolios are created to ensure projects and programs align with the strategy of the business” (Wrike, n.d.).
When projects and programs align with portfolio management strategy, organizations succeed. This can happen because it allows them to deal with uncertainty by making the best and most strategic decisions. In addition, it is important that project execution aims to deliver value at each step along the way.
Success in portfolio management depends on people, processes, and cultural factors. In fact, specific tools or techniques are secondary.
Portfolio management requires companies to make a commitment in order to provide the needed resources.
The most successful companies that use portfolio management effectively have numerous traits in common. For instance, they focus on the practice of portfolio management and dedicate attention to its key elements. In addition, successful organizations firmly believe that portfolio management gives them a big competitive advantage.
Keep in mind
In general, portfolio management is similar to program management, with projects that are unrelated to each other. In fact, organizations must be sure they work on the right projects by optimally allocating resources.
Strategic portfolio management is about deciding if the projects and programs selected align with the organization’s strategies. In other words, it determines if the organization is executing the right projects given its strategy.
To be successful, organizations need to balance risks and opportunities across the whole portfolio. In fact, portfolio management allows organizations to improve delivery, and most importantly, identify and bring greater value from the strategic project and program investments.