Among my most popular topics, week after week, is Portfolio Management. It’s a key discipline, especially crucial in driving Business-IT Maturity past the tricky mid-point where many IT organizations tend to get stuck.
IT Business Edge has just published a short slideshow on “Four Common Mistakes in IT Portfolio Management“, re-purposing a post of mine from January 2008. I think they did a great job simplifying and bringing to life some of the key points in the original post. Enjoy!
Over many years of preaching and teaching IT portfolio management, I’ve been frequently frustrated and disappointed by seeing IT organizations screw up portfolio management, and as a result, miss out on the significant and important benefits this discipline holds. They do so by buying into the concepts, then jumping to a tool choice, implementation, declaring success, then moving on to the next IT management challenge.
This is sad, to say the least. It typically means that not only do they not get the real benefits of portfolio management, but also they’ve spent money on a tool and implementation effort that they can ill afford, and next time when the perils associated with a lack of effective portfolio management surface, they will assume that it can’t have anything to do with portfolio management because they’ve already fixed that. So they look elsewhere, tweaking and probing, trying to figure out how to improve business-IT alignment. It might take them several years (or a change of CIO, whichever comes first) to figure out that at root, they still have a portfolio management problem. And its much harder to fix something you already think you’ve fixed!
To illustrate the point, let me describe a typical IT capability assessment engagement (I’m involved in these several times a year). The first day usually comprises interviews with the executive leadership team followed by a lengthy meeting with the CIO. In addition to describing their hopes for IT, each of the business leaders describes how and where they see the IT organization falling short. This typically includes descriptions of various symptoms of portfolio management dysfunctionality:
My unit constantly gets short-changed by IT.
I’m not a demanding kind of guy, but I get punished because IT only supports the people who always make the greatest demands – I keep getting squeezed to the back of the line!
The costs of IT are spread across the business units, but only some of them are getting real value.
IT is not sufficiently service oriented!
When I meet with the CIO, I probe around these issues. Frequently, at this point I’m told with great pride about the sophisticated IT portfolio management tool they’d implemented in the last year or so. The CIO will often grab a spiral bound report and display page after page of glossy, colorful pie charts of portfolio data. “See! Portfolio management is now a real strength of the IT organization. And we drill into all sorts of resource allocation and time tracking data in the very same tool. It’s really helped us!”
What he may as well have said was, “We took a powerful portfolio management tool and use it really well to do resource tracking and allocation!” When I ask, “How do you know that the portfolio allocation model is consistent with business strategic intent?” I get a blank look as he processes the question, followed by, “Oh, well they get all these reports! And, in fact, they can get at this data on line if they’d like – it’s all totally transparent!”
Let me explain what’s going on here through the imperfect analogy of managing one’s personal investment portfolio (I know – not a very popular thing to be reminded of just now!) It’s as if my financial planner took my savings, then sent me (or gave me access to) all sorts of fancy data about my personal investment portfolio, but had never educated me and taken me through the crucial decision-making (and regular review) of my financial goals, needs and ambitions (these are not the same thing!) and my risk tolerance, financial situation, time to retirement, and so on. Then one day I call him up and say, “Fred, I’m retiring tomorrow but see that all my savings have vanished! What happened?” And he says, well, you were in and extremely aggressive portfolio of very high risk investments, and unfortunately the market tanked. Weren’t you tracking the portfolio reports I sent you every month?” In other words, this would indicate that I never sat down with my financial planner and figured out my family’s financial strategy – made informed decisions about the right portfolio mix for my circumstances, how that mix changes over time and how I will monitor the portfolio performance. If he had taken me and my family through this process, several important things would have happened:
Translate this into the process of IT investment portfolio strategy and planning, and how this process can align the business leadership team and CIO. You begin to see the dangerous trap of confusing the implementation of an IT portfolio management tool with the process of IT portfolio strategy and management. Does you organization really have IT portfolio strategy and management? Or is it simply going through the motions of tracking spending and resources? If the latter, and not the former, what dysfunctionalities might it be causing? What will you do about it?
I’m going to continue on this theme of “Unwritten Rules” as a powerful way to understand what drives behavior, and with that understanding, be able to change the rules, and thereby change behavior.
Yesterday, I posted on the Unwritten Rules that are common to organizations where Program Management is practiced versus those where Project Management is practiced. (I’m ignoring what people in these organizations actually calltheir practices – I’ve seen shops who think they practice program management who are barely practicing project management!) Today I want to explore IT Portfolio Management as a key discipline for driving up Business-IT Maturity, and one that most enterprises struggle with. In fact, as with my comment on language above, there are many more shops who use the term IT Portfolio Management without actually following any real sense of the discipline.
Let’s compare the unwritten rules around IT portfolio management behavior at two different (fictitious) companies – WorstPort, Inc., and BestPort Corporation. While fictitious, the examples I will use are drawn from a composite of real clients I have worked with – with a little “poetic license” to help make my points!
At WorstPoint, Inc., the predominant unwritten rules that impact IT portfolio management behaviors include:
Now let’s look at the kinds of unwritten rules that shape IT portfolio management behaviors at BestPort Corporation:
Think about the unwritten rules around IT portfolio management at your company. Poll you business executives – what do they believe these are? What behaviors do these unwritten rules drive? Are they the behaviors your stockholders would want for long term value generation? If not, how might you go about changing these unwritten rules?
Today I will expand upon the introduction in my last post to the topic of ‘unwritten rules’ as they pertain to Business-IT Maturity.
First a reminder – the Business-IT Maturity model I’ve discussed from various angles since starting this blog last October addresses ‘two sides of the coin’, those being Business Demand maturity(the business appetite for IT enablement) and IT Supply maturity(the ability to satisfy that demand in a safe, secure, predictable, efficient and effective manner. There are unwritten rules that impact the supply side (I provided some examples in the previous post), and others that impact the demand side. Given the interdependencies between IT demand and supply, rules on either side that drive dysfunctional behavior frequently impact the other side – often in a vicious cycle. For example, “IT is a necessary overhead cost to be minimized” is a very common demand side ’unwritten rule’ that dramatically limits IT performance and business value. You can imagine an environment that behaves according to such a rule, compared with one where the rule is, “IT is a business investment to be leveraged, that can provide significant opportunities for competitive advantage.”
Of course, the reality is that IT is both a cost to be minimized, and an investment to be leveraged, and a good IT portfolio classification scheme helps differentiate these, and strong IT portfolio management models and governance practices reinforce the desired behaviors around each investment class. However, if an unwritten rule is predominantly “IT is a cost to be minimized,” it is unlikely that business executives will invest their time and energy in implementing and sustaining the kinds of IT portfolio management and governance that will create real business value. i.e., the ‘unwritten rule’ becomes a self-fulfilling prophecy, and IT leaders must find a way to break the unwritten rule and replace it with something more productive.
Another unwritten rule common to Business Demand is, “Big systems development initiatives such as ERP implementations are IT projects.” Today, most enterprises have learned the lessons around this rule, and any seasoned CIO will push back and not collude with such behaviors. There is also a common unwritten rule on the supply side, “We accept any and all IT requests from the business.” You can imagine (and have probably seen) the kinds of value-limiting activities and behaviors created by this type of unwritten rule. You can also begin to see the kinds of systemic behaviors and vicious cycles that surface from these unwritten rules.
As you can see, the combination of the demand side rule, “IT is a cost to be minimized” (a typically Level 1 and low Level 2 Business-IT maturity rule) and the supply side, “All orders are good orders” (a typical Level 1 and low Level 2 rule) leads to low value activities being willingly worked by constrained supply resources, yielding low business value from IT investments, and stealing capacity away from potentially higher value opportunities. These dynamics reinforce the sense that IT is a cost to be minimized.
Effective IT leaders must be able to surface and understand the unwritten rules that drive both IT demand and supply behaviors, and must create interventions (education and awareness building, changes to governance mechanisms, and so forth) to re-shape the unhealthy rules into ones that are value-accretive as opposed to value-limiting. We will drill further into this topic in subsequent posts.
