Portfolio Essentials (A video overview)

You’re convinced that you need a portfolio management strategy and you have an idea of what you want to include. Where do you start? What do you need to build?

This video will cover eight basic components of a complete portfolio management system. There are a variety of tools and processes out there to fit any price point and organizational culture. Being aware of the portfolio essentials will help you evaluate the options and customize your own solution that can evolve with your organization over time.

Transcript:

Hi, I’m Lisa, and welcome to Recharted Territory, a guide for changemakers tired of the status quo and looking to transform complex systems and enterprises, simply.

Transformation involves making intentional decisions in your business. Portfolio management is a tool to systematically consider what you want to create, why, and how. It’s about investing your resources in a way that gets you closer to your goals. While leaving room for discovery, creativity, and adapting to the unexpected.

This video will introduce the Portfolio Essentials, which are the core elements to include when you’re building out a successful Portfolio Team that can break down complex problems and churn out value.

If you’re new to portfolio management then I encourage you to check out some links below. They cover signs that your organization may need to look at how you manage your portfolio, as well as tips for defining the scope.

New to portfolio management? Check out these articles first:

10 signs that it’s time to invest in portfolio management

How to define the scope of your portfolio

Here, we’ll cover a broad overview of the portfolio essentials, as well as how they fit together. That way, you’ll have a high-level blueprint of what you’re building, as you design the detailed processes and select tools.

Because while software and templates are great, they aren’t as important. They can help automate your workflow and speed things up. But if you’re missing a core element, that will actually hurt the success of your portfolio more than the specific tools that you’re using.

To put the portfolio essentials into context, we need to look at where portfolio management sits within your normal business activities.

Portfolio helps fill the “air sandwich” in organizations

What is that?

Nilofer Merchant has been a strategist and consultant for many well known and successful companies, including Apple, Autodesk, Symantec, HP and many others. She introduces this phrase in one of her great books called “The New How.”

She describes an issue that she calls the “air sandwich.” Where on one side, your organization has a strategy with a clear vision and future direction. You know where you want to go.

And on a day-to-day basis you’re taking action, knocking things off your to-do list and shipping solutions.

Except there’s almost nothing in the middle.

Some symptoms of an “air sandwich” are that:

Individuals are taking steps every day without understanding how their actions fit into the bigger picture.
There’s a lack of alignment across the teams. Everyone is building their own piece, but they aren’t fitting together into a cohesive solution when it’s time to integrate.
Leaders may be encouraged that work is being completed, but frustrated that important metrics aren’t changing fast enough.

Merchant noticed this issue in successful Fortune 500s. Yet I’ve seen it as well in organizations of all sizes, in for-profits, nonprofits, and government. Effectively connecting the two slices of bread in the “air sandwich” is a problem that many organizations struggle with.

Portfolio management can help bridge those two worlds. It can ensure that strategic goals are broken down so real progress is made. And that information from the execution level is being relayed back up to strategy for real-time adjustments. So that the layers support and improve each other instead of acting independently.

The Core Elements

Now that we know where portfolio lives in an organization, let’s talk about the 8 core elements of a valuable and sustainable portfolio process:

Current State

Thinking about your portfolio of products, projects, or business models is not that different from managing a financial portfolio. The first step is understanding where you are already investing your time, money, and energy. What resources do you have access to? Where are those resources currently going?

For example:

What products and services do you currently offer?
What are your customer relationships like?
What are your current business processes?
What kinds of technology assets have you built, purchased or rented?
What projects are in-flight and on-deck?
What’s working well?
What’s not?

Future State(s)

Since we’re constantly trying to improve our businesses, there will be plenty of things that you aren’t investing in but you could. So you’ll need a place to store ideas, visions, plans, and notes about changes that you haven’t committed resources to yet. You also need to be continuously scanning the landscape, identifying trends, and outlining opportunities as the world shifts.

Value Framework

You have a lot of ideas and you’re aware of what you’re currently investing in. To compare everything, you need a way to estimate the value added over time. Because for many of these investments you’re spending money in the short-term yet might not see the full impact until months or years later. There are some lightweight as well as some very detailed ways to estimate future value. But in general, a transparent process for determining the relative value of changes will help you make more informed decisions about where to invest.

Portfolio Allocation

With an idea of the relative value of items, now you need to make decisions about how to allocate your limited resources to actually bring them to reality. You could pull the highest value items until you use up the entire budget. Some organizations decide instead to allocate a certain % of the budget to different themes or they may focus on one theme for a certain duration of time, say a quarter, and then move on to a different theme during the next quarter. There are many different options, but whatever you decide, you’ll want to revisit and adjust your strategy and mix over time as your business changes.

Research & Experimentation

This is another area that’s important but sometimes gets overlooked. We had an estimate of the value that an item would create, but we can’t ever know for sure if something is going to be worth the investment. However, we can always reduce the uncertainty by gathering information through an experiment or research project. Your portfolio management process should include resources set aside for those experiments, and defining the processes you’ll follow to quickly validate concepts. This step is especially important if you’re considering risky changes because you’ll be able to gather insights and feedback before going all in.

Related: Day 4: Building prototypes

Execution Support

The first five elements will help you figure out what you are, could, and will invest in. Now we need to complete the connection between strategy and execution. That might mean breaking down larger changes by decomposing them and looking at how you could divide them up among multiple groups and time frames. It could look like transferring information, co-creating the solution, or providing feedback on detailed designs, depending on how large your organization is. The specifics will depend on the rest of your operations and your product development process.

The last two elements are related to working and integrating with other stakeholders.

Intake/Triage

If you have a portfolio team that’s crafting a vision and building it in the real world, then you’ll want to define an intake/triage process. You’ll need a place to store ideas coming in from your customers, stakeholders, executives, anyone outside of the portfolio team. Plus a process for organizing the incoming information so you can easily take the next action and nothing gets lost in someone’s email.

Dynamic Views

There are probably many stakeholders involved in your portfolio and interested in what’s going on. They have different worldviews, vocabularies, and questions. They don’t need to know all of the details about your portfolio work, so each stakeholder may be best served by a different view.

Dynamic views are often in the form of reports, dashboards, or wikis. Software tools can help you easily create a self-service solution that stakeholders can access at any time. With executives, dynamic views may look like a regular review meeting where you’re sharing specific information to help them make decisions.

Building workflows

How do all of these essentials fit together?

In the current state, you’ll identify gaps and problems you can resolve by making changes.

Which will be evaluated by a value framework. What is the value of resolving this gap or fixing this problem?

Then when you explore the future state, you’ll end up with ideas and opportunities.

Which flow into the value framework as well. You’ll ask, what’s the value of implementing this idea or realizing this opportunity?

From the value framework, you’ll get a relative ranking. But you’ll probably have more ideas than resources to implement them. So you need a process for deciding what you’re going to invest in, which is the portfolio allocation element.

There may be some changes that you’re interested in but you’re not sure if the value is worth further investment. You’ll take any additional questions and hypotheses as inspiration for research and experimentation.

The outputs of experimentation will probably lead to more ideas, which will go into your future state knowledge base, and new insights, which will update your current state knowledge base.

That’s all just to figure out what to spend our investments and money on. We also need to make sure that large initiatives are broken down and that the portfolio team is providing execution support to bring these dreams to life.

So that’s the work that your portfolio team would focus on, whether they’re a full-time team or a collection of individuals with other roles as well.

Engaging with the outside world

The portfolio team also needs to interact with the outside world, which means managing incoming information and sharing insights with others.

Here are the portfolio activities we just discussed. The portfolio team is working on these actions and new information could come in and reports could be requested at any time.

Information that you collect through your intake and triage process could end up influencing any of the other areas. For example, if you gathered information about a new customer problem, then that would be part of your current state. If strategic goals changed that might impact your value framework. New ideas from the marketplace or competitors may influence your future state ideas and opportunities.

Since information could impact any area and come in any form, you’ll also need a triage process. Someone looking at this information and deciding which element it impacts and which actions to take next.

Dynamic views can be created manually or by leveraging automated tools. You could set up a self-service solution or host an in-person discussion. And some views may be created on a regular basis, while others are generated on demand.

What’s next

So those were the eight portfolio essentials and how you can integrate them with the rest of your enterprise. Hopefully, this was a helpful overview so you can identify which of the elements already exist in your organization, where you’re stronger, and where you could focus more energy.

Leave a comment down below and let me know which of these essentials do you already have in place and which one are you going to tackle next? Please leave any questions as well, because I’d love to hear what you’re curious to learn more about. Thanks for watching and keep recharting and reimagining existing systems.

Which of these portfolio essentials do you already have in place? Which one are you going to tackle next?