Portfolio Management 101: Strategic Alignment

Portfolio Management 101: Strategic Alignment

“Rule 101. Ensure that your portfolio is aligned with Corporate Strategy”

Designing a Portfolio Management Framework

In a recent survey, three quarters (75%) of more than 150 respondents said that the two concepts were not aligned! Or at least they said there was ‘no, partial, or some’ alignment of portfolio management with corporate strategy. (December 2020, APM webinar)

What do we mean by strategy? A strategy is a plan and an evidence-based rationale for that plan. It explains what the organisation is seeking to achieve and why (Validating Strategies, Driver 2016).

The vision, corporate goals, and strategy need to be defined, communicated, and clearly understood throughout the organisation, and critical metrics are required to ascertain the priority of the goals in relation to each other, and when they have been achieved.

Portfolio Management Framework

Figure: Portfolio Management Framework – Portfolio Management. A Practical Guide (APM, 2019)

The simple diagram illustrates the business cycle of processes from vision through to achievement of goals, and execution of the strategic plan. This is designed to be an iterative process and depending on the industry; each cycle may span several years.

Developing an effective Strategic Plan

Take, for example, an organisation that has a corporate strategy to become more customer-centric whilst improving the efficiency of its business. To that end, it has created a strategic plan that will enable it to construct and prioritise, review, and assess performance on the way to realising benefits and achieving its goals/strategic objectives.

The strategic plan for this organisation has several goals by a specific period such as to increase the number of customers, whilst making savings (run-rate savings, and cumulative savings), increase revenues, gain market position, and others. It has completed the investigation process of ‘reviewing the portfolio’ by considering various scenarios, having regard to budgetary or timely constraints and risk appetite.

The Amplify™ Compare Scenarios dashboard below shows the result of this process; namely, a balanced scenario optimised for achieving strategic goals, recommended to the Governance Board for approval. If approved, the scenario will be activated, automatically determining the collection of projects and programmes that are carried forward to implement the strategic plan.

Compare scenarios

Figure: Amplify™ compare scenarios feature

Assessing Portfolio Management Maturity

So, what approach does your organisation take to strategic alignment? And how mature is your organisation when it comes to portfolio governance, managing budgets and risks, and reporting on portfolio performance?

In the same survey, respondents identified low levels of self-reported portfolio management maturity. With most organisations at the basic awareness-level (43%) or repeatable-level (14%), and just over a quarter at higher managed (24%) or optimised-levels (4%)

Mentimeter results

Figure: Mentimeter results: How mature is portfolio management in your organisation by alignment to strategy.

Building Portfolio Management Capability

Respondents described a long list of challenges that adversely affected the effectiveness of portfolio management (maturity), with the main barriers identified as governance and leadership (28%), resources (22%), understanding (14%), and tools and techniques (8%).

So, how can your organisation move beyond the nursery slopes of this essential awareness-level maturity?

Good portfolio management is about making the right choices – where to invest organisational effort, for example, which initiatives to stop, pause, start, progress based on the viability of their business/value case.

Embed and sustain best practice with Amplify™

At Amplify-now, we are helping some of the world’s largest organisations to deliver value through dynamic portfolio prioritisation – along with the planned and measurable execution of strategic change.

Our platform helps organisations embed and sustain the best practices, such as Management of Portfolios® (Axelos) and Portfolio Management (PfMP®), promoting value-delivery across the whole lifecycle (from incubation to operations).

Amplify™ supports robust portfolio governance and assurance through stage-gate approval and audit, against clearly articulated criteria, with real-time dashboard reporting.

In short, our Amplify™ platform enables organisations to align their portfolio of initiatives with strategic goals by linking strategic planning with project and programme delivery.

If you would like to learn more about how we can support your journey to increased portfolio management maturity, check out our website and contact us for an informal chat/demo.