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Useful Charts and Figures. Where are we investing IT money? What value is it bringing to the business? How do I communicate this value to my senior management and other stakeholders?. What channels, marketing efforts do we have underway and what is the ROI of those efforts? - PowerPoint PPT PresentationTRANSCRIPT
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Useful Charts and Figures
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Text
Text
Info
rmat
ion
Technolo
gy
Enterprise• What we’re trying
• All investment types
• Total company
R&D/Innovation
Marketing
Sales
forc
e
• What channels, marketing efforts do we have underway and what is the ROI of those efforts?
• What are the best marketing channels, efforts to utilize?
• What opportunities does my sales force have before them?
• Are the opportunities available sufficient in value?
• Are all the people on my sales team bringing enough value?
• What does our R&D/Innovation pipeline look like?
• What is our mix of disruptive vs. incremental innovation?
• Are things progressing quickly enough?
• What is the viability of R&D/Innovation efforts?
• Where are we investing IT money?
• What value is it bringing to the business?
• How do I communicate this value to my senior management and other stakeholders?
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Unit Internal OptimizationPrioritization of funded investments
Segment OptimizationTrade-off of lower performing funded investments to new opportunities• Focus on segment priorities and metrics
Enterprisewide OptimizationReprioritize funded and unfunded investments across all units• Drive company-wide strategic priorities• Metric impacts cross multiple units
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Risk-Payback Period
2 1
3 4
Return-ROI
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Standardize• Standardize
financial, strategic and risk evaluation methods
• Standardize models and refine
Optimize• Leverage data to make
better decisions
• Integrate with tracking systems to improve future projections
• Utilize appropriate frameworks
Analyze• How are we doing with
regard to CPM?
• What are our challenges?
• What are we good at?
Galvanize• Build business case
for CPM effort
• Educate and get organizational buy-in
• Senior sponsorship
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
UnconsciouslyCompetent
Consciously Competent
Consciously Incompetent
UnconsciouslyIncompetent
Evolved
Evolved
Unevolved
Unevolved
Nirvana
Organizational Behavior
Process / Discipline
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Evolved
Evolved
Unevolved
Unevolved
Organizational Behavior
Process / Discipline
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Business Unit Investment Review
Team (IRT) Optimization
Enterprise Optimization
Line of Business Optimization
• Prioritization of funded investments within lines of business (LOB)• Inventory of unfunded initiatives• Determination of which investments are flexible should investment cuts be required
• Optimize across unit to focus on business unit (BU) priorities and metrics
• Maintain inventory of unfunded investments across the entire unit
• Determine which investments unit-wide which are flexible if cuts are required
• Ensure appropriate mix (short vs. long-term, risky vs. non-risky)• Fund “transformational” initiatives• Drive enterprise strategic priorities• Predictions of future opportunities and issues
Area of Business IO Capabilities
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Upfront Investment Required
LargeSmall
Complexity of Investment and/or
Variability/Uncertainty of Returns
Low
High
Complexity of Evaluation
Framework or Metric
Low
High
ROI/Payback Period
NPV/IRR
Sensitivity Analysis/Monte Carlo Simulation
Prediction Markets
Stage-Gate Decisioning
Real Options Analysis
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
What we see/hear today CPM philosophy How do we enable this?Decibel-driven decisions
- “I know what my business needs”- How loud does one yell?- Who do you know?- Who gave the best presentation?
“If it is not being measured, it is not being managed.”–famous business axiom
• Robust modeling to understand financial, strategic, risk, and so on-costs and benefits.
• Understand key performance indicators (business drivers) to model the ”right things”–measuring the wrong things is useless.
Not fully utilizing in-house experience- “We don’t have time to look back.
We are managing our business for the future.”
“Those who cannot learn from history are doomed to repeat it.”
–George Santayana
• Utilize historical results to help improve future year projections.
• Leverage this historical learning to improve resource allocation.
• Investment tracking on an ongoing basis lets decision makers identify and intervene before it is too late.
• Increased data around initiatives forces greater accountability.
Exogenous factors used to explain misses- “The project was going well until
____ stepped in or until _____ happened.”
“Accountability breeds response-ability.”–Stephen Covey
Silo approach to allocation- “My business needs this money
to achieve its goals.” - “I have too many good projects
and too little money within my own world.”
“Pursue goals that best serve the organization.”
–Jack Welch
• Provide a discipline that can be used by decision makers to optimize their own portfolio of investments.
• Aggregate these portfolios to arrive at an enterprisewide optimized portfolio.
• Use a meritocratic method to allocate resources.
The annual performance trap- “This investment was approved at
the beginning of the year, and the money is ours to spend as we see fit.”
“Innovation is stifled by rigid adherence to fixed plans and resource allocations agreed to
12 to 18 months earlier.” –Jeremy Hope
• Investments are ”alive” and treated as such.
• Get rid of annual performance contract to allow flexibility to cut or increase investment spending as performance dictates.
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Good Data
Information
Knowledge
Optimized Decisions
can
beco
me
whi
ch c
an b
e
synt
hesi
zed
into
and
ultim
atel
y
thi
s ca
n dr
ive
• Companies have plenty of data.
• They need to determine whether this is good data.
• If it is good data, tap into it.
• If not, create mechanisms to capture good data.
• Information often remains resident with a small segment of people.
• No mechanism is in place to efficiently share this information.
• Information lets people focus on more thoughtful analysis resulting in greater satisfaction.
• Knowledge is key in driving improved decisioning.
• Again, knowledge must be disseminated to be useful
• Knowledge lives on in an organization even after people leave
• Distributed knowledge improves performance.
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Contingent
Continue
CancelContingent
CBA Risk• Benefits achievable?
• Costs contained?
Ex
ec
uti
on
Ris
k•
Mile
ston
es b
eing
met
?
•O
ther
ext
erna
l ris
k fa
ctor
s?
HighLow
Continue• Recommit funding and personnel
resources.• Reward consistent solid performance.• Frequency of project milestone
checkpoints may decrease.
Low
Contingent• Recommit funding and personnel resources.• Reward consistent solid performance.• Frequency of project milestone checkpoints
may decrease.
Cancel• Free personnel and money for new ideas• Solicit ideas from other initiative owners• Document reasons for project
cancellation for future • Admonish poor project delivery (BU,
Tech, and Finance)
Finance
Business
Tech
Initiative Owner-Tech
Initiative Owner-BU
Agenda
1. Discuss project milestones and CBA expectations.
2. Remediate or remove potential underperformance.
3. Find better bets.
Inve
stm
ent
Rev
iew
Tea
m -
IR
T
Evaluation Framework
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Project
CompletedStage Gate 3Stage Gate 2Stage Gate 1
Cost Benefit Analysis (CBA)
Review
Project funding and resources requested GO GO GO GO
KIL
L
KIL
L
KIL
L
KIL
L
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Mgmt Buy-in
Well-defined Criteria
Empowered Review Team
Effective Process
• Funnel–Not tunnel
• Transparent
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Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy
By Anand Sanwal
Driver-based models (DBMs)
Source for investment projections
CPM central system composed of database and
reporting
Data repositories
Where tracked results reside
(1) Investment projections fed into CPM system.
(2) Tracking results feed CPM, allowing
comparison with projections.
(3) Tracking performance informs future projections.