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1 Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy By Anand Sanwal [email protected] Useful Charts and Figures

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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 Presentation

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Page 1: Useful Charts and Figures

1

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

Useful Charts and Figures

Page 2: Useful Charts and Figures

2

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

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?

Page 3: Useful Charts and Figures

3

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

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

Page 4: Useful Charts and Figures

4

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

Risk-Payback Period

2 1

3 4

Return-ROI

Page 5: Useful Charts and Figures

5

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

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

Page 6: Useful Charts and Figures

6

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

UnconsciouslyCompetent

Consciously Competent

Consciously Incompetent

UnconsciouslyIncompetent

Evolved

Evolved

Unevolved

Unevolved

Nirvana

Organizational Behavior

Process / Discipline

Page 7: Useful Charts and Figures

7

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

Evolved

Evolved

Unevolved

Unevolved

Organizational Behavior

Process / Discipline

Page 8: Useful Charts and Figures

8

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

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

Page 9: Useful Charts and Figures

9

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

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

Page 10: Useful Charts and Figures

10

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

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.

Page 11: Useful Charts and Figures

11

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

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.

Page 12: Useful Charts and Figures

12

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

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

Page 13: Useful Charts and Figures

13

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

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

Page 14: Useful Charts and Figures

14

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

Mgmt Buy-in

Well-defined Criteria

Empowered Review Team

Effective Process

• Funnel–Not tunnel

• Transparent

Page 15: Useful Charts and Figures

15

Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy

By Anand Sanwal

[email protected]

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.