I talk to clients and prospects on a weekly basis about “What-If” analysis; most of the time the conversation revolves around capacity, specifically having enough resources to execute work. Too often project managers keep their focus on the capacity problem. However, the problem they truly need to address is a portfolio problem, a demand management problem. This is true for every organization except those whose revenue is driven directly by their ability to meet the demand, such as professional services organizations.
When clients tell me they’re overworked, there’s a tendency is to focus on capacity issues first. The fundamental question then becomes, are you working on the right things? Although capacity is one of the common constraints in portfolio management, initiating planning exclusively to focus on managing capacity is fraught with errors. Organizations focused exclusively on workload have a tendency to manage resources at a micro level and that just isn’t sustainable. I once had a client where, when he moved his focus from matching capacity to demand and began focusing on the right things, the dialogue changed and he became more connected to the business. Dialogue between the organizations ensued that actually increased the quality of business outcomes.
Ending up with an optimal portfolio is a two-step process. First is to align the portfolio of projects to match the performance objectives (business outcomes) of the portfolio. Second is then to match capacity to that portfolio scenario. This is an iterative process until you end up with the optimal portfolio. Don’t be afraid to review these decisions throughout the year – as business rhythm changes, so might the portfolio.
Aligning the Portfolio
The best practice approach to aligning the portfolio is to first identify the correct mix of project investments that fit the performance objectives of the portfolio. Different outcomes require different analysis; one or more of these approaches may be required to complete the what-if analysis:
- Strategic Intent – focused on completeness of strategic vision or fit. Classically visualized with investment maps (bubble charts). As an example, the x and y axis represents Timing and Risk (although a priority score containing risk is also acceptable). The bubbles represent the project or investment. And the size of the bubble is either cost or an economic return metric such as ROI. This is a simple, efficient approach and the key is interpreting the “shape” of the investment map (we will need to address that later). For more portfolio mature organizations, an efficient frontier approach may be appropriate.
- Diversified / Balanced Intent – To provide insight on the right mix of investments. We never want to put all of our eggs in one basket. This is particularly true for organizations that need to maintain a particular quality level of existing assets. IT organizations have infrastructure and legacy applications where they need to maintain an acceptable service level agreement. If they don’t renew those assets, and only work on high priority projects, then the expense that the business will eventually need to incur to “fix” those neglected assets could be devastating to the budget. To visualize Balanced Intent, classifying and stratifying investments into those import investment categories and using pie or bar charts to understand the mix of investment is considered a best practice.
- Operational Intent – To provide insight on demand versus capacity. Although an advanced method, Operation Intent classically takes the selected scenario from any or a combination of the above techniques and applies capacity to it — Capacity as aggregated to “resource type.” Ideally that would involve a prioritization metric that will allow scenario analysis to individually adjust the scenario by adding and subtracting projects from the scenario.
- Risk Intent - classically an advanced portfolio technique used for asset analysis and product portfolios. Risk intent analysis would include:
- Market attractiveness versus Business strength and competiveness
- Tornado charts that evaluate the risk range of multiple topics
Setting up What-If analysis correctly and capturing those scenarios (and the decisions on the scenarios) makes the process go smoother. Revisiting those decisions and reprioritizing becomes simpler. Adding and subtracting investment into the “buckets” created for Balanced Intent allows organizations to focus on business outcomes with multiple lenses and not a single view, creating a true apples-to-apples comparison.