The document discusses the need for an alternative approach to portfolio management in organizations undergoing transformation, as the traditional methods often fail to address interdependent investments. It highlights the challenges in realizing value from IT investments, where a significant portion is wasted, and proposes a results chain tool to better understand and prioritize business outcomes. The presentation argues for a multi-year planning process that focuses on financial results and integrates benefits management with strategy implementation to ensure successful project delivery.

1. Portfolio Management
Portfolio for Executives
Fit Management
Fit for Executives
ProjectWorld 2011
ProjectWorld 2011
Fernando Santiago MBA PMP
Fernando Santiago MBA PMP

2. Learning Objectives
Learning Objectives
 At the end of this session, participants will:
Portfolio Management
 Identify when an alternative approach to portfolio management is needed,
and when the traditional approach is valid, depending on whether the
Fit for Executives
organization is in a transformational or incremental improvement mode
 Understand the relationships between financial outcomes, business
outcomes, capabilities and initiatives, and how this understanding can be
used to define programs and projects, using the Results Chain tool.
ProjectWorldon the
 Understand an alternative way to develop business cases, based
2011
expected contribution of each initiative to the financial results of the
organization.
Fernando Santiago MBA PMP

3. Learningthere a problem to solve?
Is Objectives
 Realizing Value from IT investments is a challenge
for most organizations

PortfolioCIOs believe that 40% of all IT
IBM Survey: Fortune 1000
Management
spending brought no returnfor Executives
Fit to their organizations
 Gartner Survey: 20% of all expenditures in IT is wasted
($600 billion globally)
 Other surveys: between 20%ProjectWorld 2011
to 70% of large-scale IT
investments is wasted
Fernando Santiago MBA PMP

4. Learning Objectives
Is there a problem to solve?
 If investments are not generating value, which
“are” is to blame?
Portfolio Management
Are we doing Are we
The
Strategic
Question things?
Fit for Executives
the right getting the
benefits?
The Value
Question
ProjectWorld 2011
Are we doing Are we
The The
Architecture
them the right getting them Delivery
Question way? done well? Question
Fernando Santiago MBA PMP

5. Learningthere a problem to solve?
Is Objectives
 This presentation will provide an integrated
approach for the top two

Portfolio Management
If project selection is flawed
 Fit for Executives
Architecture and delivery cannot compensate
 Benefits become a matter of chance
The
Strategic
Are we doing
the right
things?
ProjectWorld 2011
Are we
getting the
benefits?
The Value
Question
Question
Are we doing Are we
The them the getting them The
Architecture right way? Fernando Santiago MBA PMP
Delivery
done well?
Question Question

6. ¿What’s wrong with
Learning Objectives
portfolio management?
 What companies are doing:
 Capture ideas through a “funnel” process

Portfolio Management
Progressive elaboration of a business case
 Fit for Executives
Ranking of opportunities of investment, based on value,
risk and other factors
 Selection is made based on a prioritized list
 Usually a yearly process ProjectWorld 2011
 Business case are used to assess benefit realization
 All very logical and sound, but…
Fernando Santiago MBA PMP

7. ¿What’s wrong with
Learning Objectives
portfolio management?
 Frequently, PMOs face the scenario:
 Executives have their own Management
Portfolio list of projects or
different priorities
Fit for Executives
 Business cases are just a formality, and not the
basis for decision making
 Executives ask for everything, not just the “top
of the list” ProjectWorld 2011
Fernando Santiago MBA PMP

8. ¿What’s wrong with
Learning Objectives
portfolio management?
 So what is the root of the problem?
 The traditional approach for portfolio management is
Portfolio Management
based on the assumption that opportunities for
investment are independent
Fit for Executives
 This is only true in stable organizations looking
for incremental improvement of their current
business
ProjectWorld 2011
 In a transformational scenario, investments are,
by definition, interdependent
Fernando Santiago MBA PMP

9. Incremental Improvement of the
Learning Current Business
Objectives
An example of potential investments
Portfolio Management
Target
Target Percent of
Percent of
Fit for Executives
service to
service to repeat
repeat
CIF
CIF Customer
Customer
individual
individual customers in
customers in
Information
Information
Program
Program File
File
customers
customers market A
market A
based on
based on increased by
increased by
history
history Y%
Y%
Division
Division
1
1
Revenue
Revenue
Increase
Increase
Average sale
Average sale d by X%
d by X%
A4B
Application
Application
AXX can
AXX can
now
now
Ability to
Ability to
cross sell
cross sell ProjectWorld 2011
per
per
customer in
customer in
Program support B
support B
product A
product A market B
market B
in market B
in market B increased by
increased by
customers
customers
Z%
Z%
Technical Business Business Financial
Initiatives
Capabilities Capabilities Fernando Santiago MBA PMP
Outcomes
Outcomes

10. Incremental Improvement of the
Learning Objectives
Current Business
 Conditions in this scenario
 Stable environment
Portfolio Management
 Causality relationships are linear
 Fit for Executives
Investments are mostly independent
 Prioritizing a list makes sense
CIF
Program
Customer
Information
File
Target
service to
individual
customers
based on
ProjectWorld 2011
Percent of
repeat
customers in
market A
increased by
history Y%
Division 1
Revenue
Increased
by X%
Application Ability to Average sale
AXX can cross sell per customer
A4B now product A in market B
Program support B in market increased by
customers B Z%
Initiatives
Technical
Capabilities
Business
Capabilities
Business
Outcomes
Fernando Santiago MBA PMP
Financial
Outcomes

11. Learning Objectives Scenario
Transformational
A simple example of what it looks like
Portfolio Management
Fit for Executives Based on
Porter’s case
study on
Southwest
Airlines
ProjectWorld 2011
What Is strategy?
Michael Porter
Harvard Business
Review 1996
Fernando Santiago MBA PMP

12. Learning Objectives Scenario
Transformational
A closer view at the example
Portfolio Management
Fit for Executives
ProjectWorld 2011
Fernando Santiago MBA PMP

13. Learning Objectives Scenario
Transformational
• Conditions in this scenario
• Causality relationships are many to many
• Investments are not independent
•
• Portfolio Management
Benefits cannot be easily attributed
All investments are needed to implement
the strategy Fit for Executives
• Prioritizing a list doesn’t make sense
ProjectWorld 2011
Fernando Santiago MBA PMP

14. Proposed Approach for a
Learning Objectives
Transformational Scenario
 Map causality relationships between outcomes,
capabilities and initiatives using a Results Chain
Portfolio Management
 Use a top down business case approach
 Fit for Executives
Start with expected financial results to generate a stream
of inflows
 Propagate the inflows based on contributions
 Estimate outflows for initiativesProjectWorld 2011
as usual, and then
propagate the outflows in a similar way
 Business case can be assessed at any node in the Results
Chain Fernando Santiago MBA PMP

15. Proposed Approach for a
Learning Objectives
Transformational Scenario
 Use a multi-year plan, not a yearly selection of
projects
Portfolio Management
 Executives prioritize business outcomes, not projects
or capabilities Fit for Executives
 If business outcomes are needed for the strategy, the
question is when can we do them, not which ones to
chose ProjectWorld 2011
 Incremental investments not related to the strategy
are selected and funded separately
Fernando Santiago MBA PMP

16. Proposed Approach for a
Learning Objectives
Transformational Scenario
Generation of inflows: plan VS current
Portfolio Management
Planned Values
Fit for Executives
Difference
generates a
Stream of
Inflows ProjectWorld 2011
Current Trend
Inflows
Fernando Santiago MBA PMP

17. Proposed Approach for a
Learning Objectives Scenario
Transformational
Propagation of inflows and outflows
based on contributions
CIF
100% Customer
Portfolio Management
Information
80%
Target
service to
individual
40%
Percent of
repeat
customers in
Program customers market A
Fit for Executives
File
based on increased by
20% history Y%
30% 60%
100% 40%
Business Contribution
Initiative Capability 30% Division 1
A Revenue
A
30% Increased
by X%
60% ProjectWorld 2011
60% 70%
100% Ability to Average sale
Application 40%
A4B AXX can
cross sell 40% per customer
Program now support
product A in market B
in market increased by
B customers
B Z%
Fernando Santiago MBA PMP
Technical Business Business Financial
Initiatives
Capabilities Capabilities Outcomes Outcomes

18. Proposed Approach for a
Learning Objectives Scenario
Transformational
 Contributions are defined:
 Initially through expert judgment, with basic rules to ensure
consistency Portfolio Management
 Causality relationships are verified when there is
Fit for Executives
consistency between delivery and results
Delivery Status Outcome Status
Initiative
ProjectWorld 2011
A
Business
Initiative
B Outcome
Initiative Fernando Santiago MBA PMP
C

19. Benefits Management in a
Learning Objectives
Transformational Scenario
 With this approach, benefits management merges
with performance management
Portfolio Management
Success in Success in
Success in
Delivery Fit for Executives
Implementing
Strategy
achieving
business goals
Business
ProjectWorld 2011
Financial
Initiative
Outcome Outcome
Fernando Santiago MBA PMP

20. Learning Objectives
Conclusion
 The traditional approach to portfolio management
doesn’t work in every situation
 Portfolio Management
The alternative approach for transformational
Fit for Executives
scenarios integrates portfolio management, strategy
implementation and benefits management
 The main difference: they all get done!
ProjectWorld 2011
Fernando Santiago MBA PMP

21. LearningLearning Objectives
Objectives
 At the end of this session, participants will:
 Identify when an alternative approach to portfolio management is needed,
Portfolio Management
and when the traditional approach is valid, depending on whether the
organization is in a transformational or incremental improvement mode.
Fit for Executives
 Understand the relationships between financial outcomes, business
outcomes, capabilities and initiatives, and how this understanding can be
used to define programs and projects, using the Results Chain tool.
 Understand an alternative way to develop business cases, based on the
expected contribution of each initiative to the financial results of2011
ProjectWorld the
organization.
Fernando Santiago MBA PMP