Why do we need a method for prioritizing the investments of our business? How Portfolio Management helps

Why is Portfolio Management a good idea?

People have lots of ideas to make their businesses better.
Sometimes these ideas don’t work out so well once implemented. That’s pretty
much why I’m so interested in Portfolio Management. In my career in project management,
I have implemented several projects that didn’t have solid business cases for
the investments. In fact, I have managed projects that I felt were doomed to
fail; but the policy was that if the organization wanted the project
implemented, it was to be done.

Here are some examples of ideas that should have been fully
vetted:

  • The plant wants a specific manual operation
    automated – put in a request, and a machine will be built!

    • The engineers tasked with the project weren’t
      allowed to perform a feasibility study or voice their gut opinion that it
      probably wasn’t going to meet the factory’s tight specifications . It’s not a
      good feeling to build something that you suspect will eventually be scrap!
    • Under the concept of implementing something that
      should provide more profit for the business:

      • Our airline needs more money, so let’s start
        charging for soft drinks, water and juice. We get all the profit from that.

        • Did they think customers would like that?
  • We have been offering videos and streaming in
    one package. We can make more money if we break these offerings up and charge
    the customers more.

    • Again, if the customers don’t like the idea, it
      doesn’t work.
  • Let’s make our product taste just like the
    competition’s product.

    • But our product is already the leader in the
      industry!
    • Why can’t we fix things before they break?
      • This was actually a very sound request from
        middle management:  They proposed plans
        to take preventive measures and plan for the end of life for equipment.  However, the organization’s leaders couldn’t
        grasp the potential savings and efficiency of this concept, so the plan wasn’t
        implemented.
      • I don’t want prioritization. I just want a
        percentage increase in budget every year and then I’ll do what I want with the
        funds. (Guess what – I also don’t want people to know what I do with the money
        just in case my plans don’t work out.)
      • One product that became a failure in its target
        market had come from a company executive’s wife.

        • “It sounds like a good idea” isn’t really a business case!

These examples point to the reasons why Portfolio Management
works. Portfolio Management determines how to objectively judge which
investments will provide the best return and help the organization meet its
strategic goals. The Portfolio Management process requires justification for
spending. This seems like a very logical concept and, in fact, it is. However,
many organizations still don’t have structured approaches for deciding what
gets funded. Many times it’s simply a matter of leaders discussing pet
projects. Sometimes those who have the most influence or scream the loudest get
their projects funded. These leaders see Portfolio Management as a threat to
the strategy that is currently working for them. In fact, I have seen Portfolio
Management implementations sabotaged by people who didn’t want to lose their
budgets because they would be required to justify their allocations.

What kind of bad ideas have you seen implemented? How does
your organization make decisions to fund projects?

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