I mentioned in the last post the shift from project management to program management as one of the many important shifts in business-IT maturity that typically take place around the middle of Level 2 (in a simplified 3-level model). I want to explore that in greater detail in this post, and connect it to Portfolio Management which I see as a key discipline in getting to Level 3, and to extracting high, visible business value from IT investments.
A recent post, Programs are More than Just Big Projects, by colleague and friend Roy Yougman in his blog http://www.ryoungman.net/ inspried me to discuss Program Management as a critical link between Project and Portfolio Management. In a simplified sense, project management deals with a single project (be it small or large) with a focus on producing agreed deliverables, to an agreed schedule and budget. Program management deals with multiple projects that collectively produce an agreed business outcome – i.e., they have inter-dependencies (e.g., impact the same group of stakeholders, each contribute to achieving a business outcome, and depend upon each other to do so). It is the management of these inter-dependencies against the delivery of the agreed outcomes that distinguishes program from project management. I have to acknowledge that the terminology here, though well defined in the project management literature and sources such as Wikipedia, is not universal or used consistently. In the aerospace/defense industry, for example, programs have a different connotation more related to funding.
If projects can be thought of as the bottom of a hierarchy, programs sit above them in the middle of the hierarchy and address a related set of projects, then things get to be most interesting at the top of the hierarchy – the portfolio management level.
My favorite source on IT Portfolio Management are Prof. Peter Weill and his co-author, Marianne Broadbent. Their first book that addressed this topic was Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology. There are various IT portfolio models around – the reasons I like Weill’s are:
1. It differentiates the IT investment in common, shared infrastructure (broadly defined).
2. Weill has years of benchmark data showing how portfolio allocation varies by industry, and how it reflects business performance.
As I get personally closer to retirement, like many boomers, I give increasing attention to my (meagre!) personal investment portfolio, which makes personal investments and portfolio theory a great analogy for IT investments. My portfolio goals have changed over time as my circumstances have changed (e.g., putting a kid through college, getting closer to retirement). Whatever those circumstances, I’ve had the discipline (thanks to an investment advisor) to annually re-think my portfolio strategy, to be explicit about it, and to monitor the performance of my portfolio against that strategy, and adjust periodically.
In the IT portfolio domain, the same is necessary. How much of our IT spend should be leveraged across the firm? (By the way, a common challenge is the funding mechanisms for common infrastructure are often weak – another Level 2 trap is that funding in Level 1 and early Level 2 tends to be by the project, and for given business units – nobody likes to fund cross-business unit initiatives!) How much should we be spending on “risky” but potentially high value initiatives? How much on informational (business analytics/decision support)?
Another Level 2 trap is that a firm’s earliest entree into IT portfolio management is typically limited to new spend. However, the reality for most enterprises is that new IT spend represents less than 30% of total spend, so there is bigger value in applying IT portfolio management to the steady state services (bringing us back to Service Management mentioned in an earlier post)
My key points through all this are to get through Level 2 to Level 3:
1. You need great project management as a fundamental discipline.
2. You need great program management as a bridge to portfolio management. You can’t easily go from project to portfolio – there are just too many projects, and projects are focused on deliverables, whereas program focus on business outcomes – which is what portfolio management needs to focus on.
3. The biggest impact in terms of advanced IT practices comes from portfolio management (the IT investment strategy), and if you are weak in project or program management, you will never get the full potential of portfolio management.