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Jul 14, 2021

5 Keys to Effective IT Portfolio Management in 2021

According to the latest Agile (2020) report, only 4 out of 10 companies plan to improve business and IT alignment when moving to agile at scale, while more than 7 out of 10 companies expect to accelerate their delivery capability.

On the horizon

Looking at the horizon, no one can really predict what the new landscape will be for the coming months or years. However, that's not necessarily the question. The question is whether the right conditions will be in place within your company to weather this storm and make the best of the recovery.

If not, what actions need to be implemented or stopped to move forward in the right direction? What have we learned from the crisis that we are still going through today? What are the next steps?

Organizations that can better navigate and function during pandemics have several things in common: a new style of leadership, an effective way to embrace change and turn it into action, the speed of decision making and agility to pivot or persevere, but most importantly, a vision where strategy and execution work together and are integrated into an organization that is scalable, flexible, and motivated for the challenges ahead.

Changing the organization by adopting new practices and ways of working is not a simple patch that you put on from one day to the next and hope it will stay there for a while. Rather, it's a journey, where leaders must lead the organization through this change and, more importantly, be part of the change themselves.

To do this, they need to implement sustainable change and start implementing successful portfolio management that will help establish and foster new ways of working across the organization.

Here are 5 of the most important elements to consider for effective IT portfolio management:

1- Ignore sunk costs

These are costs that have already been permanently paid, that cannot be recovered in any other way, and therefore should not influence future business decisions. If you nevertheless take them into account, they will certainly prevent you from investing in other, perhaps more important, initiatives. The "loss aversion" effect must be avoided.

2 - Financing value streams

Identifying and funding value streams instead of projects is a big change for the company. It will ensure the continuous value stream, the much needed discussions about budget slippage, time and resources, but also the so-called 'cost center problem'. Indeed, we fund cost centers that look pretty good on the numbers, but will end up looking like what we call the 'Frankenstein allocation': a developer's arm, a tester's leg, a business analyst's head, etc.

The role-waving budget will support and remove the burden of the annual budgeting process, funding the value streams according to the organization's defined strategy, also avoiding phased assessments that do not ensure the requested completion and delivery.

3 - Ensure stakeholder engagement

Business leaders are uniquely qualified to ensure that the funding allocated to value chains is allocated to the right things. As such, they know what investments are needed on the most strategic elements and those that will bring value to the business, not just in one particular area.

Decisions need to be made on an economic basis and be very clearly communicated to and understood by everyone. These investments will influence what is done and delivered by the teams later, and they need to be aligned with the decisions made at the portfolio level.

4 -Defining investments by horizon

Portfolio investments are organized by investment horizons reflecting four time horizons. The amount of budget a given value chain allocates to solutions within these horizons determines the short- and long-term health of the value chains and the portfolio.

A healthy and balanced portfolio of initiatives should be invested over 4 horizons:

- H0: In systems / solutions / services that require investment to be retired

- H1: In initiatives that sell / enhance the current offering and are already in a state of funding or extraction

- H2: In the next generation of initiatives (products / services / solutions) that will be moved to Horizon 1 within 1 or 2 years

- H3: In a wide range of disruptive systems / solutions, big bets, disruptive elements that will be linked to portfolio innovation and sustainability

5 - Favor agile teams over development teams

Agile teams are a type of cross-functional, multi-disciplinary team, not limited to IT or R&D, otherwise the profits would only be in this small area of the business.

Instead, take a holistic approach, using systems thinking and start thinking about what is really needed to create agile teams (or larger teams of agile teams) that are truly independent and can deliver value on their own. Silos in the organization do not help increase the flow of value or knowledge.

On the other hand, with true agile teams, the company can accelerate its decision making by empowering people to make decisions based on their own context, engage employees around a set of goals, and help create and spread knowledge throughout the organization.

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Written by Gladwell Academy, but most of our content is created by trainers and partnering experts!