Portfolio management in retail. What is it? And why do I need it?

Portfolio management is another one of the slightly vague management consulting terms which is often discussed but seldom explained with real-world clarity and examples. Project One likes to keep our ‘consulting-speak’ to a minimum, so in this article we shall explain what Portfolio Management means in the real world and why your organisation needs to do it properly.

High-end services company case study

Most medium to large scale organisations already have some kind of technology and business portfolio management view, even if that view isn’t formally called a portfolio. A portfolio model groups projects or programmes into logical and manageable chunks which can be prioritised and resourced through a structure of process and meetings and decision-making forums. Sounds simple? Portfolio management should be simple, but it is a discipline which requires everyone to follow the process. It can be light or complex depending on the type of organisation and complexity of the projects.

Why did our customer need a portfolio?

Project One has been recently working with a luxury retail brand which provides services to wealthy clients. They have made a very significant investment in digitising their customer offerings from a very ‘offline’ market position. In the early days when they started the transformation, they instigated small agile teams to create products and scaled the teams up to increase the delivery velocity. Unfortunately, this approach got to a certain point where adding teams was in fact slowing the delivery down – dependencies became too complex, resource bottlenecks began to spring up and the teams working on dependant legacy projects couldn’t keep up with the agile team demands.

How do we build a portfolio capability?

We started by looking at the overall digital transformation strategy – what they wanted to achieve, how quickly they needed to achieve it and how they had structured the team to deliver it. ‘Organic growth’ would be the best way to describe the approach and now it wasn’t working for them. We implemented a Portfolio capability within the technology group and their job was to get a handle on all the work going on and build an overall view of the project goals, resource requirements and potential conflicts and bottlenecks in the delivery process.

What does the portfolio capability do for our customer?

Portfolio can be seen as ‘air traffic control’, they guide the work, provide the information but they do not make the decisions or fly the planes – they provide the information to the decision-makers to help them decide where to fly, in what plane and at what cost. Within our customer’s portfolio view, we can show the decision-makers exactly where their programmes are, what costs and resources are involved in the delivery, and critically, track the benefits associated with the inflight programmes. Without the financial view, it is very difficult to prioritise a portfolio and adding this dimension moves the portfolio on from ‘we must do everything for the business’ to ‘this project is a priority because the benefit is higher than this other project.’

The outcome

With the portfolio in place, it is clear to see there are too many projects running at the same time and therefore the prioritisation process to stop or slow down programmes leads to increased efficiency in the delivery. They have been able to reprioritise foundational projects, which underpin a large number of digital initiatives, as the portfolio view highlighted the dependency on these projects despite them being seen as a legacy replacement or business as usual upgrade previously. Other high-profile projects which had limited business benefit have been re-evaluated using the portfolio benefits scoring framework and led to re-prioritisation of some of those projects to allow the higher benefit projects to be accelerated. Because this is a standardised process, the stakeholders understand the logic and support the suggestions coming from the portfolio analysis.

Top 5 reasons to build a portfolio capability:

• Align every project you do to your company strategy
• Understand your company project delivery capacity
• Get a central view and control over what projects are being worked on
• Have the capability to prioritise projects based on cost and benefit
• Increase project estimating capability through data collection within the portfolio.

Top 3 success criteria for portfolio management:

From our work across many customers, three key elements are consistently seen as critical to the successful implementation and running of a portfolio capability:

• Executive support – you need to ensure all projects run through the portfolio process – no exceptions
• Expertise and leadership – the function needs to run with clarity and rigour
• Strong communications and organisation – the PMO function needs to be efficient at collecting, summarising and distributing portfolio information.

Do you need to improve your Portfolio management?

Having the right people in place, particularly in a Portfolio Lead role and the PMO support functions, is critical to ensuring the capability runs efficiently and provides benefit to the business and technology stakeholders. If your organisation needs support to create or improve your portfolio capability, please contact Project One – our consultants would love to talk in more detail about how to get the best from your portfolio.