Organise your portfolio around value rather than projects

Instead of organising your portfolio to fit in your organisation, why not set up your organisation to maximise the benefits of your portfolio?

If we took a straw poll of (not just) government organisations and asked them what their top-level portfolio consisted of, we’d put money on the answer being projects and programmes.

Portfolios of Projects and Programmes

In our experience this approach introduces a number of issues:

• Your portfolio ends up being extremely large – potentially hundreds of projects and programmes – making it very unwieldy. You could reduce your top level portfolio to a subset of the projects and programme the organisation was delivering, generally defined by an arbitrary threshold, but then you have the challenge of finding somewhere to manage the rest of the portfolio.
• Projects and programmes are often only incentivised to deliver on time and to budget. If this is their only measure of success, it doesn’t matter how good the solution is. Whether it meets the customer’s needs; or how difficult it was to transition into operations.
• There is often a painful transition to operations. This can be because the project hasn’t understood the business change required, or ensured that the change meets the need, or simply because the project team is prematurely disbanded once delivery is ‘done’. Who hasn’t heard of delivery being ‘thrown over the proverbial fence’ to an operations team? These silos are reinforced by competing measures of success. While delivering at pace is a key objective in projects and programmes, operational teams are incentivised to protect the day to day running of the service, making sure that there’s no break in service or system downtime.
• The area of the organisation that delivers projects and programmes is frequently not the area that delivers that change, or the one that has to absorb and run the change in the operational environment.
• The maintenance and management of live services is often neglected. Frequently there are no incentives to invest in decommissioning old systems, or to continuously improve existing systems to maintain the value they deliver. This results in huge operations costs and big bang cycles of change; new systems delivered every 5 years to deal with the obsolescence of the previous version that’s seen no further investment.
• Opportunity windows are often missed. The time taken to identify a need, specify a solution, stand up a project, form a high performing team and eventually deliver a solution (many months, even years, later) often means that the opportunity that was identified has been missed, or has changed such that the delivered solution is no longer applicable.
• Innovation and identification of future needs and requirements become siloed. They happen in isolation, and it becomes hard to ‘cross the chasm’ and realise value from the innovation. Using innovation to horizon scan, to empirically identify what the most valuable change work to do next is, how long it will take, the value it will deliver, and whether it will deliver value for money, or to de-risk future work is de-coupled from the portfolio.
• In an attempted mitigation, organisations will often ‘gold plate’ requirements in this ‘one-time opportunity for change’. These are then baked into the solution and eventually leads to significant waste in delivering of unrequired functionality. The identified need and associated solution often ‘misses the mark’ when the solution is finally delivered.
• The ‘up-front fixed’ nature of most Projects and Programmes means commercial processes are structured around a go-to-market strategy that seeks a time and cost estimate against a pre-determined scope and technical solution. This constrains the organisation’s ability to pivot or react to a change environment or context. Small changes require formal changes to project scope which often takes weeks or months; large changes require entire new projects to be stood up which often takes months or years.
• Each Project and Programme having their own partitioned funding creates a huge management overhead. The continuous change of activity running late, or cut back due to budget cuts, or being delayed, or re-scheduled all results in an industry of finance and commercial work (and re-work). This is exacerbated when the outputs of separate Projects and Programmes are necessary to actually realise a benefit to the organisation.

We know this is quite a long list, and we could go on, but we’re sure that anyone working in an organisation that runs a portfolio of projects and programmes, will understand these pain points all too well.

Portfolios of Products and Services

There is another way: switching from a portfolio of projects and programmes to a portfolio of enduring services, products or value streams. In this model, delivery organisations are formed around each, with end-to-end responsibility for innovation, change and run.

Under this approach, these value oriented organisations:

• Are incentivised to maximise the value they deliver to their customers whilst minimising the cost to do so (real value-for-money incentivisation)
• Have a single through-life budget against a longer-term roadmap, with the empowerment to veer and haul people and money within agreed constraints and guardrails, and with future funding based on historical success of delivering value for money
• Manage a single portfolio that brings together Innovation, Change and Run, containing:Products and services through which value is delivered to customers, with responsibility for constantly maintaining and improving them and ultimately decommissioning and replacing themMajor change, with delegated investment decision making, through which new products and solutions are introduced or through which major solution or infrastructure changes are madeInnovation to understand future needs and future solutions to maintain and increase the value they deliver, with responsibility for integrating innovation and change and bridging the chasm
• Are responsible for finding the right balance of investment across change, run, and innovation, as well as non functional elements such as security, compliance and controls, and for end-to-end consideration of the impact of change, from initial policy to development to operational implementation that helps drive real value
• Have appropriate rigor within their portfolio governance processes, which enables transparency of impactful strategic decision making. Ensuring the people receiving the value, the people with (technical, security, legal, delivery) expertise to deliver the value, and the people with financial and commercial acumen, are all involved in the prioritisation and investment decisions.
• Are accountable for all the people, tools, resources and suppliers required, minimising external dependencies and improving their agility to simultaneously innovate, change and run and make effective decisions, at the pace of relevance, to maximise value and minimise costs
• Aim to be great places to work where people feel empowered and closer to their customers and the value they receive

To be clear, this does not mean that you aren’t also managing change (and innovation) at the top of your organisation, just that these are no longer the portfolio items that are funded. Because each department is managing its own local portfolio of change and innovation, the top of the organisation can focus on the change and innovation that’s of interest to it – either because of scale or strategic importance.

And by bringing considerations of organisational structure and design into your top level organisational portfolio you create clear focus and responsibility for the senior leadership team; they become a portfolio management team using the same controls, governance and processes as the teams beneath them. This gives a clear and simple set of levers through which strategic decisions can be made and enacted.

How?

If you’ve worked with Digital Services this may look familiar. We believe this approach scales up Digital Service thinking from the team level to the organisational level. It enables Digital Service teams to be truly effective by aligning the way they’re governed to the way they operate.

We have already heard many of the reasons why this can’t work. From concerns around matrix management (this isn’t matrix management); to reluctance around breaking an existing organisational hierarchy (you don’t need to); to concerns that don’t have the skills or people (you do); or even that this doesn’t work outside of digital (it definitely does). The case studies to show this is possible are all around, and we have direct experience of enabling this transition within government.

If you’re interested in learning more, or hearing about how this model is being discussed as the future for both Defence and Digital within the UK Government, then please reach out to us.