Organizations that outperform do so because of a combination of strong execution and great strategy. Lack of either results in failure. Effective portfolio management helps achieve outperformance, making strategy real through organizational change.
In this article, excerpted from the new book Strategic Project Portfolio Management : Enabling a Productive Organization (to be published in November by Wiley), author Simon Moore explains the importance of improving the process of proposal submission. As he explains, lack of a well-thought out process will reduce the number of proposals into the portfolio selection process. Reducing the number of inputs can reduce the quality of the outputs. Having a limited list of ideas hampers any project portfolio.
Why a Long List of Proposals is Necessary
Many organizations I speak with have a list of projects only about as long as they can execute. This makes it almost impossible for that portfolio to be strategic. "The essence of strategy is choosing what not to do" (Michael Porter in his book, On Strategy, 2008). If your list of projects is about as long as you can execute, then clearly there is not much you're not doing. Of course, those organizations with a meager list of proposals might argue that there are many ideas that do not become proposals because they run into one impediment or another along the way. That may be true, but that sort of informal process is far from robust portfolio selection. Impediments are quite different from well-thought-out decisions. Putting in place a simple but consistent mechanism for idea capture can help dramatically increase the number of ideas that could become projects within the portfolio and magnify the portfolio's effectiveness.
Regardless of the differing levels of rigor applied to projects, if there are only a handful of formal proposals, then any idea that is given serious consideration by management is implemented. There may be some modifications to the proposal based on feedback but, nonetheless, most submitted proposals will be implemented. Sometimes, the idea list might be only slightly longer than can be executed, but this deficit might only be realized several months into portfolio execution. This is costly because even though some level of selection is occurring, there is a clear cost of starting projects only to quickly replace them when a better idea comes along.
The Risk of Informal Processes
Informal processes risk generating inconsistent outcomes. Sometimes proposals are written up and analyzed in excessive detail. Yet, in other situations, only a cursory analysis is done before committing a major investment of resources. It is also frustrating to those submitting the proposals if there is no transparency or consistent rationale as to why their projects are not selected. Without feedback, it is hard for participants to improve their proposals or even remain engaged in the process. Another problem is that sometimes the level of influence of the project champion can be more important than the quality of the project proposal itself.
A simple, transparent process is important because, in order to collect a large number of strong proposals, idea submission must be encouraged by building faith in the proposal system. Without it, there will be a reluctance to submit proposals in the first place. Greater formalization of the process can also be encouraged by including an element of employee compensation. There is an opportunity to tie employee compensation to successful proposals, whether through patent filings or a portion of the cost savings generated. Such compensation will encourage submission. Without grouping proposals together and analyzing them, it is a leap of faith to believe that the organization has naturally developed a process to get the best ideas onto the table without anyone consciously taking any explicit action or making any decision at the aggregate level. The ad hoc process is likely to be inefficient and more time consuming than a more structured portfolio selection process. Portfolio selection offers the opportunity to analyze proposals en masse, which can make it easier to calibrate across the group and can create efficiencies through economies of scale.
To take an extreme example, batch prioritization might require one meeting for 100 projects, as opposed to 100 ad hoc meetings if each project were considered individually. Therefore, it is key not just to have more ideas but to group those ideas together to ensure meaningful prioritization that is efficient from a time-management perspective. The grouping together of ideas is also helpful because it provides the opportunity to group similar proposals together into larger, richer proposals, and for the combination of proposals to spur new thinking and proposals. If proposals are considered in smaller sets - or worse, on an ad hoc basis as each proposal comes in - much of this cross fertilization may not occur and an opportunity for further innovation is lost.
Another level of rigor can be applied to particularly risky or critically important projects. Here, proposals can be held in reserve to be executed, should the primary project fail or go irretrievably off course - as will likely occur across a large portfolio. For example, new problems may arise that need addressing, or compelling new ideas may arise based on customer feedback or market and competitive analysis. Although these ideas are healthy and often superior to project proposals being executed, this can disrupt the process, since the attempt to configure the portfolio on the fly is unlikely to lead to an optimal outcome. Resources on a canceled project will have been wasted, and recalibrating the project portfolio too frequently as new ideas come up may not be an effective use of time and resources. Managing this balance is critical; altering the portfolio creates adjustment costs, but reacting to changing market conditions rapidly and effectively can differentiate an organization from its competition.
It is rare that organizations are able to develop a broad and extensive list of projects to truly prioritize explicitly. Nonetheless, it is a complete list that enables strategic alignment in project selection. Without an extensive list of options, how can you arrive at the best permutation? As Napoleon said, "To govern is to choose." But how can you choose without options? The best ideas do not come from you. The best ideas emerge from within your organization, given the unique perspectives of the different divisions and functional roles. These ideas must then be consistently reviewed so that you can meaningfully rank them against each other. It is clear that any attempt to prioritize ideas must start with an effective mechanism for capturing a large number of potential project ideas. This must occur even before the formal project proposal stage.
Lowering the Bar for Idea Submission
The main reason for a lack of good project ideas within most organizations is simply that it is hard for employees to know what to do with their ideas. Ideas are not asked for explicitly from a broad enough set of people, in a transparent enough fashion, and on a regular enough basis. Idea generation typically is something that is seen as being valuable, but until recently, the technology has not been available for broad and simple idea capture, and the significant implementation costs have made most organizations reluctant to explore the area. Executives are receptive to new project ideas and would like to hear more of them - especially within a streamlined, simple process - but often the process for submitting project ideas is too complex or, worse, not defined. If all ideas must be justified by a 20-page analytical report listing the expected financial benefits and strategic rationale, then the number of ideas submitted will be low and, indeed, very similar to the set of ideas management already sees.
Often, the person able to come up with the spark of a new idea may not have the skills to perform a full analysis to justify or flesh it out in rigorous fashion. However, others must do that analysis in order to ensure that the best ideas are executed, or at least reach the stage where that analysis can be done. Therefore, more important than having a process is making sure that the process is simple and available to all within the organization.
Using Simple Idea Capture
Providing a simplified, streamlined process for idea submission can increase project proposals and result in a better portfolio of projects. Simplification is not about reducing the quality of ideas, but about reducing the bureaucracy associated with producing them. Simplification is not easy, as it involves defining what is really needed before further due diligence is conducted on the project. It also means making the submission process easy to follow and locate and driving awareness of it. In terms of a simplified proposal, a relatively brief description with broad estimates of key parameters, such as budget and headcount, is all that is needed. In fact, sometimes all that is needed is the idea, and the budgetary angle can be left until later in the process. Then as the proposal moves through the process and gets closer to implementation, more detail can be added - perhaps by introducing a step to develop a detailed business case into the process, assuming the idea is selected at an initial stage. In this way, no proposal is more detailed than it needs to be. In addition, less effort is wasted on filling out what might be superfluous information because the proposal may not make it that far during the selection process.
Having this process in place helps maximize the number of ideas, which must be the central goal of the idea submission process in order for it to succeed. Figure 1 shows how having more ideas to choose from can lead to a superior portfolio of projects being selected. During this stage, it can be helpful to focus more on the benefits than the costs or impediments. It is likely that the organization is more aware of the costs and pitfalls of particular actions than of the benefits of moving into an unexplored area. Therefore, proposals should center on a clear description of the idea and potential benefits, and then the cost estimates can come later, should the potential benefits of the project warrant it. The key is that less time spent on a submission process means that less time is invested in each idea, and so more ideas are forthcoming. A side benefit of this lightweight approach is that an idea that has not been fully polished is less likely to become a pet project of anyone before it gets approved, and a simplified submission process makes it easier to reject ideas, without the problem of investing too much in concepts that will never see implementation. This can be important because the more that can be done to make the process objective and transparent, the more interest and excitement will be built around it.
A more democratic idea submission process creates the opportunity for less-senior employees to submit ideas. This group of employees has a wealth of knowledge about particular parts of the organization that executives may have little exposure to. Therefore, a more democratic - and simply easier - process for idea submission is likely to lead not only to more ideas but also to broader ideas. The ultimate result is a better portfolio because the range of possible projects is significantly expanded.
To order Strategic Project Portfolio Management : Enabling a Productive Organization, visit the publisher @ http://www.wiley.com/.
Simon Moore is the Product Planner for Microsoft's Enterprise Project Management solution and has engaged with project and portfolio executives from Brazil to Japan to define the most effective strategies to completing projects on time, on budget, and within scope. He has worked for Anheuser-Busch on new product development, financial portfolio analysis at Putnam Investments, and regulation and compliance at the Bank of England. He has served as a strategic consultant to firms in the technology, retail, and financial industries and has written for the UK's Guardian newspaper. He's a member of the Project Management Institute. Simon was born in the United Kingdom and currently lives in Seattle.