20/20 Foresight: The Origins Of Pattern Based Strategy?

Pattern Based Strategy is the new Gartner’s framework to exploit patterns in the marketplace for competitive advantage. Hugh Courtney in 2001 introduced  “Strategic Evolution Principles” which in essence could represent the foundations of Pattern Based Strategy.

The intention of this post is not to dispute the ownership of a concept but rather to point out how the management discipline evolves and adapts according to the context.

In his book, “20/20 foresight – Crafting Strategy in an Uncertain World”, Hugh Courtney highlighted:

Strategic evolution principles … enable companies to evolve successfully … through ambiguous business environments. Sucessful evolution requires companies to be: (a) quick and precise in identifying new threats and opportunities as they emerge, and (b) ready with a set of business principles and organizational norms that will help them make fast decisions and even aggressive commitments despite the high level of residual uncertainty.

Moreover H. Courtney stated that:

Companies can meet these requirements if they follow best practices in four key areas: scanning, experimenting, monitoring and committing.

We can notice, whilst comparing with the Gartner’s model of proactively seeking, modeling and adapting, that  a strong correlation in the approach to deal with decision making in uncertain environments exists.

There are some obvious similarities in the two frameworks in (1) the for search of significant signals, (2) the timely commitment of the organization, and eventually (3) the capacity of a company to embrace such models:

• Gartner promotes the critical organizational disciplines to succeed: Pattern seeking, Optempo Advantage (Gartner definition: “Optempo Advantage” represents the set of coherent guidelines and actions necessary for maximizing the alloctaion and utilization of enterprise resources (people, processes and information) , Performance Driven Culture, and Transparency;

• H. Courtney enforces the three vital areas of strategic management: market-and-time based decision making, focused competitive and market intelligence and efficient internal capital allocation.

The transparency attribute is something new and is certainly a conscequence of the serie of events that occured in the financial markets since 2001. What is new as well is the increased maturity of information technologies that are now more prone to probe market signals, to share critical insights at the speed of light, and to develop more than ever the concept of collaborative intelligence. In a way, we might say that gartner used the “Optempo Advantage”.

I always found interresting to see how the business management discipline is evolving by cycles, and its ability to recycle older concepts and ideas; however at each step in the process we are getting smarter.

The important matter is to understand where we come from and how we are adapting to changing conditions in our pursuit of knowledge excellence.

You are welcome to use  the comment section to share other models evolution that you have witnessed in the marketplace.

Reference: 20/20 Foresight – Crafting Strategy in an Uncertain World – Hugh Courtney, 2001

The Digital Competitive Advantage Of Organizations

Positioning strategically IT within the Enterprise is at the heart of many CIOs concerns. In these turbulent times, it is not uncommon to see  IT relegated to its sole cost element. Conversely, strong signals exist to prepare companies for growth. Here is the opportunity for CIOs to reap the benefits from the situation and identify the Digital Competitive Advantage for their organizations.

Making a board acknowledge the value of IT has always been a difficult exercise for CIOs. Current economic pressures and global uncertainty makes it even harder. The current cash flow focus challenges any investment with a short term view, potentially exposing  the company to future risks. Conversely, we need to admit that this systematic questioning of where we spend has value and lead to a critical Quest : “What are these Strategic/Core Resources we should be protecting?”

Time To Change

For many reasons, most of IT organizations elude this question and focus on the cost/quality service ratio. It is now time to challenge our approach and offer our business different perspectives. “What are our core IT resources that will provide a sustainable competitive advantage? ” – “What type of resources should we leverage: Organizational, Process, Technology” – “How do we define Core?” These issues should be fully integrated in the screening process of any IT related investment process and spend analysis.

Defining Core/Strategic Resources

It fits in with the “Resource Based View of the Firm” introduced by Wernerfelt B. in 1984 and how Valuable, Rare, Inimitable and Organized (VRIO) a resource can be. A core resource should meet all of these criteria.

A resource is Valuable if it helps the organization to address an external threat or exploit an opportunity. Rare if it is not widely owned by other competitors. Inimitable if it is difficult for another firm to acquire it or a substitute something else in its place. Organized if the firm is able to actually use it.

What is it about IT?

Most IT organizations have articulated their strategy (see “Is There Such Thing as IT Strategy Anymore?“)around the value of IT which fulfill the first criteria of (V)RIO, but let the others on the side. Value is driven at the pace of economics, and objectives like efficiency, quality, customer responsiveness, and innovation are inevitably calibrate on the expected Return on Investment. However criteria like Rare & Inimitable required a focus on long term.

The Digital Competitive Advantage (DCA)

DCA is the ability of organization to grow and exploit the IT resources that fulfill the CRIO criteria. Think about your next strategic workshop and identify what part of your IT culture, leadership, solution portfolio, reputation, organizational expertise make you deliver this Digital Competitive Advantage and make your business outperform the competition.

Pattern Based Strategy: A new Hype?

Pattern Based Strategy is new framework launched by Gartner to pro actively seek, model and adapt to leading indicators that form patterns in the market place.

We must admit that Gartner has been very creative lately to create new hype: Cloud computing, Enterprise architecture, and now Pattern based strategy. Beyond the promotion itself, we can see an emerging demand to reassure the business community to anticipate what tomorrow could be.

Predictive Business Intelligence is one element in the equation, but a fundamental shift in the way organization are planning need to happen, and it could be done by integrating the necessary variability of risk whilst establishing a path for growth. An approach by scenario is suggested by Gartner to accommodate this uncertainty.

Will BI market be the sole winner of this trend or will we assist to the birth of a more fundamental change in the way organization are managed?

You can see a video here of Peter Sondergaard (SVP Research). If you are interested on the subject find below some additional resources on the subject:

- “Gartner Identifies Four Disciplines of Pattern-Based Strategy“

- “Gartner Says Companies Must Implement a Pattern-Based Strategy to Increase Competitive Advantage“

You can read a post that I wrote early this year that was suggesting a similar approach:

… Last but not least, reactivity has been pushed  as a strategic enabler for growth, and if the vendors are quickly adapting, internal IT might have issue to address this need. While being reactive is certainly a good thing, being proactive is even better. IT has focused for decade on monitoring system that support the business. Why not changing the concept and establish a Business monitoring. There is tone of information present in systems today that are not exploited and could be the basis for pro-active analysis. Developping this competency within the organization memory could create tremendous value for organizations.

Looking forward for your comments.

Enterprise Investment Portfolio (Part 1) – Improving Performance

Looking at  Internal Investments as a portfolio put in perspective the way Enterprises are internally investing in changes considering risk and opportunity at a global level rather than at project level.

The following classification of investment (introduced in  “How to fight “Business Urban Legends”) follows this approach: 1- Improving Performance 2- Sustaining the current Performance 3 – Survival & Adaptation to context

Improving Performance

THINK PORTFOLIO OF VALUES: Chris Potts, a well-known corporate strategist, suggested to approach the performance of portfolio as a set of values rather than the cumulative NPV (Net Present Value)generated by individual projects (I recommend his book “FruITion: Creating the Ultimate Corporate Strategy for Information Technology“) . Using this approach, arbitration of investments is appropriately Aligned With The Overall Company Strategy. Each organization can define its own strategic measurements dashboard and consider it as a validation point whilst investing in changes. Concepts such as “Balanced Scorecard” are perfectly adaptated to this.

THINK RISKS & OPPORTUNITIES : Back to the proposed classification, “Improving Performance” investments are specific in nature as they challenge the way an Enterprise is generating value. Processes, organizations and technologies will need to be overhauled to reach a better level of performance. These changes creates Risks, that need to be mitigated, & Opportunities, that need to be exploited in the future.

THINK UNCERTAINTY OF RETURN: Another uncertainty to consider is linked to reaching or not the level of performance expected by the investment at a specific time. This has to be managed according to the “risk profile” of the company. Two classes of variables are usually responsible for this situation: The Execution Alea (Initiative on time, on cost, performance expectation fullfilled etc…) and the Context Alea (Expected Market growth, variation of the competitive landscape, regulatory environment, Industry Economics etc…).

LET SEE HOW IT WORKS: Let’s have now a closer look at the footprint of this type of investment, and how other categories might be impacted. For example we could consider improving our market reach by investing in expanding international dealer/distributor agreements, restructuring a division by industry, implementing a Customer Analytic System, developing promotional materials in different languages. All of this make sense and priorities will have to be established.

Most of the time companies are looking at the amount to invest, when they can expect a return and what are the risk (Execution Risk) and make their decision. This is rather a limited view of economical decision as it push them to choose the shortest term return – hence minimizing the risk. In addition when designing the investment, it is common to only integrate the one time cost of the initiative and new recurring costs they might incurred.

By using the suggested approach, organizations should look at the Impact of such grow and :

- Understand the necessary adjustments to sustain, in the future, such level of performance. For instance, how our back-office is going to handle an increase level of orders, or talking with people that are not English native.

- Understand that new practice adjustment will need to take place; for instance doing business with dealer abroad might required specific regulatory and market expertise that an organization does not have today.

- Understand that implementing a quick IT package could generate redundancy of data which could further create inconsistency and negative productivity impact.

Conversely,

- understanding that dealers or industry associations might be interested by getting some analytics and paying for this could generate a future stream of revenues if we are investing in the right infrastructure.

- Understanding that investing in the comprehension of market network, and industry network work could lead to earlier leads and thrive the company branding.

SO WHAT? All of this is common sense, when a Disciplined Approach is used and we are looking the Value Created Globally not project by project; it becomes rather evident,  that analyzing investment thru the cumulative list of expected returns from individual initiatives could lead to an increased Risk and missed Opportunities.

I hope you enjoyed this first section.

The Great Project Manager (Final Episode) – Building Momentum

Several years ago, I have the chance to read Jim Collins’ book – “Good to Great” (G2G), that has changed the way I was approaching performance in Project Management. I suggest to share with you my learnings in applying the different concepts raised in this book into the management of Strategic Projects.

The 5 key idea sets of G2G are: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

The flywheel image captures the overall feel of what it was like inside the companies as they went from good to great. No matter how dramatic the end result, the good to great transformations never happen in one fell swoop. There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no wrenching revolution. Good to great comes about by a cumulative process – step by step, action by action, decision by decision, turn by turn of the flywheel – that adds up to sustained and spectacular results.

Here we are, this is the final episode of the serie “The Great Project Manager”. This flywheel’s  concept was for me certainly the most insightful of all and has truly changed the way I approach change in Project Management.

PM are often confronted with initiatives that truly challenge the established consensus, and impose an organization to change.  Most of the time, we call for change agents & dedicated program to help people transitioning to the target practices. But overall the experience of PM regarding changes are always challenging and you never seem to learn enough to have one flawless process that guaranty success.

According to Jim Collin’s study, good to great companies build momentum; step by step they are improving, and they do not seem to manage changes at all: it just happen. I understand how provocative this statement can be. However I personally discovered the power of such proposition whilst facing large strategic projects; and I have identified two principles that I try to enforce when dealing with such initiative.

1 – Building momentum starts with “Rules of engagement”. After having identify the right persons in the bus, it is important to set up some ground rules that will enable the team to work appropriately. Some example could be: “Meetings start and finish on time”, “Minutes are validated by the group, and always available”, “On a weekly basis an hour meeting is organized, seeking improvements to the way the team operates” etc… Although these measures will not deliver instant greatness, they are here to establish its foundation. Week after week the team will improve and deliver consistent results based on these principles.

2 – Rules of Engagement should enable targeted changes: You need to build inside your project the foundation for the changes you want to implement. If in the targeted model:

- People need to communicate virtually, use your project to infuse this type of change.

- Centralization of backoffice is required, embed progressively a similar approach in your project.

- Marketing need to be more proactive to customer expectation make them the champion of project improvements.

By applying these principles,  teams develop greatness overthe life of critical projects and adaptions to change are easier. Having said that we must recognize as professor George E. P. Box, “All models are wrong; some models are useful”. My proposal here is not to revolution the way we manage change in project, but rather to built on interesting findings to ease some of the pains we may be facing when dealing with changes.

That’s all folks. I really hope you enjoyed this serie of posts (The Great Project Manager”) as I did. I would like to thank you all for the encouragements, direct feedback and comments I received which helped me to finalize it in a reasonable time-frame.

Find the previous episodes here: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

The Great Project Manager (Part2) – First Who Then What

Several years ago, I have the chance to read Jim Collins’ book – “Good to Great” (G2G), that has changed the way I was approaching performance in Project Management. I suggest to share with you my learnings in applying the different concepts raised in this book into the management of Strategic Projects.

TThe 5 key idea sets of G2G are: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

This post is the second part of the Serie “The Great Project Manager”. Part 1 – Level 5 Leadership is available here.

First Who Then What. Get the right people on the bus, get the wrong people off the bus, get the right people in the right seat.

First Who is not the way most of the project teams are operating today. Usually the What is defined upfront with more or less details and the Who becomes a consequence of it. What Jim Collins is suggesting is to reverse this common sequence of events, and establish from the start who will be in and who will out. Of course a main purpose must be defined, such as project objectives, prior to the Who.

Projects are often under a lot of uncertainty. It might be the likelihood of the proposal, the people commitment, the market and the derived value proposition of the project, or external and unplanned events (political climate).  The best way to prepare for this uncertainty, and what you can not possibly predict is to focus first on the who.

This tenet is certainly the most challenging of all, as it requires the project manager to intervene in company politics. The first question that he or she must answer with the top management is “Am I the right person on this bus” – Do I share the same values -  do I feel holding a responsibility for what I’m going to do – am I or could I become the best person in the company to manage this project, is the top management team is expecting a Level 5 leadership.  If you feel comfortable with all these questions, you might be the right person. The importance here is that you keep your freedom of choice.

The second part will be to cascade these questions to the persons you will have on the project team. And this where internal politics can take place. However if you have gone thru the first step process (for yourself), this path should be facilitated.

Most of energy & time of Project Managers should be to identify the best people and get them in the bus. And most importantly get the wrong people off the bus. Whatever the time used to make this happen, the decision must be enforced as soon as you detect such person. As you have the right people on your project, they should be self-motivated and self-disciplined, which will considerably decrease the need to manage them. Trying to motivate or manage people is a waste of time, it should be automatically address if your are focusing first on the Who.

This question of Who applied as well to external parties such as services or product vendors. They should be selected based on the same principles. A deep discussion during the RFP or RFQ process should be engaged on the core values and purpose.

Along the way, you might find that a person well suited for a position in the project might be short, and the seat is becoming too big for him or her. It is again where great project managers dedicate themselves to identify the right path. Either reduce the size of the seat or reassign this person on an another seat.

Great project Managers know that the question of Who is on the bus (first) is what makes a project successful, and is a best way to manage uncertainty inherent to strategic projects.

The Great Project Manager Serie: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

G2G Project Management (Part 1) – Key Lessons Learned From Level 5 Leadership

Several years ago, I have the chance to read Jim Collins’ book – “Good to Great” (G2G), that has changed the way I was approaching performance in Project Management. I suggest to share with you my learnings in applying the different concepts raised in this book into the management of Strategic Projects.

The 5 key idea sets of G2G are: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that level 5 leaders have no ego or self-interest. Indeed they are incredibly ambitious – but their ambition is first and foremost for the institution, not themselves.

Which Ambitions For The Project Manager?

Prior embarking in any strategic project, election of the project manager (by extension the project team) is a critical step. In most cases the PM is selected based on his/her previous assignments, organization knowledge, leading capability, and potentially his/her level of expertise in project management.

Usually the acceptance of such position by the PM is the result of having a new experience in her/his resume, enabling the access to a higher position, or “I do not have something else to do”. Here is certainly where resides the problem. The PM will focus on the completion on time, on cost of the project and might try to appear as the leader who makes the project successful.

The essence of L5 leadership conveys success way after the finalization of a project, and implies a focus on the future organization’s performance rather than short term objective of implementation. When selecting the PM, an organization should identify individual who will care about the future outcome and the one who goes beyond personal renown as an element of his/her motivation.

Managing The Level Of Expectations

Jim collins’  article in the Wall street Journal “High Returns Amid Low Expectations” highlighted “How sky-high expectations become the seeds of decline.” The fact that an organization is expecting a lot from a project creates extraordinary pressure, especially in term of time, which might drives to some spectacular actions to show that the project will be delivered at D-Date.

That is the role of the PM to tune down some of the expectations of senior management and don’t let the panic impact the ultimate deliverable of the project, which is  – improved organizational performance. We should see the case of ATT CEO, Michael Amstrong in the late 90s, as a key lesson learned.

Ambiguity Of Controls

Jim Collins argues that if you assemble a team with the same core values and core purpose and you give them the freedom of choice along with some commitment mechanisms, the level of controls required to operate should be minimum. Temptation to micro control a project is always present, especially because their are great tools to do so out there. However relying on a strong team commitment will free up the execution of some combersome reporting mechanisms. The level 5 leadership knows how to balance these controls and develop the commitment of the entire team. As a rule of thumb “If you want to control your project, focus on the team commitment”. Again like the PM, it all starts by its own selection: “Put the right people on the Bus”.

Learning As A Key Performance Driver

I’m always baffled by the amount of opportunities missed in a project because some information are not shared on time, not share at all, or not easily accesible by the entire team. When assembling the team, people are selected for their expertise, and they will act in the project as knowers not as learners. But here is a great opportunity to learn even more by people who will be exposed to their expertise. It is important whilst kicking of the project to understand the learning goals of every players, and make learning a central practice to the team. For instance a weekly meeting to share the team learning could create opportunities to avoid wrong decisions and accelerate the overall planning.

Leadership Versus Power

One of the key finding of G2G is that there is an inversed relationship between “Exercicing Power and Exercicing Leadership”. Project Management is the ideal place to practice Level 5 leadership, and provides the foundation to move from good to great for anyone wishing to go beyond his personnal agenda.

The Great Project Manager Serie: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

Balanced Scorecard & Strategy Map – What’s next?

I personnaly found very useful the utilization of the Strategy Map framework (Norton & Kaplan). It provides a solid foundation to articulate and promote a unified strategy and establish a rodmap for its execution thru explicit & meaningful measurements.

One thing that I struggle with, is the efficency of the execution and its related byproduct: “the optimization of the Investment Portfolio in changes”. I intend to write an article on this subject, and I am interrested by your feedback on the utilization of Strategy Maps and Balanced Scorecard and how your organization dealt with return & prioritization of  investments.

Looking forward to receiving your comments.

CIOs – Manage your S-Curve

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The S-Curve is the graphical representation of the complex relationship between Performance and level of effort (or investment level). I have highlighted the critical importance of this concept in a previous post: “The Dark Art of IT investment“.

Businesses are adapting Organizations, Processes and Technologies (OPT) to deliver superior performance in a specific context. Adapting them means managing their investments, which could be done by changing any possible combination of OPT.

It will be interresting for any leader to understand the full potential of an OPT capability toward its potential performance limit. Driving therefore to design the best approach in managing his/her investment in changes. When this limit is reached, it is recommended to revisit the fundamental of the OPT combination, leading to an important paradigm shift in the business model (Often called the “Inflection Point”).

Let see some practical examples.

For Start-Ups, Entrepreneurs are assuming light organizations with cross responsabilities in term of execution and can implement rapid decision cycle. Processes are not clearly designed up front but tend to impose themselves as the organisation grows. Information Technology is introduced sporadically, delivering non measured benefits. It comes a time when the owner has to overhaul the fundamentals of its business model to ensure future performance. Bringing new people, structuring the organization in distinctive responsabilities, and one of them is IT. This new changes in OPT capability will drive performance according to this new context of growth.

For Corporations, we can observe effort to rationalize their processes by leveraging automation, introducing quality insurrance, and refining their go to market model. Acquisitions campaigns can lead to harmonization of technologies and applications or simple integration of common infrastructure. Continuous Improvement Program focused on the introduction of best practices in a particular industry using benchmarking.

At this point, let try to summarize some basic facts that we can all relate with our personal experiences:

Investment in changes can be done incrementally, introducing progressive adjustment of the OPT set, but there is a performance limit  established by the industry itself. The question becomes how to reach as fast as possible this performance.

We observe different business phases as the organization grows, and context changes that required important investment in changes and will ultimatly drive the company performance to the industry standard. The question here is when to launch this critical steps (Inflection Points) if they are following the S-Curve model and generating disruption and drop in performance.

Last but not least, going beyond Performance of Industry Standards required radical innovations.

Structuring an OPT capability lead to an optimization of number of steps, a business can take to reach a specific performance. It is obvious that successive steps could create less risks for a company but will go with a much bigger effort in term of investment.

It is leaders’ responsability to establish the right path to reach ultimate performance according to the business context. Here are some examples of this context:

• Volume of process output, such as number of customer invoices to handle, number of products to manufacture, number of customers, markets to support, number of employees to manage, lead to adapt OPT to improve or sustain performance.
• Time is critical in term of ability of organization to change. Practicing on a regular basis changes lead to a more flexible and adaptable organization.
• Constraint – The current crisis is one example on how market condition can change the way we are investing in changes.
• Expectations in term of structure of value creation (Shareholder, customer, employee, communities…) can lead to focus our investment in specific value segment. Change in expectations for gross margin can lead to focus on low cost sourcing  separating this function from engineering and leading to high Escape Rate.

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Leaders should seek the optimization of their S-Curves. When and how to invest in OPT should be driven by the perceived change in context, the potential of an OPT Capability  and the company appetite for risk.

The Ultimate Guide: Strategy to Invest in IT Related Projects

How to ensure sustainable performance of your investments?

The suggested approach on how to evaluate an investment is steered toward its integration within an overall company investment portfolio. Most of the time organizations make their decision at project level, missing the big picture of strategy for resource allocation and are subsequently confronted with internal politics pressure.

I have created and used these guidelines in many situations to build a trusted relationship with senior management when deciding on where the company should invest.

Specific Assumptions Regarding this Guide: All project management matters should be treated separately. The focus in on the decision to invest, not on the organizational ability to execute. We focus here on investments that create new capability for the company by exploiting Information Technology; Investments sustaining the current capability could be dealt with a different approach, not describe here.

Expected Values for the Organization

What is the primary reason of this investment? Most of the time small investments are focused on delivering one key value segment for the organization. But when it comes to major changes like ERP, multiple values could be generated. Trying to allocate part of the investment to a specific value can become rapidly complex.

Focusing on the main reason of why we want to invest, force us into a two fold discussion: How do we define value, and can we structure (potentially phased) the project in a way that we are addressing key value segment? Value segments should be defined at the right level (Operational Efficiency versus Working Capital Improvement), measured with a key metric, and integrate the identification of the primary beneficiary of the value created (Shareholders, Customers, Employees, Partners, communities,). While other implicit values could be generated by the investment, identify them clearly as secondary.

Tip(s): Design your investment to focus on one critical value segment.

Suggested Reading(s): Potts

Underlying Variables and Risk Topology

Return on investment is usually based on critical assumptions, like market size, competition move, political climate, regulation framework etc…. Whilst investing, we need to identify clearly these parameters and their inherent level of uncertainty. In 80/20 Hugh Courtney suggests a framework to tackle with different profiles of uncertainty which could be used to improve our understanding of risk exposure. It is called the “4 levels of residual uncertainty”: “A clearenough future”, “Alternate Future”, “A range of futures”, “True ambiguity”.  A balance approach is recommended based on the appetite for risk of the organization (“Utility Curve”).

A company could define standard assumptions for the entire portfolio of investment and monitor their evolution over time. This will enable a more accurate picture of the value created and improve the confidence of senior management and shareholder in the way we invest in the company. It is all about managing expectations in an uncertain world.

It is important to notice here that topology of risk will drive the choice of the method used to calculate the return on investment (DCF, EVA, Decision tree, Real Options…).

Tip(s): Understand that you balance your portfolio on critical assumptions that you may not be in control of.

Suggested Reading(s): Trigeorgis, Courtney

Featured Video(s): Bernstein

Relationship between Effort & Performance

I have raised the importance of this relation, in one of my previous post (“The Dark Art of IT Investment”), and suggested to approach this paradigm thru the S-Curve model. When optimizing a portfolio of investment it is important to understand how far we are in the process in term of leveraging past investments. Further we should determine if we are reaching an inflection point when a more drastic change is required versus pursuing continuous improvements that might deliver less and less value.

It is interesting at this step to introduce some flexibility in your investment by incorporating “Options” that you could exercise later, or leverage past ones that you might have created. Several categorizations of these “Options” exist in the literature – Lenos Trigeorgis suggested: “Defer Investment”, “Time to Build”, “Expand”, “Contract”, “Shutdown & Restart”, “Abandon”, “Switch”.

Although theories and mathematical models are available on this subject, I strongly recommend keeping it simple and focusing on the big picture.

Tip(s): Calibrate your portfolio between leverage and future opportunities and optimize it by incorporating flexibility thru premiums.

Suggested Reading(s): Fibol

Tool(s): Working Capital Profiler

The True Recipient of Investment

This is where we bring the human side in the equation. We are all aware of the IT’s potential of disruption on process and organization. Even more, they impact People. A restrictive view is to consider the only change is related to the way people work. But we should consider an investment as a possible lever to change the way people are perceived, see others, and develop the organization as a whole.

Organization, Process, and Technology (OPT) are concepts that could potentially dehumanize the decision process. So rather than considering investing in OPT we are truly investing in People who will subsequently grow the organization. Having said that, it is critical to understand in which population we are investing, and how we intend to maximize the value from them.

Tip(s): Structure your portfolio around effective people and efficient processes.

Suggested Reading(s): Dupuy

Big Picture

To make a sound decision, leaders need to have a clear understanding of the commitment they are created for their organization. If establishing financial footprint of an investment for the next 3 to 5 years is common discipline nowadays, the operational impact of multiple investments is not generally not consider. One of the key advices that I offer when dealing with IT related Investment is to look at the big picture, and to use common sense whilst deciding on moving the entire organization.

Tip(s): Picture the organization after all investment decisions, and use common sense to ensure that this is where the organization should be according to its values and principles.