What is strategic portfolio management?

Different organizations across different industries will likely take unique approaches to the process of creating and implementing a strategic portfolio. That said, there are four basic stages to this process that most businesses should be aware of.

Before any organization can start aligning their resources, they need to understand what it is that they are trying to accomplish—the desired business outcomes. First, assess and understand the strategic goals of the organization, including both short- and long-term objectives. Second, take inventory of all available resources, including budgets and people. Lastly, review established priorities. Planners and project management offices (PMO) with resource managers can then prioritize and categorize the investments. This step also includes identifying tasks and projects that are not contributing towards strategic success, so that their resources may be redirected for better use elsewhere.

With a clear picture of the current state of the portfolio, the next step is for the organization to select key business metrics through which they may gauge success. By monitoring process performance, the organization can identify areas that may require course correction to keep operations aligned with the current strategy. One approach is to establish a phase-gate process to divide traditional projects into smaller, more manageable steps. Analyze these steps to confirm that they support the larger strategic goals and adjust where necessary. Additionally, organizations may incorporate Agile or Hybrid project management methods of working.

In this stage of the process, organizations review their resources and how they’re being used, eliminating any redundancies that they may find. They enable planners and managers to select, prioritize, and schedule the right work continuously while aligning teams, driving efficiency, and staying on strategy. Additionally, it’s important to consider emergent issues or other potential risks that may cause problems. All tasks and other portfolio items must be correctly balanced and aligned with one another to ensure that everything is functioning together consistently.

With the situation assessed, all resources accounted for, metrics established, and portfolio items aligned to established business goals, the portfolio management process is more or less complete. However, there is one final stage that is nevertheless extremely important—ongoing management. The management stage involves tracking the portfolio and all related items, making changes where needed to maintain priorities and continue progress towards business goals. This may also include revisiting budgets, reassigning resources, or even delaying or canceling projects. Because any active portfolio will require close management, this stage is one that continues indefinitely. A key aspect of SPM is having a single, integrated view that shows all work (pending, ongoing, and completed) in the context of your strategic initiatives, enabling organizations to see actual progress towards key objectives, identify trends that may indicate challenges or opportunities, and analyze the impact of potential pivots.

As previously addressed, strategic portfolio management brings together a number of different disciplines. Here, we identify several important components of modern SPM:

Operating models are used by enterprises to visualize and organize how the organization operates, bringing together customer offering, business capabilities, and corporate structure to deliver value to customers in a way that is aligned with the organizational strategy.

Portfolio management enables teams and business leaders to take a holistic view of all information technology across the entire enterprise, supervising, controlling, and maintaining resources throughout the organization.

Financial management helps align costs with business strategy, with an emphasis on accurately forecasting the impact of cutting costs in different areas.

Risk and security management is used to identify potential dangers and to better secure any areas that may present security weaknesses or non-compliance issues. This component provides insight into which systems may carry increased risk, what those risks are, and how best to respond to said risks.

Enterprise architecture governance describes the structural layers of complex business systems and enables organizations to better align their resources and tools with the rest of the business.