Strategic portfolio management describes the processes and tools that businesses may use to align available resources to meet strategic goals.
Time, resources, people, tools, budgets etc. are all limited. As such, decision makers often must select which projects, products, programmes or initiatives (“investments”) to pursue, and which to abandon. Generally, these decisions are based on several factors, with perhaps the most important being how well these investments align with the organisation’s strategic goals. If the initiative in question does not support desired business outcome, then it may be a suitable candidate for elimination. On the other hand, initiatives that align well with strategic objectives should be prioritised.
Strategic portfolio management (SPM) encompasses a range of business capabilities, processes and technological support aimed at enabling organisations to continually develop portfolios of strategic solutions and options. Used correctly, these options are capable of improving how the organisation allocates its finite resources towards enterprise-wide business strategies.
To achieve successful strategic portfolio management, three key attributes must be implemented: portfolio alignment, value-oriented decision-making, and continuous portfolio adaptability. Organisations that excel in all three of these attributes are twice as likely as their competitors to see superior business results from their digital and technology-related investments.
Strategic portfolio management approach drives greater business agility by effectively integrating:
- Adaptive Project Management
- Strategy Execution Management
- Business & Enterprise Architecture
Everything that an organisation does may be a part of the strategic portfolio. This includes change initiatives aimed at improving how the business interacts with customers, promotes products or services, improves employee productivity and more.
Together, these components of the strategic portfolio help inform important business decisions about which actions should be pursued to positively impact the company and help it reach its goals.
Although the two terms may seem nearly identical and are sometimes used interchangeably, strategic portfolio management is not the same thing as adaptive project management. While SPM includes the processes and tools for compiling and maintaining the right investments, APM picks up where SPM leaves off, defining how organisations proceed with executing those investments within the portfolio. Both SPM and APM are necessary for organisations who wish to optimise their ability to compete.
Although SPM has the capacity to impact every role within an organisation, responsibility for strategic portfolio management falls primarily to the senior management team. Appropriately applied, SPM helps managers better align their strategy and operations efforts.
Strategic portfolio management differs from traditional programme and project management solutions, in that it is not primarily focused on how the projects, programmes, products or initiatives themselves are managed. Instead, the main concern within strategic portfolio management is aligning business strategy with work. This enables decision-makers to plan, deliver and track value across different methodologies and structures. In other words, it’s designed to ensure that the right activities are being completed to further business goals to align the organisation.
With this in mind, businesses may enjoy several valuable advantages from effective strategic portfolio management. These benefits include the following:
One of the key advantages of strategic portfolio management is its ability to accelerate the time it takes for products, services or projects to reach the market. By actively managing and prioritising projects within the portfolio, organisations can optimise resource allocation, streamline processes and eliminate possible bottlenecks. This results in increased efficiency as projects are aligned with strategic objectives, ensuring that efforts are focused on delivering the most valuable initiatives promptly. With a clear understanding of project dependencies and resource availability, decision-makers can help expedite project delivery, allowing the business to seize market opportunities swiftly and gain a competitive edge.
Today's organisations must be prepared to face unexpected disruptions, such as technological advancements, market shifts or unforeseen events. Strategic portfolio management equips businesses with the agility and flexibility needed to respond effectively to emergent events. By continuously assessing the portfolio and regularly reviewing project priorities, organisations can proactively reallocate resources, adjust project scopes, or even introduce new initiatives to mitigate the impact of disruptions. The ability to respond promptly to disruptions minimises potential negative consequences and positions the organisation for continued growth and resilience.
Achieving effective integration between strategic objectives and project execution is a common challenge for many organisations. Strategic portfolio management addresses this issue by providing a structured and systematic approach to ensure that projects are aligned with the overall business strategy. SPM facilitates the translation of strategic goals into tangible projects, defining clear objectives, milestones and success metrics. By actively monitoring project performance and evaluating their alignment with strategic objectives, organisations can make informed decisions regarding project continuation, reprioritisation or termination. This alignment fosters a more cohesive and focused approach to project execution, reducing the risk of pursuing initiatives that do not contribute to the organisation's strategic goals.
The tools that support strategic portfolio management help simplify project-vetting processes. Companies can easily identify profitable investments while avoiding wasting resources on those initiatives that are less likely to succeed or those not aligned to the organisation goals. This helps improve business efficiency by not only identifying and eliminating bad investments, but also by streamlining how organisations approach these investments in the first place. This enables the organisation to focus on the right work to achieve the right results.
Prioritising investments based on their potential for alignment with strategic goals is not a new concept—programme portfolio management, agile financial management, strategy management, integrated IT portfolio analysis, and other disciplines all have a hand in achieving strategic results. Where SPM differs from more-traditional approaches is in its ability to bring these disciplines together. Instead of each task being performed by a different team, strategic portfolio management cohesively connects related disciplines together in such a way that any change is instantly visible, and immediately accounted for through every related activity.
The modern business world is one of unpredictable and continuous change as new technologies and regulations place even greater pressure on organisations to deliver—and fast. The need for organisational flexibility, competitiveness, innovation and speed become driving factors that thwart disruption. To keep up with changes as they occur, companies need the agility to pivot their strategies at a moment’s notice. Strategic portfolio management empowers organisations to quickly define strategy, set objectives and key results (OKRs), align roadmaps, create budgets and secure resources to account for new strategies as change occurs.
A major advantage of strategic portfolio management is its ability to accelerate business processes. This goes beyond simply pushing projects more quickly to market; SPM reduces the time needed to push ideas through the innovation funnel, making it possible to complete and launch new digital initiatives within even the strictest deadlines.
Finally, and most importantly, strategic portfolio management gives teams a complete picture of their available resources, maintaining focus on long-term strategy and vital objectives even when faced with emergent situations. SPM helps ensure that businesses can operate distraction free, aligning every process and team in such a way that it supports the overall goals of the company.
Organisations invest heavily in digital initiatives to enhance customer experiences, drive innovation and improve operational efficiency. However, many businesses struggle to fully realise the anticipated value from these investments. Strategic portfolio management provides a framework for evaluating and prioritising digital initiatives based on their alignment with the business strategy, potential value generation and resource requirements. By focusing on initiatives that offer the highest returns and effectively managing their execution, organisations can maximise the value they derive from their digital investments, achieving the desired business outcomes.
Different organisations 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 organisation 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 organisation, 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 prioritise and categorise 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 organisation to select key business metrics through which they may gauge success. By monitoring process performance, the organisation 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. Analyse these steps to confirm that they support the larger strategic goals and adjust where necessary. Additionally, organisations may incorporate Agile or Hybrid project management methods of working.
In this stage of the process, organisations develop a strategic portfolio plan that outlines the specific projects, programmes or initiatives that will be included in the portfolio. The plan should clearly define the goals and objectives of the portfolio, along with the key performance indicators (KPIs) that will be used to measure progress. Additionally, the plan must consider the allocation of resources, including budget, personnel and other assets, to ensure that the selected initiatives can be executed effectively. It is likewise important to consider emergent issues or other potential risks that may cause problems.
Once the strategic portfolio plan is in place, it's time to execute the selected initiatives. This stage involves implementing the projects and programmes according to the established priorities and resource allocations. Post execution, ongoing management is essential to ensure that the portfolio remains aligned with the organisation's strategic objectives and adapts to changing circumstances. This 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 cancelling 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 organisations to see actual progress towards key objectives, identify trends that may indicate challenges or opportunities, and analyse 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 visualise and organise how the organisation operates, bringing together customer offering, business capabilities, and corporate structure to deliver value to customers in a way that is aligned with the organisational 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 organisation.
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 organisations to better align their resources and tools with the rest of the business.
Strategic portfolio management is a versatile approach that can be applied across various areas within an organisation to improve decision-making, resource allocation and strategic alignment. Here are several use cases detailing how SPM can make a positive impact:
- Gain Real-time Insights
Strategic portfolio management provides organisations with real-time visibility into their capital budgets and investments. This enables informed decision-making based on accurate and up-to-date information. - Optimise Return on Investment
By utilising strategic portfolio management, organisations can develop capital plans that optimise their ROI. This involves assessing and prioritising capital projects based on their potential value and aligning them with the overall business strategy. - Streamline Capital Portfolio
Strategic portfolio management helps streamline the capital portfolio by identifying redundant or low-value projects and reallocating resources to initiatives with higher strategic impact. This maximises efficiency and ensures resources are utilised effectively.
- Periodic Strategic Reassessment
Strategic portfolio management allows organisations to periodically reassess their strategic direction. This ensures that the portfolio remains aligned with changing market conditions, customer needs and internal capabilities. - Flexible Resource Allocation
With strategic portfolio management, organisations can allocate funds based on changing priorities. This enables them to adjust investments and resource allocation in response to emerging opportunities or shifting business priorities. - Reprioritise Investments
As circumstances change, strategic portfolio management empowers organisations to reprioritise investments. Projects can be adjusted, paused or accelerated to ensure that resources are directed towards the most impactful initiatives. - Regular Performance Evaluation
Strategic portfolio management encourages regular evaluation of project performance. This allows organisations to use predefined metrics to identify underperforming projects, and then take corrective actions to improve overall portfolio performance effectively.
- Actionable Initiative Translation
Strategic portfolio management helps translate strategic programmes into actionable initiatives. It ensures that these initiatives are clear, with well-defined objectives, timelines and resource requirements. - Innovation and Transformation
By fostering an environment for innovation and transformation, strategic portfolio management supports organisations in driving change and staying ahead of the competition. It encourages the inclusion of innovative projects that have the potential to create significant value. - Process Automation
Strategic portfolio management facilitates the automation of phased processes involved in programme and portfolio management. This streamlines workflows, reduces manual effort and enhances overall operational efficiency. - Risk Mitigation and Visibility
Through improved visibility, strategic portfolio management enhances risk mitigation. SPM allows organisations to identify and address risks and dependencies early on, ensuring that potential issues are proactively managed. - Executive Dashboards
Strategic portfolio management provides executive dashboards that communicate progress and key performance indicators to stakeholders. These dashboards offer a comprehensive view of the portfolio's status, enabling informed decision-making at the leadership level.
- Driving Innovation and Transformation
Strategic portfolio management within IT enables organisations to drive innovation and transformation by aligning IT initiatives with strategic objectives. It ensures that IT investments are strategically prioritised and deliver value to the overall business. - Integrated IT Portfolio Management
Strategic portfolio management helps organisations manage an integrated portfolio of IT initiatives. It enables effective resource allocation, minimises duplication, and ensures alignment with the IT strategy and business goals. - Risk Mitigation in IT Operations
With strategic portfolio management, organisations can mitigate risks associated with IT operations. It allows for proactive identification and management of risks, ensuring smooth and secure IT operations. - Visualising Interdependencies
Strategic portfolio management provides a visual representation of the interdependencies between strategy, technology and outcomes. This enables organisations to understand how IT initiatives contribute to the achievement of strategic goals and make informed decisions accordingly. - Modernising Application Portfolio
Strategic portfolio management supports the modernisation of the application portfolio. It facilitates the identification of legacy systems that may need to be replaced or upgraded to meet current business needs. By analysing the application portfolio within the strategic portfolio management framework, organisations can prioritise modernisation efforts and allocate resources effectively.
- Effective Execution of Strategic Initiatives
Strategic portfolio management plays a vital role in the execution of strategic initiatives. By aligning projects with the overall business strategy and allocating resources accordingly, organisations can effectively execute their strategic plans and achieve desired outcomes. - Alignment of Projects with Strategic Goals
Strategic portfolio management ensures that projects within the portfolio are aligned with strategic goals. This alignment minimises the risk of pursuing projects that do not contribute to the organisation's strategic objectives, allowing for better resource allocation and prioritisation. - Monitoring Progress and Adjusting Course
With strategic portfolio management, organisations can continuously monitor the progress of projects and adjust their course as needed. Regular evaluation and assessment help identify bottlenecks, risks or deviations from the strategic direction, enabling timely corrective actions. - Enhanced Collaboration and Communication
Strategic portfolio management promotes collaboration and communication among stakeholders involved in strategy execution. It provides a structured framework for sharing information, aligning efforts, and facilitating effective decision-making across teams and departments.
Working with limited resources is a fact of modern business. To ensure that those resources are being put to the best possible use in driving business objectives, organisations need powerful strategic portfolio management tools, backed by reliable data and efficient digital workflows. ServiceNow, the leader in IT management solutions, has the answer.
Built on the award-winning ServiceNow AI Platform (a single, unifying platform that gives you complete, accurate, and timely insight into every aspect of your business, enabling innovation at scale and speed), ServiceNow’s Strategic Portfolio Management (SPM) is the only enterprise SPM solution capable of turning uncertainty into opportunity. Designed as a marriage of methodologies, capabilities and processes, and supported by fully integrated technologies, ServiceNow SPM empowers decision makers with the insights they need to evaluate and fund the investments that matter most. Connect strategy, delivery, and vital business outcomes regardless of changes to industries or markets, and act with confidence built on unmatched agility and effective digital insights.
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