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Investile Dysfunction Readers. I'm happy to announce I'm moving my blog to a new address. The old blog entries will remain here as will the comments. Of course, all of these have been moved to the new site as well.
The new blog address is here and can be found at http://brilliont.com/blogs/id/.
So I recently spoke at a conference in Amsterdam where I heard an executive from Air France, (Marco Vd Poel), talk about their portfolio management effort. It was a refreshingly honest and well-articulated presentation. It was one of those presentations that only a practitioner can give because it was based in reality and showed the good and bad of their portfolio management efforts.
Marco had one line in his presentation that was simple, to the point and absolutely SPOT ON. I'm not sure if it's a line he came up with, but he's the first person I've heard say it so he gets the credit. He stated:
"Project Management is about doing projects right. Portfolio Management is about doing the right projects."
Now let that sink in for a second.
How money is that line, eh? It is absolutely 100,000% correct and elegantly simple. So the next logical question is why are project managers running portfolio management efforts within their organizations if it is a different skillset altogether. It's a bit like having Eliot Spitzer teach a class on abstinence. They don't go together.
Undertaking the right projects and investments is about measuring value, considering strategy, risk and financial returns, etc and optimizing the portfolio based on those inputs and factors. Plain and simple - this is not what project managers know how to do nor what they are trained/supposed to do.
Portfolio management in the corporate setting especially IT has basically evolved like this. If you have enough projects, they roll up into a program. If you have enough programs, you all of a sudden have a portfolio. Somehow having a portfolio defined this way gives you the skills to do portfolio management. Wrong.
I'm not sure when folks will realize this. When they do, it will let project managers do their job better because they won't have to do these portfolio exercises. And it will let organizations get the right people to head up their portfolio management efforts and actually get the value they can from such an effort - instead of the glorified project management that it currently is.
This is not meant to disparage project managers. I just think they're being asked to do things that they're not best-suited to do. Picking the right projects as part of a portfolio is a strategic, financial and risk discipline and very different than the skills possessed by project managers. If you are in the handful of project managers who can do it all, please don't write to tell me this. You are awesome and a rare gem. I'm talking about the average project manager who doesn't have the project management + strategy, finance, risk, etc skills.
Thoughts?
Today's Wall Street Journal had a blurb from their Business Tech Blog about Ramon Baez who has started a campaign against jargon within the company. Wow - this is a seemingly simple thing but something a lot of organizations with their own language, e.g., finance, IT, etc fail to do.
The blog posting which I've included below almost in its entirety is refreshing because of Baez's outlook.
Baez has tried to eradicate tech speak and acronyms since joining the consumer-goods giant a little over a year ago. He’s starting with the emails that the information-technology department sends out whenever it has to make changes to a system. You probably know these messages: They’re the ones that make your eyes glaze over for the three seconds it takes to find the delete button.
Baez tells the Business Technology Blog that these emails used to say things like the TFPS server will be unavailable on Saturday. “Even I don’t know what that is,” Baez says, adding that the information is useless unless it’s clear to people what a system does. When Baez sought out the source of the email, he found it was sent by the team that manages that server in India.
In order to make sure that his staff is sending out messages with information people can use, he’s brought in communications staffers to vet each outbound email. And he insists that the emails make it clear who a message is intended for, with language like “if you use this system please read on.” That way, people who don’t use it can delete the message immediately.
Baez also made sure he solved one other consequence of the dreaded email from IT: Tech staffers must coordinate maintenance schedules with the rest of the business. That way, no one will time a network upgrade for the one weekend when everybody has to work.
This last point is so incredibly key. How many times have I seen or experienced tech taking a system down because they had to with little no thought to the business needs for that system? With all of the talk of governance and the business value of IT and other rambling nonsense, it's nice to see a CIO who realizes that it can be simple things that can make a difference. And doing these basic little things can build a great deal of credibility with the rest of the organization.
Fortune's March 17 issue contains an excerpt from a book entitled The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation which is by P&G CEO, A.G. Lafley, and management consultant, Ram Charan, which has a couple of passages which are brilliont (nice, eh?). Before I share Lafley's awesome insights, it is worth looking at P&G's stock chart since he took over in 2001. So take a look at the chart below and notice the stocks dismal to pathetic performance until 2001 and then look at when Lafley took over. That is some chart, eh? So how did he do it?
Organic Growth
"We made sustainable organic growth the priority. Organic growth is less risky than acquired growth and more highly valued by investors...Adding a few points in market share can mean hundreds of millions in new revenue."
Instead of chasing inorganic growth through M&A, Lafley astutely realized that optimizing their portfolio of internal investments in product development, marketing, etc could drive significant value in a much less risky. And the price chart shows the fruits of this effort. This really is one of the best examples I've seen of the power of organic growth and the fact that it works. Managing your investments as part of a corporate portfolio really drives performance.
On Innovation
"Long known for a preference to do everything in-house, we began to seek out innovation from any and all sources. Innovation is all about connection, so get everyone we can involved: P&Gers past and present, customers, suppliers, even competitors. The more connections, the more ideas; the more ideas, the more solutions. And because what gets measured gets managed, we established a goal of that half of new-product and technology innovations have some contribution from outside P&G - such as licensing or buying a technology, finding a partner, or making an acquisition. We are already beyond that figure, compared with 15% in 2000."
I'm really beginning to like this Lafley guy. On the topic of innovation, he hits on so many key elements of innovation and the best part he actually did this in his organization - didn't theorize or pontificate on it. Let's dissect his most brilliont points.
I hope to meet Mr. Lafley at some point. In the meantime, I'll settle for his book. For more info on the book, check out it's Amazon listing by clicking here.
We launched a site today called Investile Dysfunction which details the problems organizations face in getting their performance up. It mainly comes down to their inability to select the best projects and investments to maximize strategic and financial performance.
Investile dysfunction impairs most organization's performance. The great news, however, is that it is 100% treatable and that treatment options are 100% safe. We're glad to launch on April 1. Because it is time the foolishness by which organizations manage their resource allocation needs to be stopped.
You can end Investile Dysfunction. Help is available.
