Strategic Decision and Risk Management
As mentioned in Part 1, I had the opportunity to lead the Strategic Decision and Risk Management (SDRM) Strategic Portfolio Management Course at Stanford University. It was a great opportunity to connect with business leaders in a wide range of industries to discuss critical issues and challenges that professionals who are responsible for portfolio management face every day. As part of this interactive class, the participants came up with a list of “10 Commandments” for strategic portfolio management. They cover a fairly wide range of best practices, ranging from attitudinal shifts to specific techniques that organizations need to get the most out of their planning activities. I explored the first five commandments in Part 1 and will look at the second tablet in this one.
VI. Thou Shalt Evaluate and Calibrate
VII. Thou Shalt Pursue Value
Scoring rules, “strategic fit” and similar approaches substitute easy metrics for effective ones. Like the proverbial drunk looking for his keys where the light is instead of where he dropped them, these approaches rarely have the power to change people’s minds and drive decisions. Measuring economic value in a rigorous way does have this power. Value is not a business case built on assumptions nobody believes (see commandment V), but rather incorporates uncertainty. Figure out what makes makes the most value and do that.
VIII. Thou Shalt Fund Oysters
Oyster projects, those difficult and uncertain efforts with big potential need to be funded, nurtured and protected (see Innovation Screen). Most companies do not have enough of these, and sell the future short. Too often they are squeezed out Bread & Butter projects are reliable, secure for the most part, consistent. (Or worse, by White Elephant projects, see commandment IV) But you need to fund oysters as well in order to remain competitive and to grow as a company. Do not kill the oysters, for the pearls lie within.
IX. Thou Shalt Not Ignore Alternatives
X. Thou Shalt Inspire
We do not want to embrace ‘status quo’ when we strategize portfolio management – the point is to grow. To do that, we must not fear confrontation and change management. It is a part of the process! To analyze our progress, we must paint the picture, inspire with our heads, hearts and wallets, but remove emotion from the decision making.