- Understand the value of good portfolio decisions
- Decrease clutter
- Focus on what matters
- Raise your aspirations
- Look inside projects for hidden value
- Create learning plans to make that hidden value real
- Start an oyster farm
- Heal wounded projects
- Keep scouting
- Follow a continuous process of strategic portfolio management
Understand the Value of Good Portfolio Decisions
In the game, players are each given ten mock projects, whose technical success/failure and commercial value are simulated by dice. The projects use different types of dice (4-sided, 6-sided, and 20-sided) to represent different probabilities of success and ranges of potential value. Each player then selects five projects for a portfolio, and sets aside the other five. (In live events, there is a buy-in of $5, with a payout of $10 if the player’s portfolio meets or exceeds a threshold value.)
The children’s story Millions Of Cats is a fable about clutter. If you can’t say no to any project proposal, you end up with far more projects than you can fund or manage. And if you can’t bring yourself to cancel or redirect projects that have little chance of success or little potential for significant return, those projects linger to clutter your portfolio.
Focus on What Matters
Pearls, Oysters and Bread and Butter projects are where you should focus your resources and attention. Remember that neglecting Oysters for the sake of “low-risk” Bread and Butter projects will rob you of the potential for growth.
Look Inside Projects for Hidden Value
Raise Your Aspirations
Before cancelling or shelving a White Elephant project, look into its business model and see if its upside potential has been stunted. Have assumptions about the market, the realizable price, the available margins been systematically reduced in the name of ‘cutting risk’? What would happen to the projected value of the project if these assumptions were restored to the original aspirations, or if an entirely new set of aspirations was applied?
Create Learning Plans to Make that Hidden Value Rea
If the peek into project uncertainties reveal that an insignificant project can become an Oyster, what would you need to learn and to validate about the project and its inputs to reduce the uncertainty of the key factors and gain knowledge about the project’s potential? And what steps would you have to take to learn those things?
For example, if the average selling price of the new product has the greatest impact on the project’s value, how would you go about learning what price potential customers would be willing to pay? If the performance of the product has the greatest impact, what would you need to do to test and measure the product’s performance?
Knowing what you need to learn is only one aspect of a learning plan. For each thing you need to learn, you also need to determine whether it is a showstopper. A showstopper may be a failure point that demonstrates the project cannot technically succeed, or it may be a value threshold that shows that the project is not commercially viable.
Steps in a learning plan should be ordered from the most difficult to the least, so that you can get past the biggest questions before spending time and resources on the smaller and less uncertain ones. If a project is doomed to fail because of a big issue, it’s best to find that out as soon as possible so you can pivot to a better use of your time and resources (capturing that option value in your portfolio).
Start an Oyster Farm
Growth comes from capturing significant upside. Bread and Butter projects can help your business maintain its market position and cashflow, but you need Pearls to achieve breakthrough growth – and Pearls come from Oysters.
It’s important to remember that individual Oysters are each unlikely to succeed. For a growth strategy to work, you need an Oyster farm, a program to search consistently for new Oyster opportunities and to cultivate existing Oysters according to their respective learning plans. With a sufficient crop of Oysters, you are very likely to happen upon Pearls regularly enough to meet your business’s growth goals.
Heal Wounded Projects
Diluted focus is not the only problem clutter creates. Another is spreading resources too thin.
It’s common for companies to call for across-the-board cuts, asking every project leader for belt-tightening. Using project resources efficiently and intelligently is important, but when resources get cut below the level needed to execute on the project, that’s neither efficient or intelligent. The project becomes wounded, able to limp along but unable to make the necessary progress to realize its upside potential – or even to achieve any degree of commercial success.
Follow a Continuous Process of Strategic Portfolio Management
- Evaluation: look into each project to find its value with corresponding uncertainty ranges.
- Calibration: put all the projects on a comparable scale so that comparisons between them are credible.
- Decision: align the portfolio with the future you want to create, prioritizing projects and balancing the strategic mix.
- Tracking: monitor the progress of learning plans, collect and update actual performance data.