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Software Development
SD Best Practices 2004 / Show Daily /

Portfolio Management for Fun and Profit

Andy Kaufman explains how to steer projects as shrewdly as a stockbroker overseeing a healthy mix of investments.

We're a culture of consumerism. This weekend, before attending our own SD Best Practices conference in balmy Boston, I went shopping in some of the area's most prestigious stores. This isn't my preferred activity, but in the name of maintaining old connections, I accompanied my girlfriend on her quest to capture the latest handbag. In the process, I saw teenage -- yes, teenage -- girls decked out in top-name designer goods. I remarked to a saleswoman in disbelief, "They're so young; how could they be spending so much money on a handbag?" "Yes, it's a shame," she replied; "they'll have nothing to strive for when they're older." Taking full advantage of the situation, she recommended that my friend wait until she's 50 to buy the $1,500 bag she was eyeing (it was sort of dowdy, anyway) and get the $500 bag today.

The savvy saleswoman's advice turned out to be just what some software developers need to hear, too: Leave some room in your goal-setting for near- and long-term rewards. In his Monday morning talk at SD Best Practices, author and consultant Andy Kaufman evinced awe at the number of companies where developers drafted plans that left no possibility for failure or even falling short of their lofty project goals, and who had no insight into the overall corporate IT investment structure.

"Change is part of the game," he said, "but you have to keep sight of where you want to go so that you know how to respond. You have to have a baseline and know where you're heading, because when all of a sudden, you're heading for the rocks, what do you do?"

Warning early on that he had no panaceas up his sleeve—audience members seeking five easy steps to success were advised to go elsewhere—Kaufman delved into strategic approaches that manage project portfolios just like stockbrokers manage investments, and touted their consistent, reliable delivery of business-aligned projects.

Common investment approaches can help align IT with business objectives that maximize value while minimizing risks, Kaufman claimed. They also lead to team responsibility, effective use of resources, and reduction or termination of redundant or irrelevant projects. He recommended creating a program office, an internal structure that supports project managers and, in some cases, is ultimately responsible for the project's results.

The Three Powerhouses

Kaufman focused on three powerhouse techniques to help organize and enhance a company's portfolio: the MIT Portfolio Pyramid, the SWOT Method and the META Group Categories—each with different measures that capture and reflect a company's objective.

The MIT Portfolio Pyramid, developed by Peter Weill, director of MIT's Sloan Center for Information Systems Research, and Marianne Broadbent, group vice president and head of research for Gartner's executive programs worldwide, depicts projects in four asset classes: infrastructure (allowing basic enterprise capability; improving flexibility and integration), transactional (focusing on reducing cost and boosting productivity), informational (based on information for managing the company) and strategic (focusing on sales growth and competitive advantage). Based on your company's objective, the proportions in each of the four classes vary. Kaufman offered three case examples. In a cost-focused company, a 42%-40%-13%-5% mix concentrates on projects in the infrastructure and transactions classes. Alternatively, an agile portfolio with a 50%-15%-20%-15% mix focuses on infrastructure and higher-risk initiatives that can offer larger payoffs. A 58%-11%-14%-17% mix balances cost with agility. The company's portfolio should be tuned to reflect the business objectives specified in the pyramid.

Kaufman went on to the more detailed and quantifiable SWOT method, which evaluated projects in terms of strengths (how strongly the project aligns with business priorities), weaknesses (ability to execute the project), opportunities (the opportunities that will be created as a result of the project) and threats (the risks associated with the project). As in the MIT method, a company weights the four dimensions in this model to reflect its objectives and determine a project's future course.

Kaufman then mentioned the META Group Categories, in which projects are divvied up in three segments: those that run the business (nondiscretionary projects that "keep the light on"); those that grow the business (projects that improve service, efficiency and add value to customers); and those that transform the business (which lay the groundwork for entry into emerging markets).

Kaufman noted that the approach you choose depends on your company's culture and needs, stating emphatically that there's no right or wrong method. Ending with a simple plea for caution and patience, he admitted the obvious: Even with all the cool tools in the world, good project management takes time.

—Rosalyn Lum

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