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Connecting the Dots Between Strategy, Planning and Your Portfolio

Many companies, especially large organizations, have entire teams dedicated to the Planning function, Strategy function and Portfolio function. Yet, many companies do not successfully connect the dots between these three functions. Individually, each team has a responsibility that sets them apart from one another; However, each team is dependent on each other to ensure success and accuracy throughout the year. These teams must work together when forecasts are reported, project estimates and actuals need to be compared and when tactical projects that meet the strategic needs are challenged.

Understanding how each of these functions connects to the other is critical for efficiency, accuracy and decision making support. . Strategy is needed to define the long term road map for where an organization wants to be. Planning is needed to plot the financial future expectations (portfolio of business needs including depreciating assets, total cost of ownership, new technology, etc) that will support the strategic path. Portfolio management is needed to ensure that plans are being followed.

Beginning with the Strategy function, there is a literally a plethora of books, definitions, agreements, disagreements, experts and non-experts that will give you their thoughts and opinions on the definition of strategy. For all intents and our purposes Strategy is simply defined as the framework and long-term goals, or roadmap, of an organization. The key word being “long-term”. Strategy does not get into the weeds of specific technologies, but higher level expectations of what the end deliverable will be. Also, strategy does not confine you to absolutes based on unknowns (such as future market sector behavior, economics, etc)

Your Portfolio is made up of the tactical solutions of implementations used to meet the expectations set in the strategy. These are generally your IT portfolio of projects that meet business needs and business processes. Each of these tactical solutions could be broken down with a strategic view and tactical solutions a level below, but we’ll save that for another discussion.

Planning is the activity to financially plan what is needed for the next few years to meet the needs of the tactical solutions and eventually meet the strategic needs. Generally, the next year’s financial needs are pretty much in stone because it is close enough for people to work their expertise on estimates, depreciation, asset management and other business needs. This is not to say Leadership will not still ask for cuts or identify changes in strategy that could impact next year’s financial plan. As the years go out further, a lower of level of confidence is applied to the financial needs due to a larger number of unknowns.

As an organization defines its strategy, things such as focus and corporate direction are considered over a period of time such as 3-5 years. The challenge with this is that business needs depend on process and technology, and both are becoming more and more rapidly changing, so more unknowns are living in many strategies especially where technology may be a tool to achieve a goal.

The First Missed Connection: Misunderstanding Strategic Needs and Tactical Solutions

As long-term strategies are defined, tactical solutions are defined to meet the expectations and goals set forth in the strategy. This is the first dot connection that gets missed. Why? Because Executive leadership who sets the strategy counts on the tactical solutions being delivered by their team of experts. The reality is that not many tactical solutions are managed by experts. Estimates could be off, processes not followed, understanding of expectations not clear, communications not clear and a variety of other risks that will impact the tactical solutions not meeting the strategic expectations. I have seen entire teams dedicated to building tools and “throw it over the fence” because the development team was not communicating with the business and their needs. Once the development team threw the tool over the fence (in excess of half a $million USD), the business kicked it back saying they were on a different path.

The misunderstanding between the development team negatively impacted future budgets and planning for the next few years. How? Because the new tool was supposed to be capitalized and depreciation planned for, and since the project was written off, the whole amount hit the books for Operational Expenses (OPEX) in the current year.

The Second Missed Connection: Planning at the Micro Level Instead of the Macro Level

This is the second connection of dots often missed: Items financially planned for in the portfolio to meet the strategic needs may not go against intended budgets if business needs change. Keep the planning to the program level, larger buckets of money, instead of at the micro level of individual projects when possible. It is a financial risk because the Finance team is expecting the teams executing (either business process improvements or developing new tools or both) to communicate with their business partners. The Finance team expects the IT organization to communicate depreciation needs to the receiving organizations. This is often missed due to lack of understanding of processes and expectations. So when a surprise like the receiving org not wanting a new tool because they changed direction and neither the development team nor the business communicated it clearly, someone has to pay for the mistake. If possible, keep the planning stage to the Program level instead of at the individual project level so changes can be more readily accommodated the mitigate a trickledown effect.

The Third Missed Connection: Not Having the Right People Engaged

The third missed connection is inexperienced managers making uninformed decisions that impact the financial planning cycle, short and long-term portfolio of business (IT and/or business process) and strategic expectations. This is easiest to address since organizations can better prepare the teams developing tactical solutions in better estimating, clear communications with the business needs, continuous engagement with the Finance and planning teams for periodic re-evaluation of strategy, early identification and mitigation of risk and string Leadership and Project Management skills.

Tying It All Together:

Understanding how the dots connect between your portfolio, planning (and associated financials) and strategy will ensure the success of the expected outcome. While each team is different with different skills, the only barrier to really overcome is when a team says, "That’s not our job.” Different roles in an organization can bridge the gap to ensure alignment, and that role needs the influence to help each team along in its understanding of the risks and issues associated with a break in the connection of dots. Lack of understanding how the dots are connected should not be an acceptable excuse for failure.

Key Take Aways:

  1. Engage experienced team members from Planning, Portfolio and Strategy.

  1. Maintain transparency on business needs and changes

  2. Allow for a level of flexibility and change, such as macro planning at the program level

  3. Don’t accept, “Not our job”, as a reason for failure between Strategy, Planning and your Portfolio teams. Instead, approach it as a learning opportunity to educate the teams engaged and manage risk accordingly.

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