Do the right thing: successful portfolio management

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Many power and utility (P&U) companies are in the midst of massive transformation. But with many change programs running in parallel, achieving consistent alignment to business strategy can be challenging. Jonathan Blackmore reports.

A changing market environment and economic volatility are driving wide-scale change among P&U companies.

Many organizations are driven by significant cost pressures to transform their businesses while utilities in the rapid-growth markets face funding challenges to develop new infrastructure and keep up with demand. Fast evolving regulatory demands add to the complexity.

For many organizations, the success of their transformation programs is crucial to their long-term sustainability and future growth.

But with many competing projects and priorities across functions and geographies, it can be difficult for some organizations to “do the right thing” and “do things right.” They may find themselves getting a poor return from their investment in these projects and programs.

Three levels of execution

When executing these transformation programs, organizations generally operate along three main management levels:

  • Portfolio management - focused on the decision-making process around which programs and projects should be executed, based on their alignment with the organization’s goals and objectives
  • Program management - the intermediate layer focused on the delivery of business benefits
  • Project management - focused on delivering a tangible outcome

Our risk-based portfolio management approach helps organizations manage the risk of their transformation in an integrated way. It helps P&U companies focus on the projects that really matter and optimize their portfolio, and enhances their chance of transformation success.

Typical portfolio challenges

In our experience supporting clients during the portfolio management process, we see many struggle to maintain control because of:

  • Too many projects running at the same time that do not deliver because of a lack of focus
  • Strategic objectives that are not supported by a project or program
  • Investments in a project or program that are not supported by a strategic objective, that is, are not aligned to the enterprise strategy

A particular challenge for some P&U companies is their inability to identify all of their current projects, especially if they operate across different geographies. Without a clear inventory, utilities will struggle to resource their projects with the right capabilities while seeing that day-to-day operations are not compromised.

Another common danger is a lack of consistent frameworks against which to prioritize the portfolio of projects. Without this kind of guidance, it is difficult for companies to determine which project is more important than others — and what criteria to use when making these decisions.

Five steps to success

The portfolio management process is typically executed a couple of times a year.

Although it is tailored to match each utility company, our approach involves five steps:

  • Translation of the strategy into initiative
  • Identification of programs and and projects
  • Optimization of the portfolio
  • Approval of the portfolio
  • Identification of risks and associated remediation strategies

In our experience, P&U organizations may do well at managing the risks of individual projects, but often because of their sheer size and broad geographical footprint, this risk management is not expanded across to the program and portfolio levels.

Understanding the risks faced across a portfolio of projects and the interdependencies of these projects is critical.

It is also important that companies have the ability to consistently drill down from their top to bottom levels so their portfolio remains aligned to strategic business objectives.

Optimize value creation

For utilities juggling competing priorities and pressures, our risk-based portfolio management approach helps focus efforts on “doing the right thing” and “doing things right.”

A well-managed portfolio is directly linked to an organization’s ability to successfully execute its chosen strategy. P&U companies must ask themselves: “Will my portfolio deliver my business outcomes?”

If not, the time is now to optimize the overall value creation from their portfolio to achieve future success.

How we can help

We are working with P&U companies around the world to optimize their portfolios and enhance the success of their transformation programs. Our consistent methodologies, broad sector experience and deep subject-matter knowledge help us support clients as they develop solutions to specific business needs and achieve their potential.

Read our report Strategy deployment through portfolio managementfor more information.