Portfolio Definition Cycle

The portfolio definition cycle is used for generating key information that are needed by the senior leadership to make decisions. This cycle enables senior stakeholders to understand whether the portfolio is aligned with the organizational strategy. In other words, this will help to answer the question, “will the portfolio enable us to go where we plan to go?”

The organization’s strategy is usually transformed to a set of goals, which trickle down along the firm’s hierarchy. The portfolio definition cycle takes over from this point. The primary objective of the portfolio management practice is to align the organization’s projects and programmes with its higher strategy and see them through to the end. Portfolio definition cycle is the starting point for this goal.

There are two outputs that result from the portfolio definition cycle – the portfolio strategy and the delivery plan. The portfolio strategy indicates what will be delivered by the portfolio. The delivery plan goes into details such as when it will be delivered, what are the milestones, risks, costs, people requirements and other factors.

Portfolio Definition Cycle Practices

The five practices of the definition cycle are:

• Understand
• Categorize
• Prioritize
• Balance
• Plan

Outputs of Portfolio Definition Cycle

There are two key outputs from the definition cycle - the portfolio strategy and the delivery plan. The portfolio strategy indicates “what” the portfolio will deliver. The delivery plan indicates “when and how” the outputs will be delivered. These two outputs enable the senior leadership to understand:

• What will be delivered?
• When will they be delivered?
• What are the key milestones?
• What are the costs associated with these?
• What are the risks?
• What business changes will occur after they are successfully delivered?

Planning and managing details of individual projects is the task of project or programme management team. However, the senior leadership should have an idea of milestones, that will give out benefit-generating outputs, the high-level costs, where the resources are allocated, risks, dependencies and benefits that are realized so far. This will allow the senior leadership to assess whether the changes are going according to what was planned and whether the organization actually has the capacity to deliver what was planned.

Benefits of Managing the Portfolio Definition Cycle Well

The definition cycle is about choosing the right projects (“doing the right things”). If the portfolio definition cycle is not done well:

• The portfolio may not reflect the organizational strategy.
• Important, strategically aligned projects may go unnoticed and projects that superficially appear to be important, may get undue priority.
• Pet projects of senior team members may get priority.
• Funds may be allocated to the wrong projects while strategically important projects are starved.
• The outputs from projects may not be used completely in BAU, which result in poor benefits realization.

The portfolio definition cycle needs significant contribution from senior leadership throughout its life and not just at the inception alone. It is important for the portfolio managers and senior leadership meet regularly to review the direction and the status. Poor engagement from the senior leadership can eventually result in the problems that were mentioned earlier.

Written by Inham Hassen

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