Seeking portfolio management excellence
it's a small world after all
A Global PM Perspective
“…competitive pressures no longer afford us the luxury of time to take an evolutional approach toward user education and development.”
Rudolph G. Boznak, United Research, a Gemini Consulting Company
As the 21st century approaches, one facet of management reality is becoming increasingly clear: tomorrow's competitive companies will be those that can find more effective ways to develop and introduce a greater variety of new products faster than ever before. This paradigm shift toward simultaneously conducting multiple products and projects, or portfolio management, is not a new phenomenon. Rather, it has slowly evolved over the past decade.
A 1988-89 survey of international manufacturing conference attendees illustrates the growing importance of portfolio management. The survey results revealed that “typical electronics, consumer goods, pharmaceutical and aerospace/defense companies are attempting to manage an average of 46 projects concurrently.”1 The need for more effective portfolio management tools and methodologies is clear.
The most promising theorem for meeting this need will be a more sophisticated project management methodology. The key words here are will be because most of us, practitioners and developers alike, still have a lot of work to do. While many project management developers claim their latest software releases are able to manage multiple projects or an entire portfolio, few of their packages are equipped to fully satisfy the strategic and tactical needs of tomorrow's portfolio management environment. Because businesses are just beginning to recognize the need to manage large, complex portfolios of projects, developers have not yet had much market impetus to move in this direction.
1. Survey of international manufacturing conference attendees, conducted by United Research Company, Inc., 1988-1989.
A CASE FOR BREAKTHROUGH THINKING
However, competitive pressures no longer afford us the luxury of time to take an evolutionary approach toward user education and development. “Out-of-the-box” thinking is required to prompt a revolutionary breakthrough. We need to set aside our individual ethnocentricities and become open to discovery of “best practice” solutions wherever we can find them. Sometimes the search leads to discoveries in the most unexpected places.
At the 1990 INTERNET World Congress in Vienna, I unexpectedly made just such a discovery. I was a participant in what was once an unlikely interaction: an exchange of ideas by an American and a Soviet about the need for a portfolio management methodology. During the conference, Victor L., the director of a computer department of a Soviet start-up company, described to me a software package developed by his company that could be just the portfolio management solution we in the free-market world have been seeking. Ironically, a growing free-market need had been addressed by a representative of a regime critically in need of free-market savvy.
Before I spoke with Victor, the possibility that a state-of-the-art portfolio management solution might be developed by a Soviet was probably the farthest thing from my mind. And why would it have been otherwise? My perception after touring businesses and professional organizations in the Soviet Union was that modern computer technology was a missing link outside the defense sector. I had visited 10,000-man manufacturing companies that were being managed without basic word processing and spreadsheet support. Computer terminals were virtually nowhere to be seen.
These personal observations, combined with the picture of the Soviet Union that the media had painted for so many years, made it easy to conclude that the Western world was light years ahead of Soviet business software application and development.
Yet, on the contrary Victor had described to me the GAUSS System, a state-of-the-art software approach in use in the Soviet Union that could enable a business to more effectively manage a portfolio of programs from both a strategic and tactical point of view.
PERESTROIKA PAVES THE WAY FOR PORTFOLIO MANAGEMENT
At this point, the specifics about the software are not significant. What is of more importance is the approach. In basic terms, the GAUSS System was developed as a real-time tool for evaluating multiple projects against a set of user-defined indices. Herein lies the breakthrough thinking. Unlike the ability to level or constrain projects based upon resources, the controlling indices in the GAUSS System permit a much wider range of business variables. For example, these criteria might include optimal revenue, profit contribution, minimum cash flow or expenses, critical resources, or even particular market segment or customer.
Once the individual projects are loaded and the appropriate indices determined, the system calculates the optimum master business plan to satisfy these parameters. In essence, the GAUSS algorithms can enable a corporate executive team to rapidly simulate and model the optimal mix of projects to provide maximum profit contribution or simulate the optimum level of customer service given a specified cash flow expectation. The Soviet approach offers an opportunity to satisfy the emerging needs of portfolio management. Some of these needs are:
- User-friendly multiproject-management software;
- A workable portfolio management methodology; and
- A strategic simulation capability based upon business scenarios and conditions such as optimal revenue generation, profit contribution, cash flow, or customer service.
IT'S A SMALL WORLD AFTER ALL
Winning the competitive war of the ’90s will be difficult, and there will be casualties. Some form of portfolio management will be a critical tool in every winning competitor's arsenal.
Ironically, a breakthrough for optimizing business in a market-driven economy might just originate from the proponents of state-planned and -managed industry. Today, it is possible for two people from differing political perspectives, who are struggling to converse about a technical subject on mutually foreign ground, to have a productive discussion about a portfolio management approach. It truly is a small world after all.
Rudolph G. Boznak is an internationally recognized authority on strategic operationalization rcomputer-integrated enterprise, manufacturing, and major automated systems design and implementation. He advises Fortune 50 aerospace/defenser electronics, pharmaceutical, shipbuilding, and automotive executives on how to improve their manufacturing competitiveness by developing and integrating state-of-the-art systems and the human dynamics required to implement them. Boznak is a technology executive at United Research, an international management consulting firm and a Gemini Consulting company. A certified production inventory manager and a member of APICS, Boznak has a B.S. in business management from the University of Nebraska and an M.S. in management/computer science from American Technological University.
FEBRUARY 1992 pm network