Top-down represents to portfolio management what agile represented to project management. In the mid nineties, as projects in information technology became more volatile and less predictable, most of them were challenged, if not outright failures (see Chaos Report 1994). Agile came up with a simple solution to estimating and scheduling: don`t. Instead, it proposed relative estimating using t-shirt sizes (many purists screamed in horror) and a flexible backlog to manage a floating scope (now it was heart attacks too). Today, agile is a mainstream approach for software development and nobody challenges its validity.
Similarly, portfolio management today has failed miserably in helping organizations execute strategy (nine out of ten fail) and manage benefits from projects (20-40% investment in IT is wasted). The response has been more complicated optimization models that require levels of maturity that do not really exist in many organizations. Models are fed with business cases that are in many cases a guess or a make-the-numbers game, and the results are questionable. What companies need is not rocket science, but a simple way to translate the logic of the business and the strategy into a portfolio of programs and projects.
Top-down portfolio management represents this simple solution, translating business strategy into a Results Chain that captures the cause-effect relationships. Inflows are then estimated at the business level, by comparing the forecast as a result of the implementation of the strategy (every company should have this) to the status quo, if nothing is done. This generates a stream of inflows that is then propagated through the results chain based on relative contributions (yes, t-shirt sizes used here). Investments are also propagated, so return on investment can be assessed at any node.
If this sounds complicated, let me assure you it is not. This past spring I conducted a workshop at ProjectWorld in Toronto with 30 participants who, working in teams translated a strategy from a case study into a Results Chain, estimated inflows for the top-down business case, propagated inflows, estimated investments and propagated them, and assessed return at every node. All of this was done in one day, using EXCEL, POWERPOINT AND PEN AND PAPER ONLY. It is that intuitive, once you get it.
The kicker: top-down does not require a high level of PPM maturity in the organization, as only basic information is needed. What is required is a well defined strategy, and this could be the main constraint to its adoption. If your organization or one of your customers has a transformational strategy, try top-down and be among the first to join this new trend in portfolio management.
Of course, it is easier with a tool, which is why we developed BRMTool. The application supports not only planning, but also execution.
P3M is launching the SaaS version of BRMTool with a series of free webinars and a simulation webshop. For more information click on the link below.