Now that I am working on a book on agile portfolio management, I was curious about this book. Looking at the title I was thinking am I too late? After reading the book I am even more energized to deliver the agile portfolio management book. This book is all about prescriptive or control-based portfolio management.
The outcome-driven organization – Your project portfolio running on espresso 2nd Edition, written by Linda E. Szmyt and Fernando Santago gives you a project portfolio management set up comparable with Management of Portfolios (MoP) from Axelos/PeopleCert and Managing Benefits from APMG. The authors want to see transparency, a sense of fairness, as well as visibility and predictability across the portfolio. That’s what they call a project portfolio running on expresso. They move away from a focus on scope and work, to one driven by outcomes and business results.
Throughout the book 6 types of investment are used: mandatory/legislated, keep the lights on, optimize current operation, grow the business, transformational, venture. Compare the buckets in MoP (in MoP you can differentiate from these types. E.g., covering your main strategic objectives). What I miss is a discussion regarding allocation of funds across these buckets. Prioritization within the buckets or investment types is based on adjusted NPV and IRR taking delivery and benefit risks into account.
For each investment type you get an overview of activities needed for the realization of the benefits, the rigour required and the usage of a business case as the cornerstone for managing a portfolio to maximize value (I don’t agree that there is no need for a business case for the mandatory/legislated investment types. Here, the business case can be used to show do nothing, bronze, silver of gold solution scenario’s and use that in your decision-making).
Benefits management is all about calculation of financial indicators like NPV, IRR and EVA/EVM and benefits forecasting. The benefits map is explained in detail and shows outcomes, capabilities and initiatives including propagation of inflows to initiatives and outflows. An explanation of the importance of the role business change manager connected to the benefits is lacking. Those who are responsible for realizing the benefits. With these people you can discuss what outcomes/capabilities are needed. Benefits performance index (BPI) and or realization performance index (RPI) as additions to the schedule and cost performance indices from EVA/EVM are discussed too.
On some places you see very brief additions regarding agile. But remarks like “this is not very different than a project following a predictive approach and delivering in phases that add more functionality to a capability” is too easy. Or “projects that follow an agile approach are not that different from other projects when it comes to the realization of benefits”. I would say that if you have an incremental delivery of benefits, you can benefit of regular feedback, deliver a better product, and reduce benefit risks.
“Red” initiatives including expected ROI and level of risk are important. The authors show what information is needed to maximize value at the portfolio level. E.g. the current and expected IRR at portfolio level, the target split percentage between operational and transformational projects. The investments metrics showing for each RAG-status and project stage the total investment or IRR. This could give a completely different picture if you show the number of projects. Another view is the investment versus delivery and benefit risk.
Conclusion. A good overview of prescriptive or control-based portfolio management. The set up of portfolio dashboards with indicators at portfolio level are much better than looking at only lists of projects and their RAG-status. But…
You can create great reports or dashboards based on financial figures but it’s jiggling with balls. It gives the impression that you use a data driven project portfolio approach, but I doubt it. There are so many assumptions behind those figures (e.g., the outflows, the contributions, the delivery and benefit risk adjustments, et cetera) that you may wonder if you are kidding yourself. This asks for scenario thinking, continuous validation, checking hypotheses with MVP’s and RATs, and execution flexibility among other things but that will be covered in the agile portfolio management book I am writing together with Rini van Solingen. By the way the authors see the MVP as the minimum marketable product (MMP) and not as an instrument to test, with minimum effort, a hypothesis.
At http://www.outcomedrivenorganization.com you can find free downloads of several tools and templates.
To order The outcome-driven organization: bol.com