Moving beyond projects (part two)

In the last post, we explored how a strong focus on projects can negatively impact knowledge management (KM) at an organization. In this post, we’ll turn to the negative effects a project focus can have on portfolio management.

Let me begin by saying that a project focus is absolutely critical to portfolio management in the day-to-day sense of the term, i.e., making sure that all in-flight projects and programs run smoothly, don’t step on each other’s toes, get done on time and on budget, and so on. However, portfolio management has a strategic value to the enterprise that goes beyond merely the care and feeding of the current projects at an organization. I’ve looked at this issue in depth elsewhere, but in short, doing portfolio management strategically requires moving past simply managing projects so that you can focus instead on managing the assets that your projects create, maintain, extend, and retire over the long-term rather than for the duration of a single project.

Here’s an IT portfolio management example in the insurance space from my earlier post on portfolio management:

When a company creates a life insurance product to sell, part of the product development process is to estimate the total cost of servicing that product, which, if the product gets sold to a 25-year-old, could include over 50 years of customer support (and even longer if the policy provides for a structured annuity to beneficiaries over their lifetime). The complexity and uncertainty in this equation, just for a single dimension like customer service, is staggering: for a policy sold in 1975, phone and paper mail were the two customer service options; round about the year 2000, these expanded to include email and internet customer portals; in 2010, options include secure chat and text messages; and in 2020? Anybody’s guess. Now expand this equation to consider some of the other relevant dimensions, like payment processing, customer communication management, and regulatory compliance, and then multiply it by the total number of insurance products the company offers—short term thinking can’t possibly frame the issues the way an insurance company needs to in order to remain successful over the long-haul.

The only way an organization can effectively address this kind of complexity is by shifting their focus away from individual projects (e.g., the initial efforts to build the claims system, the subsequent efforts to extend the functionality of the system, integrate it with other systems at the organization, and migrate data from other systems into it, and so on) and onto the assets these projects affect (e.g., the claims system itself).

This is easier said than done at most organizations, largely because of the KM challenges a project-centric organization faces, but also because a true asset orientation cuts across explicit and implicit ownership boundaries and shifts the balance of politics at an organization. As we saw in the last post with the mining operations example, all the information needed to effectively manage assets is typically stored in silos across the enterprise (e.g., engineering and operations) and all but inaccessible to the people who need it to manage a given asset, either because they don’t know where it is (or that it even exists) or because the “owner” of that information is unwilling to share it.

What this KM example brings to the surface is that the shift from a project focus to an asset one requires more than simply saying, “let’s focus on assets rather than projects”—although that intentionality is an important first step. To truly adopt an asset orientation requires an organization to open up, to become the kind of enterprise that values knowledge sharing over isolated expertise, one that fosters a culture where job security isn’t equated with knowing more than everyone else but with sharing as much of your knowledge as possible with others in the organization.

Although this transformation is a difficult one to make for most organizations, the good news is that in 2010 there are larger cultural forces both putting pressure on organizations to make this shift and providing some of the tools they need to do so. The rapid adoption of social computing and collaboration by private citizens in their everyday lives has reached the point where organizations are faced not with the decision of whether to make social computing and collaboration part of how they do business, but rather how social computing and collaboration will be a part of how they do business…and whether management or the collective actions of line level employees will determine the outcome. Add to this the growing ecosystem of new and maturing social collaboration and computing tools available, many of them for free, and you’ve got ideal conditions for precisely the kind of transformation we’ve been talking about here.

In the next post, we’ll continue exploring the benefits an asset orientation can have for organizations and turn to a consideration of risk management activities.