Portfolio Process
In order for the adoption of a portfolio management process (which would be new to this unit) to be successful, the following steps must be followed under the guidance of the portfolio management, and in collaboration with the individual project managers and PMO:
· Transition from the existing pure-functional organizational structure to a matrix-style structure by which key functional executives, comprising a newly formed portfolio process committee, would be directly responsible for making portfolio-management decisions;
· Identification of the strategic goals of both the SBU and the parent company, Sony, and reevaluating goals as the market or technologies shift, or as Sony adjusts its corporate strategies;
· Adoption of appropriate methods and mechanics (i.e. strategic road map, target resource split, strategic buckets) for aligning these strategic goals with the project portfolio;
· Management of the portfolio by means of a set of selection criteria for proposed projects, as well as reallocating, reprioritizing, and/or rescheduling current projects at various phases of the pipeline, (thus the portfolio and project management processes become interconnected, and the portfolio is constantly reevaluated).
As the portfolio management process aims to preserve existing functional departments and minimize impact on the flow of existing operations, we recommend a transition to a project/functional matrix over the next 12 months. Our proposed organizational structure would include all current “vertical” departments, served by a central PMO and each represented by their line director, who in addition to their functional areas, would actively shape the portfolio decision-making as well. The directors of each of these lines will be included in quarterly portfolio committee meetings. Facilitating these meetings and serving as a central resource for portfolio management and strategic alignment, the PMO and portfolio management functions will span across “horizontally” across all of the line functions. The lines represented “vertically”, by their directors, at these meetings would be: each product line (i.e. PSP, PS3, etc.), the gaming studio/product development, marketing, human resources, operations, and finance.
A key objective of the portfolio process committee is to identify the strategic goals of the SBU, as well as of Sony overall. These directors are ideal for this type of strategic reevaluation because the current top-down hierarchy of the various functions, or lines, allows them to likely be among the first managers to be included in “big picture” decision-making. Especially in the fast-paced, and highly competitive, industry of electronic gaming, it is vital for this tier of management to stay abreast of the unit’s vision and strategic objectives, as well as be prepared to respond if any changes in strategy should occur. One major purpose of the quarterly meetings is to reevaluate strategic objectives, accounting for any changes in the market or technologies, whether they are internal or external, and based upon those changes, recommend reallocation of resources, reprioritization of current projects, or termination of ones which may no longer fit.
Once the strategic goals of the unit and parent company have been identified, the portfolio process committee will be tasked with taking a “big picture” snapshot of the portfolio, and this is often carried out through one or more of several methods, including: a strategic road map, target resource split, or strategic buckets. These methods help translate vague terms of direction and strategy into actual delineations of resource allocation, where resources are people and funds committed to certain projects or programs. We recommend that a combination of methods be regularly administered in order to constantly reevaluate the intended strategic direction of the unit’s portfolio. The development of a strategic road map is most pertinent to the area of product development (managing multiple product lines), while the strategic buckets and target resource split methods are helpful in setting actual spending targets across a wide range of projects. Additionally, a resource breakdown by project types, which compares actual figures with target figures, is helpful in pinpointing areas of opportunity versus areas of waste. It is vital that the resource allocation of the unit’s portfolio is evaluated quarterly at the portfolio committee meetings using a balance of these proven methods. From these tools, a plan of resource allocation should be agreed upon, which will directly influence the selection criteria and process, reallocation of resources, and decisions to either reprioritize, hold, or terminate projects, as facilitated by the PMO in accordance with the committee’s findings.
Another task that is critical for the portfolio process committee to consider is to articulate several outcome-based goals when identifying strategic parameters for the portfolio, as opposed to activity-based goals. As described by Katzenbach and Smith (2001), outcome-based goals which follow the SMART acronym (Specific, Measurable, Aggressive yet achievable, Relevant, and Time-bound) are more likely to offer a clear milestone for achieving success. The implication for the portfolio management process is that a strategic objective (i.e. improved customer service, or better graphics performance) can more precisely be evaluated or ranked by reworking individual product processes, pinpointing specific areas of opportunity, and setting specific, measurable outcome-oriented goals. Each portfolio committee meeting should incorporate these types of goals as they are helpful tools for determining strategic alignment, total portfolio value, and proper balance of projects in the pipeline.
Of Robert G. Cooper’s (2005) two levels of decision-making in portfolio management, the portfolio process committee is primarily tasked with Level 1 (strategic portfolio management); subsequently, the PMO team will be responsible for Level 2 (tactical portfolio decisions, i.e. project selection).
At this level, a wide range of projects and project ideas will be evaluated based on selection criteria, and individual project managers will be given the opportunity to report financials and demonstrate the allocation of resources at the given phases of their projects. Facilitated by the PMO and following a schedule of bi-weekly meetings, decisions must be made whether to “go” or “kill” a project at any phase or “gate”, depending largely on the strategic directions which were earlier passed down from the portfolio process committee. Here, the PMO and team members use a series of data and criteria to more specifically rank those projects which were approved by the “big picture” portfolio management process. By first addressing overall strategy and resource allocation, the project and program managers at Level 2 should have a solid foundation upon which they can base their rankings and selections.
It is clear in the implementation of the proposed process, that the ultimate goal of the portfolio management system is to lay a framework for determining where the unit should spend its resources, and how those resources should be split across project types, markets, or product categories. Through a collaborative effort of the committee members and facilitation of the PMO, the end result is a system which achieves strategic alignment, maximizes the portfolio’s overall value, and maintains a proper balance of projects in support of the strategic goals of the SCEA unit.