What is Strategic Portfolio Management (SPM)?

It enables alignment and transparency and helps organizations handle economic changes or competing priorities, minimizing risk and maximizing business value.

A sub-discipline of organizational governance, SPM centralizes business processes and portfolio management technologies to provide decision makers with various options for running the best, most cost-effective business strategies. Teams and business leaders can assess and collectively manage the company’s strategic portfolio—all existing and proposed projects—based on key metrics (resource utilization and cost, for example).

SPM functions, though familiar to many IT strategists and planners, are increasingly integral to broader business success. And while definitions, goals and investment needs vary from company to company, SPM helps businesses:

• Reprioritize or cancel projects based on their alignment with business objectives.
• Automate capacity and resource management, especially for critical projects and programs.
• Adjust investment flows in the organization’s portfolios based on their relevance to business goals.

When implemented effectively, SPM practices can streamline resource allocation toward enterprise-wide business strategies, facilitating robust, accurate communication of budgets, timelines, roadmaps and dependences across teams and workflows.

And, using real-time project and organizational data, SPM helps focus business intelligence so executives and other decision-makers can keep up with shifting budgets, market conditions, portfolio priorities and overall business goals. 

Time, resources, personnel and budgets are all limited in today’s dynamic business and IT environments. Business organizations must move faster than ever before, making riskier, more impactful decisions and pushing continuous innovation to ensure their long-term survival.

Consequently, decision makers must choose which projects, products, programs or initiatives to pursue and which to abandon (based on factors such as resource consumption and alignment with the organization’s strategic goals).

Investments that don’t support wanted business outcomes are candidates for elimination, and investments that align well with strategic objectives are prioritized.

However, the decision-making process can present significant challenges for enterprise-level businesses. If, for instance, strategic objectives are unclear—because they aren’t well-defined or adequately communicated to all the stakeholders involved in implementation—investment decisions can suffer.

Some organizations also struggle with information and process visibility across the systems integral to portfolio management, creating information silos in vital areas (such as capacity planning, risk management and financial management). These issues often worsen because of the aggressive scaling of agile practices, which can create blind spots for both portfolio and financial planners.

Unaddressed information silos prevent project portfolio managers from getting a comprehensive view of enterprise data, which hinders capacity planning, budget allocation and overall decision making. Furthermore, the disconnected systems of record that track budgets, resources and work assignments make it difficult to dynamically respond to changing market conditions.

But, as teams across the business work with greater autonomy and faster decision making, continuous alignment with a single source of truth becomes increasingly paramount.

SPM practices address visibility and alignment issues by integrating disciplines that are typically handled by separate teams. These include strategy management, program portfolio management (PPM), integrated IT portfolio analysis, lean portfolio management and agile financial management.

In SPM environments, these tasks are centralized and interconnected, so any changes (in business strategy, operating models, IT portfolios or enterprise architecture) are immediately visible to all necessary stakeholders. Real-time, enterprise-wide visibility facilitates streamlined portfolio alignment, value-oriented decision making and continuous portfolio adaptability. 

As such, SPM helps enterprises, project managers and project management offices (PMOs) achieve superior business results and maintain their competitive advantage through digital- and technology-related investments.

Strategic portfolio management helps enterprises create a single source of truth, incorporating several business and IT disciplines, such as:

Business strategy and operating model development are integral for defining a company’s strategic vision. The process typically includes specifying business and operating models and devising strategic themes to achieve established goals. It also requires teams to align business strategy with IT initiatives, prioritizing those that support corporate strategy.

Operating models serve as a blueprint wherein organizations visualize and structure their operations. They connect customer offerings, business capabilities and corporate structures to help ensure that value delivery is in line with the organization's strategic goals.

By clearly defining how different parts of the business interact, operating models facilitate efficient processes and enhance customer satisfaction, creating more cohesive and strategic operations.

IT and enterprise portfolio management provide a holistic view of all technology-related assets and initiatives across an organization. They enable businesses to organize their entire IT portfolio, enhancing agility, simplifying portfolio modifications and optimizing portfolio impact.

And, with centralized portfolios, project managers can conduct comprehensive impact analyses to improve asset synergies and minimize planning errors.

IT and enterprise portfolio management provide a broad understanding of an enterprise’s IT landscape, so companies can make informed decisions about resource allocation, project prioritization and overall IT strategy. Teams and business leaders can also better oversee and maintain IT resources to help ensure continuous innovation and alignment with business objectives.

Enterprise architecture governance defines the structural layers—including the business, application, information and technical layers—of complex business systems. It provides a framework for managing and optimizing IT assets and processes, enabling decision makers to align their resources and tools with the rest of the business.

Effective governance helps optimize system integration and maximize infrastructure agility, so teams can more easily implement competitive digital transformation practices and set standards for change.

Agile transformation refers to the iterative, comprehensive process of moving an entire enterprise toward more agile, reactive business practices.

As part of an SPM program, agile transformation helps ensure unified system visibility from goal and strategic theme development to portfolio maintenance, so agile outputs are aligned with business priorities. It highlights how changes in business planning or strategy execution can impact upstream strategy and downstream activities.

Business leaders and portfolio managers get a clear line of sight into new product performance, including any obstacles that might hinder market success or product impact on strategic outcomes.

Comprehensive visibility into agile pipelines enables teams to adjust new products as issues and improvement opportunities arise, helping businesses continuously optimize portfolio strategy and operations.

Financial management enables teams to align costs with business strategy, focusing on precise forecasting and budgeting. It helps business leaders understand current and future business priorities (and the IT support they require) and the financial implications of cost-cutting measures across different parts of the business.

By accurately predicting the impact of IT cost optimization decisions, companies can make strategic decisions that support long-term goals while also maintaining financial health. This approach helps ensure efficient resource allocation and minimize financial risk.

Risk and security management is the practice of identifying potential threats and securing any areas with vulnerabilities or compliance issues. It provides organizations with insights into systems that might expose the IT infrastructure to risks, detailing what the risks are and how best to address them.

Effective risk and security management enables businesses to protect their IT assets, maintain operational continuity and consumer trust and safeguard the company's profit.

SPM focuses on aligning project portfolios with strategic objectives and maximizes the contribution of existing and proposed projects to those objectives. It evaluates all project portfolios and capacity planning functions collectively, gauging the strategic fit of initiatives to optimize resource management across each portfolio.

Decision-making occurs at the portfolio level, and often involves C-suite executives, to help ensure that project portfolios are prioritized based on their pertinence to strategic goals.

PPM prioritizes efficient project and program management to ensure that tasks are completed on time, within budget and in alignment with organizational goals.

Like SPM, PPM focuses on project selection, project prioritization, resource allocation and risk and dependency management. However, unlike SPM, PPM’s scope is limited to individual projects within each portfolio, so decision-making occurs at the project or program level. It takes a short- to medium-term view and seeks to streamline and optimize the project lifecycle end to end.

SPM is a versatile, customizable portfolio management approach, so implementation varies based on organizational budgets, goals, business needs and IT requirements. However, leading enterprises tend to rely on four key processes:

To understand resource requirements and start the allocation process, all stakeholders need a clear understanding of intended business outcomes and the current state of strategic portfolios. It’s important to consider both short- and long-term objectives, inventory all available resources (such as budgets and personnel) and review established priorities.

Planners, PMOs and resource managers can then prioritize and categorize investments, identifying any tasks and projects that don’t work toward broader goals and redirecting resources accordingly.

With all stakeholders on the same page, teams can select key performance indicators (KPIs) and initiate continuous monitoring processes to measure success. When necessary, decision makers adjust their approach to keep portfolios aligned with business strategy.

Many businesses use phase-gate processes—which break projects into smaller, more manageable segments or steps—to streamline analysis. Agile and hybrid project management methodologies are also frequently used to optimize analyses.

Using real-time insights from project and portfolio analyses, teams can develop a portfolio plan that details specific projects and strategic initiatives to prioritize, deprioritize or cancel. Planning processes also include budget and personnel allocation, risk assessment and issue identification tasks. 

Established goals, objectives and KPIs help project managers and PMOs measure progress and help business leaders visualize progress.

With the portfolio plan in place, teams can start the strategy execution process. However, ongoing monitoring and assessment are vital to keeping the portfolio aligned with strategic objectives and adapting as conditions or budgets change.

SPM tools automate these tasks, providing stakeholders with an integrated view of all current, future and completed work. This approach enables all stakeholders to know the status of strategic portfolios. If a program is no longer the best fit for the strategic plan, leaders can choose to postpone or cancel it.

Transitioning to SPM can be a challenging undertaking. If a business has a limited budget, it can be difficult to make prioritization decisions that satisfy every stakeholder. And managing a large portfolio of interrelated projects can be complex, requiring sophisticated tools and processes to maintain coherence and alignment.

However, SPM offers enterprises myriad benefits, including:

• Stronger decision making. SPM tools use dashboards to provide a holistic view of all portfolio projects, helping business leaders and portfolio managers quickly decide which projects to pursue, maintain or end.

• Better strategic alignment and visibility. SPM practices help ensure that all projects are aligned with business objectives, fostering transparency and accountability throughout the enterprise.

• Increased business agility. SPM helps organizations respond quickly to market changes and internal shifts by reallocating resources and reprioritizing projects as needed.

• Optimized resource usage. SPM enables businesses to efficiently allocate resources, maximizing productivity and minimizing waste so that high-priority projects receive the necessary support.

• Streamlined collaboration. SPM facilitates efficient collaboration across complex projects and programs, providing a single, visual source of truth and keeping teams aligned on the highest business priorities.

• Proactive risk management. SPM processes introduce more audit and control points in business and IT environments, so portfolio managers can identify and address risks at the portfolio level. Proactive risk management helps prevent disruptions that might derail projects and hinder progress toward strategic objectives.