PSGS 011: Book Review: Optimizing Corporate Portfolio Management

"Only as you do know yourself can your brain serve you as a sharp and efficient tool. Know your own failings, passions and prejudices so you can separate them from what you see." –Bernard Baruch

Premise:

• The premise of "Optimizing Corporate Portfolio Management" is that resource allocation (time, money, staff, information and corporate assets) along with making smarter business investment decisions is critical to a business’s value creation processes. This book provides examples from American Express regarding what they've entitled investment optimization and how they have used the principles of allocating discretionary funds whether for marketing, sales or technology investments with the same investment category and the best projects compete for the same dollars.

• A few notable endorsements where provide by:

• David J Rubenstein, “a must read at the top of the organization,” Professor of Marketing at the Wharton School University Pennsylvania.
• San Retina, “a must have for all organizational leaders trying to maximize the value of their corporate investments,” Chair Enterprise Portfolio Management Council Principle Transform Action.
• Hi Yash Sing Yoni, “programmatic and full of real-life examples and must read for anyone involved with practicing portfolio management,” Director Portfolio Management Trans Union, LLC.

 What I learned:

• Although American Express has a strong corporate portfolio management capability, they are on a continuous journey to learn from other organizations and were open to discussing how they could improve in this critical area with industry experts and other practitioners from various organizations.
• The book illustrates the importance of looking at enterprise portfolio management and segmenting the larger portfolio into smaller sub-portfolios that can be optimized and then rolled up. The author believes that this practice gives AMEX more control in managing its corporate portfolio and drives resource optimization across the various departments.
• In the introductory chapter, “Why is Corporate Portfolio Management Important,” the author highlights that every organization has a corporate portfolio management process. The issues is whether or not it’s documented and whether or not the organization proactively manages their corporate portfolio. Resources like time, money, people, equipment and information are limited and valuable and the misuse of those resources can create opportunity cost that can hurt the organization’s ability to execute its strategy.
• The book highlights the seven deadly sins of mismanaging an investment portfolio. Mismanaging the investment portfolio can have dire consequences on an organization’s ability to exist if limited resources are invested in activities, projects or programs that lead the organization down a path that is misaligned with the overall corporate strategy and does not take into consideration the trends and impact of disruptive technology and economic pressures.
• The seven deadly sins are: 

1. Narrowly Defining the Portfolio 
2. Investment Decisions Are Like New Year’s Resolutions 
3. Decibel-Driven versus Data-Driven Decision Making 
4. Too Many Metrics, Not Enough Time 
5. One-Size-Fits-All Portfolio Management 
6. If We Install This Software, We Will Be Able To Optimize Our Corporate Portfolio 
7. It Is All About The Projections      

 Conclusion:

• The corporate portfolio management methodology that the book highlights, which I really like, is divided into four phases:

1.  Discover and Analyze
2. Galvanize and Charter
3. Standardize and Plan
4. Implement and Optimize

• By following these best practices you will enable your organization to get ahead in either an upward or downward economy.