Portfolio Management and the Dakota Indian’s Dead Horse Theory

The tribal wisdom of the Dakota Indians, learnt through years of experience, says that when you discover that you are riding a dead horse, the best strategy is to dismount. Obviously this goes without saying but in portfolio management, because significant investment factors (or sunk costs) are taken into consideration, other strategies are often tried with deceased equines. Some strategies, ordered by personal preference, include using a stronger whip; providing additional funding and/or training to increase the dead horse's performance; and lastly, reclassifying the dead horse as "living-impaired". For a full listing of "alternative" strategies to reanimate a dead horse, visit here.

However, on a more serious note, failed programmes and projects are an inevitable and a necessary evil to achieve an expansive, successful portfolio of programmes, projects and business as usual activities. However, without an effective understanding of the portfolio (defined as the totality of an organisation's investments aligned to strategic objectives), the organisation risks not delivering the expected benefits particularly by starting, or continuing to fund poorly conceived programmes and projects that no longer support the new strategy objectives. Conversely, successful organisations understand the simple mathematical equation of subtraction and addition. That is, stopping unviable initiatives where the sunk cost saved could be better used to start the next prioritised and unfunded pipeline initiative. 

As such, more organisations should take heed of Microsoft CEO, Tim Cook’s advice about portfolio management. At Microsoft, “we believe in saying no to thousands of projects so that we can really focus on the few that are truly important and meaningful to us.” That is, the ones that aligns to new strategic objectives - rather than the old objectives - which we can confidently deliver. It’s therefore important to create a ‘not-to-do’ list that includes those projects driven by technology rather than customer needs. 

Learn to pivot

Perhaps the most significant step organisations can take to unlock people resource capacity is balancing the introduction of new priorities and activities with clear direction on what the business must stop doing. While British Rock Band, Queen may have belted out “I want it all and I want it now"; unfortunately you cannot have your cake and eat it too within financial and people constraints.

Although most organisations recognise the importance of making tough choices, few take seriously the added step of clarifying what they are not going to do at the start of a new strategy, which is a major reason strategy execution and benefits realisation in practice (or clear line of sight) often fails. To enable effective portfolio management, organisations must learn how to stop one initiative and switch delivery teams to work on something that is more strategically important, once sufficient value has been delivered.  The metric of success is no longer about meeting an arbitrary date or even a fixed budget, but rather about maximising the value to the organisation and its customers. The key is to be able to ruthlessly evaluate the value delivered by an initiative and recognise when the cost of developing the next part of a ‘deliverable’ exceeds the value which will be derived from having that work completed.  

To this end, continued business justification of programmes and projects in terms of desirability (benefits), affordability (costs) and achievability (risks) is predicated on remaining aligned with new strategic objectives. Fundamental to effective portfolio management is an organisations ability to "dismount any dead horses" or unviable investments if there is to be a clear line of sight about how its initiatives individually and collectively contributes towards achieving its strategic objectives. Like Antonio Nieto-Rodriguez from the Strategic Implementation Institute says “Every terminated priority is an opportunity to learn and do better next time. Priorities change and, if managed successfully, has the capacity to fundamentally change organisations, but only if executive management takes accountability of making the difficult choices.”

References

Nieto-Rodriguez, A (2016), How to Prioritize Your Company’s Projects. Harvard Business Review. Available at: https://hbr.org/2016/12/how-to-prioritize-your-companys-projects