Changing Organizational Behavior at American Express - The First CPM Summit

We just concluded our first ever two-day Investment Optimization summit at American Express which my team in Corporate Planning & Analysis put together. And I'm happy to report it was a resounding success. As I've previously discussed, enabling CPM within any organization is as much about process as it is about organizational behavior.

And the summit was an attempt at impacting organizational behavior. Some of the highlights of the summit are as follows:

• Although the CPM effort at American Express is largely managed by the finance organization, we required that our business unit finance partners invite those from the business to the summit as it is the business people who are initiating and managing these investments. And so it is important to ensure that the initiative owners understand why we engage in CPM. As a result, attendees at the summit were 65% finance and 35% business.
• In an effort to not have the 2 days solely comprised of one speaker after another, there was a CPM simulation done over both days where the participants were given a fictitious company and different roles and had to determine how to allocate finite resources amongst competing investments. This drove home why CPM was important to the attendees and was cited as one of the highlights of the summit.
• Of course, there were several speakers including myself, a video address from the company's CFO, Gary Crittenden, and opening remarks by the SVP of Corporate Planning & Analysis. Additionally, individual business unit CPM practitioners shared their best practices on a variety of topics.
• Beyond the internal speakers, there were several external speakers including Professor Clark Gilbert of Harvard and the author of From Resource Allocation to Strategy who discussed the inherent link between a company's portfolio and strategy. We also had Professor Sunil Gupta of Columbia Business School who discussed valuing marketing investments and finally Steve Berez, a partner at Bain, who covered IT Portfolio Management.
• There was also an awards ceremony where we recognized those who have made CPM at American Express so successful.

Beyond the content and simulation, the company's investment in the summit was perhaps the greatest indication of the organization's serious interest in CPM's success. The other intangible benefit from the summit was the networking it enabled amongst the many CPM practitioners within the company.

If anyone is interested in learning more about American Express' CPM summit, please do drop me a line as I'd be happy to tell you more. Additionally, if others have found interesting and effective ways to impact organizational behavior when enabling a CPM discipline, please leave your thoughts and ideas with others reading this.

What drives a successful Corporate Portfolio Management strategy?

In order to establish a Corporate Portfolio Management discipline within your organization, you need to focus on two main dimensions -- organizational behavior and process. Below is a useful framework as you think about where your organization is today and where you want to take it.

While myriad consultants and software vendors will offer the illusion that some simplistic scorecard, report or software solution will help optimize your discretionary investment portfolio, they are, simply put, selling you a dream. Scorecards, reports and software solutions can help enable Corporate Portfolio Management if the appropriate process is put into place and organizational behavior is appropriately aligned with CPM. If a scorecard, report or software solution could optimize your portfolio, why would they need you? Silver bullets for CPM don't exist. CPM requires you to get your hands dirty with the promise of significant business benefits. But if you're looking for sanitized and simplistic gimmicks which look good in PowerPoint but don't take into account organizational realities, CPM is not for you.

The framework given above has organizations which are unevolved on both process and behavioral fronts falling into the unconsciously incompetent category, e.g., they don't know what they'd don't know. This is not a bad thing, and I suspect if you are reading this blog, you at least know some thing about CPM, therefore, putting you in the conscious incompetence bucket at a minimum. As you evolve on these two levers, your organization can approach unconscious competence which implies CPM is part of the fiber or DNA of your organization. However, this unconscious competence is unattainable. You can always tweak and improve your CPM capabilities while becoming unconsciously competent being your aspiration.

So what do I mean when I talk about these two dimensions? Let me provide you with a high-level overview of each.

• Organizational behavior - Trying to enable CPM without an understanding of the behavioral changes required is foolhardy if not impossible. Because at its core, CPM is a change-management effort. And it ultimately may make some people uncomfortable because it will ask some previously unasked hard questions that aim to get at better decisions for the overall organization, and it also may instill a sense of competition for resources. In order to move organizational behavior in a way that embraces Corporate Portfolio Management, it is important to understand 3 aspects related to behavior. (1) Incentives - Are people incentivized ($$, promotions, span of control, etc) to give up resources for the 'greater good'? Since the answer is probably no today, is this going to change? (2) Cross-organizational collaboration - Is collaboration across functional or business segments encouraged and occurring? This means collaboration not just in terms of resources but in terms of knowledge sharing. And lastly, there is (3) Decision-making style - Does your organization rely on intuitive, gut instinct to make decisions or use data and analytics to make decisions?


• Process - This is related to how well-defined your processes are around and as related to CPM. If you have a well laid out process, it may make sense, in fact, to enable this with a software solution. But don't be fooled into believing that a software will form the epicenter of a process. At American Express, we relied on a basic, excel based tool for several years. Only after we understood the shortfalls of our existing process and understood what a more advanced software needed did we go out and opt for something more elaborate. From a process standpoint, there are 4 main aspects to consider. (1) Standardization - Is the definition of what is an investment clear within the organization and sufficiently comprehensive? Are cost/benefit analyses (CBAs) across the organization standardized when measuring financial, risk, and strategic returns? (2) Robustness - Are driver-based models used to perform CBAs, and are risks and strategic benefits and concerns sufficiently well-defined and comprehensive? (3) Appropriate centralization - If there are driver-based models, are certain global assumptions such as discount rate or tax rates that are centralized across the organization in a way that promotes consistency in investment modeling? Additionally, is there an impartial group that can serve as the nerve center for the company’s CPM efforts who will be charged with constantly discussing the organization’s portfolio and asking provocative questions of initiative owners? Note: Be careful not to overcentralize as it will demotivate the subject matter experts within your organization. (4) Tracking - Are actual results captured and used to compare past investment performance and improve going forward investments? Is this "closing of the loop" enabled?

If you can make significant progress on these two elements, you're on your way to realizing the immense potential of Corporate Portfolio Management. Be careful not to focus only on one dimension as they are tied to each other. You cannot be highly evolved from a process standpoint and be nowhere on behavior. Behavior generally will lag process as shown below.

I'd welcome your thoughts on what other dimensions you feel might be important in making a Corporate Portfolio Management strategy a reality within an organization. Also, what have you done within your organization to make CPM a success - what tools and tricks can you share with others who are also embarking on this path. And if you've been tripped up on your road to CPM, what missteps might have occurred which you might help others avoid?

Corporate Portfolio Management blog begins...

Corporate Portfolio Management (CPM) - An increasingly important discipline. I hope to share some of my experiences, insights, ideas and questions about CPM through this blog, and more importantly, hope to encourage discussion amongst current and prospective practitioners of the CPM discipline. Of course, the many valuable (and sometimes not so valuable) insights of other practitioners and thought leaders will also be highlighted.

For those unfamiliar with the term CPM, let's start with a bit of a definition. CPM encapsulates several other more commonly known terms such as enterprise portfolio management or project portfolio management (PPM). By encapsulate, I mean that enterprise portfolio management and PPM are most-often associated with information technology (IT) while CPM is more expansive. CPM includes IT investments but also is a strategy & discipline that can be utilized to optimize decisions related any area where an organization is making discretionary investment including: marketing/advertising & promotion, salesforce, IT, R&D/innovation, capital expenditures, operations, etc. CPM looks at these discretionary projects but as investments which generate benefits - financial, strategic, risk, etc.

In terms of my background and expertise with CPM, I am currently a Vice President at American Express managing the organization's corporate portfolio management effort (known internally as Investment Optimization). Additionally, I head up American Express CFO's internal strategy and business analysis group. I've lead the development of the company's CPM effort which is patent-pending alongside numerous talented colleagues over the last several years.

Beyond efforts at American Express, I've had the opportunity to speak with numerous thought leaders within other organizations and think tanks about CPM who've really helped to evolve my thinking about CPM and the field overall. I hope some of them will contribute to this blog going forward and/or that I'll get the opportunity to share some of their insights with you over time.

I welcome your feedback, questions and ideas about this blog, and my hope is that will serve as a useful forum to spur dialogue, new ideas and greater interest in and realization of the power of CPM. Happy optimizing. Whether you agree or disagree with my viewpoints, I welcome and look forward to your feedback.