Taking Corporate Portfolio Management beyond IT

I remain amazed at how the entire portfolio management discipline has become largely focused on enabling corporate portfolio management for IT investments. Granted, most organizations do struggle with their IT expenses. Many (most) do not even fully understand that these IT expenses are in fact investments, but this fixation on IT is a bit stifling - as it minimizes the impact that CPM can have on an organization.

Corporate Portfolio Management should be used for any area where discretionary expenditures and hence investments are occurring including advertising & promotion, innovation/R&D, operations, sales, IT, capital expenditures, etc. This means looking past just your capital expenditures but also looking at operating expenses which, today, maybe considered business as usual, but which in fact, can be highly discretionary.

Conversations with numerous companies shows that 25-40% of a company's operating expenses are in fact discretionary (industry dependent). While the added scrutiny will likely not appeal to people who've become used to a certain size treasure chest to play with, this huge percentage does underscore the massive opportunity organizations have before them if they can optimize their portfolio. For owners of these expense pools, CPM lets you articulate where you are spending your money from the lens of an investment - not as a discretionary expense that should be cut if and when the environment requires.

At American Express, we've defined anything that is not required to keep the machine running as an investment and so are able to introduce tweaks to our portfolio within and across business segments as well as functional areas. Why limit oneself to optimizing within one narrow mini-portfolio of the organization? Starting with a mini-portfolio might be the right way to start and pilot the concept of Corporate Portfolio Management, but ultimately, CPM is about thinking and achieving BIG.

I'd love to hear from those who've successfully introduced Corporate Portfolio Management to other areas of their organization and the successes and challenges you've faced. Also, if someone can articulate why IT seems to be receiving all the attention around CPM, that would be very useful to understand. It seems to me that this has been driven by the ecosystem of consultants and software vendors that have emerged, but I'd love to hear other insights and thoughts in this regard.

Book to be released on Corporate Portfolio Management

I am happy to announce that I will be releasing a book entitled Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy. The book will be released in April/May 2007, and my intention is to create a guide executives and CPM practitioners can utilize to build a robust CPM discipline within their organization. Gary Crittenden, Chief Financial Officer and EVP, has graciously agreed to write the foreword to the book, and I anticipate having numerous case studies on organizations who've deployed CPM.

More details to come.