Application Portfolio Management (APM) Best Practices

Overview

Portfolio investment decisions are made under uncertainty about the future. Business priorities may shift after an investment is committed. Vendor roadmaps may change in ways that affect the applications being invested in. Technical approaches that appear sound at the time of decision may prove more costly or more complex than anticipated in implementation. Organizations that commit to portfolio investments without testing them against alternative scenarios and challenging their underlying assumptions consistently experience investment surprises that could have been identified and addressed before commitments became binding.

Best Practice

Apply scenario planning discipline to significant portfolio investment decisions before commitments are finalized. Define two or three alternative scenarios - variations in business priority, vendor landscape, technical approach, organizational capacity, or external market conditions - and assess how each investment option performs under each scenario. Identify the specific assumptions that each investment option depends on and assess the organizational consequences if those assumptions prove incorrect. Use scenario analysis to identify investment options that are robust across scenarios versus those that perform well only under the most optimistic set of assumptions. Prefer investments that deliver acceptable outcomes under a broad range of scenarios over those that deliver optimal outcomes under a single best-case scenario.

Benefit(s)

Scenario-tested portfolio investment decisions are more robust and more likely to deliver their expected outcomes because the assumptions underlying them have been explicitly examined and challenged before commitment rather than accepted implicitly and discovered to be wrong during execution. Investment options that depend on fragile or optimistic assumptions are identified before commitment rather than after. The organization develops an investment decision discipline that reduces the frequency and magnitude of investment surprises. Leaders who see investment options scenario-tested before commitment have greater confidence in the decisions they are making and are more willing to commit the significant investments that strategic portfolio evolution requires.