Technology Portfolio Management (TPM) Best Practices

Overview

Technology investment decisions made in a single-scenario planning framework — where the plan is developed against the most likely future and then executed without evaluating alternative futures — are consistently more fragile than decisions tested against multiple plausible scenarios. Technology investment decisions in particular benefit from scenario testing because technology portfolio changes are expensive to reverse: a platform adoption that commits significant organizational capacity and a multi-year license term is difficult to unwind if the anticipated business growth does not materialize, if the technology’s market position shifts significantly, or if the strategic direction that motivated the adoption changes.

Best Practice

Apply scenario planning to significant technology investment decisions before committing to them, evaluating each investment across two or three plausible future scenarios that differ in their assumptions about the most consequential uncertainties. For technology portfolio investment decisions, the most consequential uncertainties typically include: the pace and direction of business growth, which determines the scale at which the technology investment must perform and the timeline over which its cost must be recovered; the strategic direction stability, which determines whether the capabilities the technology investment is intended to support remain strategic priorities throughout the investment horizon; the technology market evolution, which determines whether the technology being invested in remains the preferred alternative or is displaced by a new technology category; and the regulatory trajectory, which determines whether the compliance requirements applicable to the technology investment remain stable or evolve in a direction that affects the investment’s viability.

Benefit(s)

Scenario planning applied to technology investment decisions produces investments that are more robust to the range of plausible futures the organization might encounter than investments designed for a single expected future. Technologies that perform well across multiple scenarios are more confidently adopted. Technologies that perform well only in the most optimistic scenario receive more conservative adoption commitments — shorter initial terms, smaller initial scope, more explicit exit provisions — that preserve the organization’s flexibility to adjust if the optimistic scenario does not materialize. And the scenario planning discipline builds the organizational habit of evaluating technology investment decisions against multiple futures rather than only the future that happens to be most convenient for the investment being proposed.