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Saturday, March 01, 2008
Report from the CPM Conference in Clearwater Beach - Stopping Investile Dysfunction
Reported by A Matt Piazza in Florida
The Corporate Portfolio Management Conference in Clearwater Beach, Florida included six keynote presentations. One of the most informative was delivered by Anand Sanwal with the title: “Stopping Investile Dysfunction. The Power of Corporate Portfolio Management”.
Mr. Sanwal, former VP Investment Optimization & Strategic Business Analysis at American Express and the author of the best-selling book “Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy” shared his view that industry leaders are those that consistently make better decisions. And it is the strategic and financial discipline of corporate portfolio management that enables companies to continuously make better decisions and hence become leaders by selecting, funding and executing on the best investments and projects.
Mr. Sanwal offered a pragmatic practitioner’s perspective having built the discipline at American Express’s on how to bring corporate portfolio management to one’s organization. He discussed the over indulgence on data, strategies and processes and indicated they needed to be balanced with significant attention to the culture and behavior of the organization. He quoted the CFO of Medtronic who he’d recently heard say “Culture eats strategy for lunch” and challenged the audience to understand that making better decisions is about better information and data as well as ensuring people know why better decisions are important and incentivizing them to make them by creating a “marketplace for discretionary investments.”
The problem of poor project or investment selection which Sanwal has termed “Investile Dysfunction” is commonplace. He cited statistics from the Corporate Portfolio Management Association (www.corporateportfoliomanagement.org) that over 85% of corporate management believes their resource allocations is “not-in-good shape”; that 55% of corporate investments are “not-in-good shape” with respect to the accuracy of their benefits, costs and time of delivery estimates; and that 86% of these corporation business decisions are driven by politics and relationships and not driven by data. Sanwal doesn’t argue for strictly data-driven decisions but what he calls a balance between decibel and data-driven decision-making or “intuition vs analytical” decision-making.
He did make the case that data does work citing the example of movie financier John Miller who makes movie selections based on a database of metrics related to movies – and not based on scripts, personal relationships, buzz, etc.
Other example of the power of data working in decision-making that he provided included those of Billy Beane of the Oakland A’s and his ability to use data to change the conventional “wisdom” on player selection as immortalized in the book “Money Ball”. He also cited an example from Malcolm Gladwell’s Blink on how Cooke County Hospital better allocated beds by determining which patients complaining of chest pains were actually having heart attacks by using data and statistics instead of relying solely on doctor’s diagnoses.
In summary, Sanwal demonstrated the power of corporate portfolio management and challenged the audience to not follow the best practice but to be the best practice. He stated that “There is no such thing as a world-class follower” and pushed the audience to strive to become the leader by utilizing Corporate Portfolio Management. His practical, “in the trenches” perspective and his success at American Express where he focused on the process as well as the cultural and behavioral elements seem to offer a viable treatment option to Investile Dysfunction which hurts most organizations today.
The Corporate Portfolio Management Conferences was organized by the Product Development Management Association (PDMA) and IIR, a division of SRA International. Information about the conference can be found at http://www.iirusa.com/cpm/overview.xml.
The Corporate Portfolio Management Conference in Clearwater Beach, Florida included six keynote presentations. One of the most informative was delivered by Anand Sanwal with the title: “Stopping Investile Dysfunction. The Power of Corporate Portfolio Management”.
Mr. Sanwal offered a pragmatic practitioner’s perspective having built the discipline at American Express’s on how to bring corporate portfolio management to one’s organization. He discussed the over indulgence on data, strategies and processes and indicated they needed to be balanced with significant attention to the culture and behavior of the organization. He quoted the CFO of Medtronic who he’d recently heard say “Culture eats strategy for lunch” and challenged the audience to understand that making better decisions is about better information and data as well as ensuring people know why better decisions are important and incentivizing them to make them by creating a “marketplace for discretionary investments.”
The problem of poor project or investment selection which Sanwal has termed “Investile Dysfunction” is commonplace. He cited statistics from the Corporate Portfolio Management Association (www.corporateportfoliomanagement.org) that over 85% of corporate management believes their resource allocations is “not-in-good shape”; that 55% of corporate investments are “not-in-good shape” with respect to the accuracy of their benefits, costs and time of delivery estimates; and that 86% of these corporation business decisions are driven by politics and relationships and not driven by data. Sanwal doesn’t argue for strictly data-driven decisions but what he calls a balance between decibel and data-driven decision-making or “intuition vs analytical” decision-making.
He did make the case that data does work citing the example of movie financier John Miller who makes movie selections based on a database of metrics related to movies – and not based on scripts, personal relationships, buzz, etc.
Other example of the power of data working in decision-making that he provided included those of Billy Beane of the Oakland A’s and his ability to use data to change the conventional “wisdom” on player selection as immortalized in the book “Money Ball”. He also cited an example from Malcolm Gladwell’s Blink on how Cooke County Hospital better allocated beds by determining which patients complaining of chest pains were actually having heart attacks by using data and statistics instead of relying solely on doctor’s diagnoses.
In summary, Sanwal demonstrated the power of corporate portfolio management and challenged the audience to not follow the best practice but to be the best practice. He stated that “There is no such thing as a world-class follower” and pushed the audience to strive to become the leader by utilizing Corporate Portfolio Management. His practical, “in the trenches” perspective and his success at American Express where he focused on the process as well as the cultural and behavioral elements seem to offer a viable treatment option to Investile Dysfunction which hurts most organizations today.
The Corporate Portfolio Management Conferences was organized by the Product Development Management Association (PDMA) and IIR, a division of SRA International. Information about the conference can be found at http://www.iirusa.com/cpm/overview.xml.
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