Continuous portfolio reconfiguration at Company A

Due to the various uncertainties influencing the innovation project portfolios, the key ac-tors responsible for portfolio uncertainty management need to develop adequate re-sponses to either maximize the opportunities or minimize the threats. Hence, reconfig-uring the portfolio content is an essential way to practice such portfolio uncertainty man-agement. At Company A, such portfolio reconfiguration happens constantly. As one of the interviewees explains:

“On some level, it happens all the time. In a way that is normal, cause when you think about the roadmap – –, the only thing that is certain is that it is never flaw-less.” – I1

Portfolio reconfiguration is practiced in different ways by the different actors participating in portfolio uncertainty management. In other words, the key actors seem target different

uncertainties in terms of the uncertainty type and source. For example, smaller devia-tions arising from single projects are mainly managed in project steering meetings. In order to respond to these uncertainties, the project teams and project steering groups are often authorized to terminate unsuccessful projects and reallocate resources to an important project when necessary.

Although such slight modifications to the portfolio content might happen on a daily or weekly basis, the innovation project portfolios are primarily reconfigured approximately once a month during portfolio steering meetings. In these meetings portfolio reconfigu-ration is mainly practiced at through adding, terminating and reprioritizing projects and reallocating resources. The purpose of such actions is to target both smaller deviations and larger uncertainties and changes arising from all three uncertainty sources: external environment, organizational complexity and single projects. According to one of the members of the research and development team, these monthly steering meetings usu-ally follow a certain agenda:

“– – we have this meeting once a month, where we go through all the new project ideas, take a look at the progress of the old, on-going projects, and review what we have planned for our [to-do] list, and reprioritize our backlog – –.” – I2

Adding new projects to the portfolio is highly important in order to maintain competitive edge in a dynamic environment. New project ideas are gathered from multiple sources and proposed by different stakeholders listed in the previous chapter. Company A has also established an internal innovation platform where employees are able to submit and vote new ideas. In addition, the research and development team has their own idea gath-ering platform, where the team members are able share their ideas with the rest of the team. This process is explained by one of the interviewees as follows:

“Basically, the process works in a way that we have this sort of an idea gathering inbox, where our team members can freely submit ideas. We then aim to make the first evaluation on whether or not the idea makes sense and try to prioritize them in terms of which ideas are added to the backlog and which ones are re-jected. And if it is added to the backlog, then we aim to estimate the relative ben-efits compared to the effort it requires.” – I3

Project prioritization is another important practice related to portfolio reconfiguration, and it is especially topical when the steering group needs to decide which project should be started next. At Company A, prioritization is based on the estimated value of the projects.

In more detail, the research and development team utilizes SML-categorization in project prioritization, where the potential benefits and costs are classified as small, medium or

large. The sub-portfolio managers are typically the ones responsible for these evalua-tions. As one of the interviewees explains:

“– – those responsible for the road maps have always estimated, by having con-versations or whatever is the method, that what is the potential value for the pro-ject, so what the profit could be and what would be the cost. – – And then we basically choose those that seem to generate the greatest benefits with the lowest effort.” – I2

However, the interviewees recognize the uncertainties related to the basis of these esti-mates, as the estimations are in fact deemed subjective:

“– – it has a formal structure, but the decisions are still quite, well it is most of the time quite subjective cause we simply just believe that this is the best decision, especially when we are discussing things that are as uncertain as research.”– I2 This uncertainty related the basis of estimates is taken into account in the decision-mak-ing process. As the projects within a certain product area are estimated by a sdecision-mak-ingle, designated person, the estimations should be comparable with each other. In addition, the estimations are cross-checked by the other sub-portfolio and portfolio managers dur-ing the portfolio steerdur-ing meetdur-ings, which in turn enhances the reliability of the relative priority between the different projects.

Project prioritization is also impacted by the uncertainties related to the customer rela-tions. One of the interviewees describes the role of the customers in project prioritization as follows:

“In some of our new sales cases we have to promise to solve a certain problem, but we do not yet know how. Then naturally it will dictate strongly how we will allocate our innovation resources. – – So, it is customer-oriented, for sure, and the customer point of view does influence the prioritization a lot.” – I5

As briefly mentioned in the previous quotation, portfolio reconfiguration may require re-source reallocations based on the project priority. Allocating limited rere-sources is espe-cially hard in the context of research and development, where different projects require different competences from the project members. As one of the interviewees explains:

“– – so, it does not work in a way that when we finish up with this other thing, then we have all those employees to be allocated to another place, because the skillset is a thing that restrains a lot. – – So due to that, the prioritization is not always that straight forward that we can simply just think that all of these project members can be then moved elsewhere.” – I5

Another common uncertainty response at Company A seems to be delaying planned projects until further notice. For example, changing resource situations might put inno-vation projects on hold, and additionally the variability related to project parameters might cause unplanned delays. Sometimes, however, projects are also terminated completely.

Such portfolio clean-up does not occur in every steering meeting but is important when the project backlog seem to get too packed. The reasoning behind project termination often relates to changes in the perceived value of the project:

“Sometimes things might end up there [to the backlog] that seemed really im-portant at certain moment, but after hanging there for a while with a low priority, we decide that it does not make sense after all and we throw it away. But these sorts of things indeed happen a few times a year. It is a bit hard to say, since this process has not been running for too long.” – I3

The chaos caused by the COVID-19 pandemic has also clearly increased the need to reprioritize the portfolio content and reallocate resources based on the new priority. As one of the interviewee explains:

“And we did a lot of reconfiguring during the spring, and as the markets were hit by the shock, the focus points might have changed drastically. A certain thing that was seen as important is not as crucial anymore, meaning that even if we did not necessarily terminate a certain initiative, we might have put some things on hold or on a lower priority. And at the same time, we saw some other things that we wanted to push forward, meaning that we increased their priority and reallocated resources to those things. Due to that, we of course had to then lower the priority of some other things, so we would get more resources out of it.” – I5

Due to the strategic significance of uncertainties arising from the COVID-19 pandemic, the product council was also involved in the portfolio reconfiguration:

“– – during this corona situation, we had to put multiple projects on hold, as we did not necessarily have resources to do all of them. So, these sorts of decisions are then made in the product council.” – I2

Product council is therefore also an important actor participating in innovation project portfolio reconfiguration, especially when a chaos or a significant uncertainty threatens to compromise to objective of the whole portfolio. Such drastic changes made to the innovation project portfolios could be titled as portfolio refocusing, where the portfolio content is heavily modified at once in order to respond to uncertainties with high severity.

It should also be noted, however, that the product council as well as the steering groups at Company A are relatively new forums established only a few years back. Hence, the

responsibilities and practices are not completely formalized or clearly defined. Therefore, different development ideas and current challenges related to uncertainty management in the innovation project portfolio context are discussed further in the following chapter.