Managing portfolio uncertainties at Company A

Efficient management of portfolio uncertainties requires high awareness of the key un-certainties as well as clear roles and responsibilities among the various portfolio stake-holders. Hence, this chapter aims to present the portfolio uncertainties and responsibility areas at Company A based on the collected empirical data.

Portfolio uncertainties

According to the interview data, research and development at Company A is often char-acterized with the high level of uncertainty. Especially innovation project portfolio 1 was seen to be exposed to multiple uncertainties due to the focus on long-term research and development projects. The uncertain and dynamic nature of the research and develop-ment portfolio is described by one of the interviewees as follows:

“It is really hard to make plans for a longer period of time when a lot of ad hoc -tasks come up, and also customer requests might suddenly appear from some-where and override other things. So, in a way it is a bit dull, but it is not really worth

it, six months is already quite a long planning period for this. There is not a lot of motivation to plan much further as things will change anyway.” – I3

Although the uncertainty level of the product development portfolio is lower compared to the research and development portfolio, both are exposed to similar portfolio uncertain-ties. Figure 7 aims to illustrate the different portfolio uncertainties mentioned during the interviews. These uncertainties have been classified according to the portfolio uncertain-ties presented in chapter 2.2.2. with a few new additions: uncertainuncertain-ties related to human competences and legal factors were added as new uncertainty categories based on the interview data. In addition, the uncertainties have been color coded based on three broader categories based on the literature review: external environment, organizational complexity and single projects.

Portfolio uncertainties at Company A

One of the greatest portfolio uncertainties at Company A turns out to be the variability associated with estimates of project parameters. Especially variability related to esti-mated time and quality of the project were deemed as significant uncertainties impacting the whole innovation portfolio. In addition, changing customer needs were also men-tioned in four interviews as a key uncertainty related to the innovation project portfolio.

According to multiple interviewees, research and development is heavily guided by the customer needs and their requests. After all, added customer value is one of the key factors defining innovation at Company A, this finding does not seem surprising.

Thirdly, the basis of estimates of project parameters, design and logistics, and objectives and priorities was also recognized as a significant uncertainty in four interviews. Espe-cially estimating the duration and the potential value of an innovation project involves a high level of uncertainty:

“At the early stage, even when we estimate the benefit and we estimate the time is takes to develop it, those might be so inaccurate that it will dilute the whole thing. – – So basically, estimating the workload based on the potential benefits is really hard, that it is probably one of the greatest sources of uncertainty for us.” – I2

Technological opportunities and threats, competitive conditions and changing resource situations were all mentioned in three interviews. Particularly the opportunities brought by machine learning and artificial intelligence were often mentioned, and some uncer-tainty is seen to lie in choosing the right tools and techniques to process the data. Adop-tion of new technologies was also seen to be tightly linked to maintaining competitive-ness in a dynamic context. Changing resource situations on the other hand were often mentioned in relation to the COVID-19 outbreak. For example, the company was com-pany was unable to follow their initial plan to grow their resources in research and devel-opment due to the high uncertainty caused by the outbreak, and some resources had to be reallocated elsewhere due to drastic changes in customer needs.

The COVID-19 outbreak has also increased the portfolio dynamics at Company A, since the portfolio content then had to be reconfigured especially in terms of project priority and resource allocation. These reconfiguration practices are discussed in further detail in chapter 4.1.4. In addition, potential interdependencies between portfolio components were mentioned once as an uncertainty impacting the innovation project portfolios. Such uncertainty is seen to be often related to variability associated with project duration, as a delay in a certain project might mean that the schedule of another project gets delayed as well due to the limited resources.

According to two interviewees, the inaccurate time estimates might be partly caused by employees’ possible inability to voice their concerns related to their own competences.

In addition, only a limited number of employees might attain the competences needed to complete a certain task. Hence, it might be challenging to match project requirements and the competences of the employee. As one of the interviewees explains:

“Sometimes you may think that this will take two weeks and then it takes six months, or the other way around. It is strongly related to how well you are able to match the employee, really at the personal level, meaning where do their

strengths lie, who is efficient at what and where you would need some other type of a person or a researcher. Those matches do not always work out and some-times things are simply so hard that even the best expert in the world would not be able to succeed just like that.” – I3

In addition, another interviewee mentioned a shortage in senior expertise at Company A. Due to these concerns, human competences was added as a new category for port-folio uncertainties. Similarly, uncertainties related legal factors was seen as a potential risk influencing the innovation project portfolio. Although such legalities were only men-tioned in one of the interviews, breaching time limits defined in customer contracts was seen as a significant financial risk. Of course, this uncertainty is also highly related to the variability associated with project duration as well as the basis of estimates of project parameters.

At Company A, the uncertainties presented in figure 7 are quite evenly distributed across the external environment, organizational complexity and single project categories. If the count of interviews where the uncertainty was mentioned is used as a weighting factor, 40% of the identified uncertainties fall under the category of the external environment.

These uncertainties include changing customer needs, technological opportunities and threats, competitive conditions and legal factors. As human competences is categorized under organizational complexity similarly to changing resource situations, portfolio dy-namics and potential intendencies among portfolio components, this category covers nearly 30% of the identified portfolio uncertainties. Single projects also represent nearly 30%, including the variability associated with estimates of project parameters and the basis of estimates of project parameters, design and logistics, and objectives and prior-ities.

Roles and responsibilities

At Company A, the perception of role clarity related to portfolio uncertainty management varies between the interviewees. When asked if the responsibilities between the different portfolio stakeholders are clearly defined, one interviewee states the following:

"I do not feel that way. These things have not been that specifically defined and maybe it is that sort of a thing that has not been assigned to anyone in a way. But I am aware that I kind of, if I sense something, then I need to bring those things up. But I would not say that it is really that clear." – I3

In other words, the interviewee is aware of their responsibility to practice portfolio uncer-tainty management but could not clearly define who is really accountable for it. However,

another interviewee does not completely agree with the ambiguity of responsibilities. He also brings up a potential root cause of differing perceptions on the topic:

“[The responsibilities are] quite clear. Maybe due to our quick growth rate and start up -background we have not been the world’s most process oriented firm historically so everyone would certainly not agree that those are that clear, but I do not see any obvious shortcomings at that end.” – I1

Even though the sense of role clarity differs among the participants, most interviewees brought up similar actors and responsibility areas related to innovation project portfolio uncertainty management. These actors and their corresponding roles and responsibili-ties emerging from the empirical data are compiled to table 12.

As both data scientists and product managers often take the role of a project manager in their own innovation projects, these actors were seen to bear the primary responsibility for project uncertainty management. This responsibility seems to be closely embedded to the daily operations of these actors. In addition to the project manager and team mem-bers, project uncertainty management is also practiced in the project steering groups.

These meetings enable the project team to share possible concerns related to their cur-rent tasks, as explained by one of the interviewees:

“– – if it seems like it is stuck, then we might make decisions on whether or not it makes sense to continue the project any further. At the same time, we discuss that, if it seems like it is growing to a huge project, then we might need to for example allocate more resources to it or something like that.” – I3

Whereas data analysts are typically only acting on a single project level, the product managers often bear responsibility for an entire sub-roadmap of innovation projects.

Hence, product managers can also be seen to take the role of a sub-portfolio manager, where they have to collaborate closely with their own development team and the principal portfolio manager. In other words, the product managers need to manage the limited resources, typically their own development team members, by allocating them to projects with highest priority. Of course, the relative importance between these projects might change due to various uncertainties, and hence requires frequent reassessment of pro-ject duration, cost and potential value.

Table 12. Key actors, roles and responsibilities related to portfolio uncertainty man-agement at Company A

As described in chapter 4.1.2, the research and development portfolio has been divided into four sectors, each managed by their own corresponding team lead. These senior data analysts are responsible for their own product area specific roadmaps and therefore also suit the role of a sub-portfolio manager. The sub-portfolio managers are accountable for their team’s success and aim to support the team members when they are facing innovation project related problems and uncertainties. In addition, sub-portfolio manag-ers also bear responsibility for uncertainty management on the whole portfolio level. Ac-cording to one of the senior data analysts, the responsibility for portfolio uncertainty man-agement is distributed among the four sub-portfolio managers and the team director act-ing as the portfolio manager as follows:

“It is practically distributed evenly among the five people who participate in road mapping. At least in my opinion no one is any more or less responsible for it. – – Of course, in a certain way the team director has the final say.” – Senior data analyst

These actors mainly interact through portfolio steering meetings organized by the port-folio manager, where the portport-folio content is reconfigured based on the project priority and resource availability. One senior data analyst summarizes all relevant actors engag-ing in portfolio uncertainty management in terms of the research and development port-folio:

“It is either the steering group or the corresponding line-organizations such as team leads like me for example. It is also my responsibility that if someone tells me that things are not proceeding, then I need to be concerned and maybe do something about it. But that is basically it. It involves the management team, steer-ing groups, teams leads and finally the team director." – Senior data analyst Product managers on the other hand report to the head of product management and the principal product manager. The principal product manager is responsible for the road map processes at the high level and acts as the portfolio manager for the product devel-opment portfolio. Similarly to the director of research and develdevel-opment team, the princi-pal product manager organizes monthly portfolio steering meetings for the product man-agers and collaborates closely with other relevant stakeholders such as the top manage-ment and other product council members.

Company A has a few designated program managers at the technology side of the or-ganization, but also product managers or other actors can be assigned with this role.

Similarly to project managers, uncertainty management seems to be embedded in the

daily operations of the program managers. One interviewee describes the main respon-sibilities of the program manager as follows:

"The program manager is responsible for ensuring that all necessary tasks are included in the roadmaps, so that when we have the deadline for when it needs to be in use, all of those tasks are finished by then" – I2

Program managers also organize program steering meetings, where they share the cur-rent program status for all relevant stakeholders. According to one of the interviewees, the purpose of such meetings is to present the current program status and solve possible bottlenecks caused by different uncertainties impacting the program. Hence, such steer-ing meetsteer-ings are also essential for program uncertainty management.

Additionally, program managers are responsible for filling a program specific product canvas and updating it throughout the program. This product canvas contains infor-mation for example on the potential customers and estimated value and cost of the pro-gram. Hence, it is an important tool used by the product council to compare the priority of different programs when deciding on which program should be kick-started next.

Although many interviewees emphasized the importance of autonomous decision-mak-ing practiced at the project, program and portfolio level, some significant decisions still need to be escalated to the management team. This escalation order starts from the project managers and members, proceeds to the sub-portfolio and portfolio managers, and significant decisions are then escalated to the chief product officer or chief technol-ogy officer depending on the situation. Finally, the chief executive officer is involved in decisions with high strategic importance.

Due to this escalation order, the top and middle management at Company A are also relevant actors in terms of portfolio uncertainty management and participate in decision-making when required. In addition, the new product strategy and management team is intended to take the primary responsibility for sensing uncertainties arising from the ex-ternal market. Such identification of potential opportunities and threats related to cus-tomers and competitors has not been previously assigned to anyone, as one of the in-terviewees explains:

“In the future, the new team is meant to be quite strictly responsible for that. Until now the responsibility for that has not really been assigned to anyone. So basi-cally, this has been happening but one could not say who is responsible for that.

And therefore these observations have been made by multiple fronts, sometimes early on and sometimes a bit later. But now in the future the idea is that the new team will think about that, communicate with customers, follow competitors and

discuss with other stakeholders such as analysts about what is going on in the market. And constantly aim to decide which direction we should go.” – I1

The new team will therefore also play significant role in guiding the long-term strategic direction of the product offering based on their findings. The chief product officer, how-ever, still holds the main responsibility for the product offering, including the innovation project portfolios. In addition, the chief product officer participates in long-term and short-term problem-solving related to the issues arising from the portfolios, and therefore can also be seen as an active actor in portfolio uncertainty management.

The top management interacts with the portfolios mainly through product council meet-ings and other steering groups described previously. The product council has the ulti-mate power to decide which programs will be started next based on their relative strate-gic priority. In addition, the product council practices product life cycle management, where the new products are moved towards general availability when certain require-ments are fulfilled. The top management also aims to ensure alignment between the on-going innovation projects, current product offering and strategic objectives of the com-pany, and therefore plays a significant role in defining the direction of the future research and development activities.

To conclude, various actors are involved in portfolio uncertainty management at Com-pany A. Portfolio reconfiguration, however, is mainly practiced within three important fo-rums: project steering groups, portfolio steering groups and product council. These port-folio reconfiguration practices are discussed in further detail in the following chapter.