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Many firms employ suboptimal practices when managing the vast sums of money they invest in their portfolios of strategic initiatives. Firms pursue these initiatives and projects to advance their strategies, increase the efficiency of operations, launch new products, and improve customer experience, among many other aims. Resources are limited, though, and management teams must select those initiatives that are most likely to yield the best outcomes and deliver the most value to the organization.

Despite the importance of making these decisions correctly, we observe a range of common issues across many firms, including a disproportionate focus on short-term, tactical initiatives, ineffective governance and oversight, piecemeal approaches to initiative screening and selection, and weak monitoring and execution, among other flaws. These inadequate practices are a drag on firms’ ability to capture value from initiatives and ultimately achieve robust growth.

In the current environment, there is an urgent imperative for companies to strengthen their initiative management capabilities, particularly in light of macroeconomic headwinds and the resulting high degree of investor scrutiny on companies’ deployment of capital. While most firms have some aspect of their initiative management process that can be improved, several have dramatically improved their practices in recent years. We think that institutions can universally benefit from learning about best practices employed by other firms to manage their portfolios of strategic initiatives.

Exhibit 1: The benefits of effective initiative portfolio management

The must-haves for effective initiative management

We advise firms to have the must-haves below in place to construct, deliver, continuously manage, and ultimately realize value from their initiative portfolios.

  • Set the initiative portfolio strategy: Clearly articulate your initiative portfolio strategy, target allocation of investment dollars, and how the initiative portfolio supports your firm’s strategy
  • Institute a robust investment sourcing and decision process: Efficiently identify the most promising initiatives, invest with discipline, and lay the foundation to deliver within timeline and budget
  • Actively monitor delivery and re-balance the portfolio: Understand your portfolio and individual initiatives and proactively adjust to ensure they continue to deliver expected value to your firm
  • Create a culture that prizes innovation and balances individual and collective accountability: Promote individual ownership while creating a "constellation of incentives" for cross-functional collaboration to deliver initiatives

How to start your journey toward better initiative management

Establishing effective initiative management can be a daunting challenge and many firms need to develop a number of foundational capabilities, each of which may be substantial in isolation. Therefore, we recommend that firms prioritize starting the journey, but do so in a controlled manner by launching low risk, no regrets actions prior to scaling. Based on our experience with firms across stages of maturity of initiative management, we recommend a staged transition with a series of phases that build upon each other, as shown below.

Exhibit 2: Initiative portfolio management transition roadmap

Conclusion: Make every dollar count

Firms that are unable to rigorously invest in and manage their initiative portfolios are leaving significant value on the table. In the face of a more challenging economic environment and increasing investor scrutiny, better deployment of scarce resources is critical for firms to achieve growth, efficiently operate, and ultimately compete and expand valuations.

Leading firms have already started to embark on the journey to stronger initiative management, which often entails a large, multi-year body of work. Lagging firms risk falling further behind and being punished by the market — for firms that are not yet on the journey to stronger initiative portfolio management, the time to start is now.