Capability-based project prioritization:
To get started with a capability-based project prioritization approach, please decompose the projects into the capabilities that are involved. An easy way of doing it is to compose the projects with an agglomeration of the underlying capabilities as Lego blocks.
Everyone agrees capabilities are a foundational building block of business. And there is agreement that prioritization is necessary to focus scarce resources of highest ROI projects. The synergy is in combining both and doing a capabilities-based project prioritization.
Here is a summary approach and key steps to capabilities-based project prioritization:
Start with capability mapping
- Start with the highest level value chain capabilities. These value chain capabilities should not be more than 10-12 and must be very coarse grain.
- Decompose the capabilities to at least level three – preferably level four and five as needed.
- Stack rank the capabilities on a variety of factors: Importance of the capability to the organization; ability in meeting business needs; maturity of the capability; and architectural fit. One of the ways you can achieve simplicity and clarity is categorizing the capabilities as “Core” “Context” and “Commodity, ” and the guiding principle is “Invest in the Core” “Standardize the Context” and “Outsource the Commodity.”
Link projects to Capabilities
- Decompose the projects into the capabilities that are involved. An easy way of doing it is to compose the projects with an agglomeration of the underlying capabilities as Lego blocks.
Identify overlaps, conflicts, and redundancy
- By cross-analyzing the projects, you can identify duplication of efforts and any conflicts in leveraging capabilities. This is an important step to avoid silos and ensure plug and play and interoperability.
Prioritize projects based on underlying capabilities
- By inheriting the value dimensions of the capabilities, and adding a few holistic parameters, one can easily value-rank the projects. For example, the value of a capability, meeting business needs, innovation and competitive differentiation, revenue impact can be some of the parameters that can holistically stack rank the projects. If any of the projects are not adding significant value and are focused on commodity capabilities, one needs to strongly question the justification. (Of course, some “keep the lights on projects” are indeed necessary.) If on the other hand, a project is focused on core capabilities and can provide competitive differentiation, a substantial investment can be justified.
Create a portfolio view of the projects
- In addition to the analysis of the individual projects, creating a portfolio view of the projects will help manage the overall spend. Analytical lenses will provide information on how much is a firm spending on “lights on” “business as usual” and “competitive leapfrogging.” It can also shed light on what capabilities are included in projects most frequently and derive a standard set of capabilities. Last but not the least, having a portfolio-level view will allow for managing resource constraints, overlaps and conflicts more effectively.
Measure the Project Results
- A big challenge is large firms is there is no effective post-mortem on projects. More than projects measuring the impact on the underlying capabilities and their evolution will be a powerful tool. Having defined key performance indicators and success metrics and measuring completed projects and their underlying capabilities against the metrics – objectively, will help understand the shortcomings and the lessons can be applied to future projects and capabilities.
Does your team do capability-based project prioritization? If so what has been your experience and what are results?