Linking Strategy to Execution: Why Great Strategies Fail and How Leaders Deliver Results

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This transcript is based on the episode’s English auto-captions and has been formatted for readability. Please allow for occasional transcription errors in names, acronyms and specialised terms.

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the way you take strategy and e execute on a strategy, it's always about decisions on where you're going to put those scarce resources. And if you're not doing those efficiently, if you don't have the visibility into where the constraints are, then then you're going to run into problems. So when you when you roll up the portfolio, there's typically, [music] you know, there should be a prioritized list of projects that are in alignment with your strategy, but there's always going to be some what we might call uh pet projects or zombie projects or projects that are languishing that we're investing in, but aren't quite quite getting the bang for the buck we expect. We need to call those out and make some tough decisions. Uh [music] where I get nervous is when when you when you say it [music] you want some investment in the longer term and then when you actually roll up the projects you're you're actually spending a very small amount if anything in those longer [music] term because the the the the near-term is going to win out every time to make cuz that's really the way uh a lot of leaders are incented. They're incented to hit their quarter overquarter numbers. So, it's hard to talk about this topic without getting into uh incentive systems and how leaders are are measured. You know, when you're dealing in high uncertainty [music] territory, when you're going into new markets with new technologies, then um your business case is almost worthless because you're, you know, we know we're just guessing at the at the uh the growth rates because it's it's never been done before by definition. So, those hockey sick growth curves um are can be meaningless. It's more [music] important to identify what are the high impact assumptions that we're making and let's go and test those assumptions.

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Hello and welcome to the Enterprise Tech Talk. I am your host Saumitra Kalikar. Now, it's fair to assume that all organizations have corporate strategies, but not all strategies result into measurable business outcomes. And despite heavy investments into digital transformations, AI and technology modernization programs, many organizations continue to struggle to realize their strategic ambitions. And this raises an important question as to why strategy execution remains such an important challenge for most of the organizations. Today we will explore this question through multiple angles. And to unpack the topic further, I'm joined today by Noel Sobleman. Noel is the strategy and innovation advisor with more than 25 years of experience in helping organizations improve their investment planning, portfolio management and execution planning capabilities.

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He's also author of a book uh titled um innovation portfolio management linking strategy to execution. Noel, welcome to the broadcast. Great to have you here. >> Uh a pleasure to join you and looking forward to our conversation today. No, before we get started, can you tell us a little bit about your book? Um, what's his overall focus area and what inspired you to to write the book? >> Yeah, so I've um been advising companies for over a decade now on all aspects of innovation and new product development. And one consistent theme is there there seems to be a disconnect between that ambition that or whether it be a growth goal or a purpose-driven mission and the actual projects that you're investing in. When you when you roll up kind of do a bottoms up of uh project projections and um maybe risk reduce them a little bit and you compare them to your growth goals, there's t tends to be a disconnect. And I've always wondered why that was. And um so that's that's part of the motivation for try trying to figure out how how companies can can uh close that gap. And the the discipline that I've landed on over and over again is is the a way to connect strategy to project execution and portfolio management is the way to do that. So um uh what I wrote about was first describing what this discipline of innovation portfolio management is and how you know when you're good. So I I put in the book a maturity model that shows what's the difference. How do you know what are the characteristics of a company that is really doing this this discipline well?

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>> Um and then I wrote about how how to build a capability. So, a lot of the book is about uh it's really a how-to, how to build the capability, and that covers everything from portfolio, how to structure your portfolio, how to govern and make decisions in a portfolio, uh how to handle resource management, how data flows, what kind of tools you can use to enable these practices, and what kind of forums work best for making these types of decisions. And then uh much of the the last third of the book I would say is about um the uh the organizational change that's needed to get an or a large organization to adopt these practices. So a lot of um the hardest part of what I do is not helping companies implement a new process or select and implement a tool. The hardest part is the behavior change. How do you overcome that resistance to change when you're implementing a new way of working that um everybody might not support? So, I put a lot of effort and research into figuring out what are some of those typical barriers that I've run into and and how to overcome them. And then there's a little bit of discussion about AI and how that's impacting this discipline. Um what what um what I see going forward in terms of technology. Um and that that's pretty much it in a nutshell. Uh, so it's um it's currently it's currently available for pre-order.

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It launches in September. >> Oh, great. I look I look forward to it. Definitely add to my list, you know. Um, so let's get started and and let's get to the core of the the discussion today uh as to why strategy execution fails. uh most of the organizations today are responding to various priorities as you would uh acknowledge whether it's AI transformation their AI ambitions whether it's a emerging cyber security risk economic uncertainty uh right now as well as the evolving customer experiences right um but even for planning and executing their strategies now they also have good planning tools as I said they have rich data set uh more important ly I I would also argue that there is greater executive focus but still many organizations continue to struggle to execute their strategies right and um when I was doing some homework for our our podcast our episode um I came across a project management institute paper which said that um only 50% of uh projects really delivered their intended business value right which indicates to me that um it's not necessarily just a delivery problem.

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it's potentially a bigger organization discipline problem. Now I wanted to start there our conversation. Um when we see that uh based on your experience when we see that strategy execution often fails where does it often happen? Is it at the the the leadership level? Is it the middle management that typically controll strategies succeeds or phase or it really happens at the at on the ground at the delivery level. Yeah, there there's a lot to unpack there. So, um there's a number of ways to kind of look at where the the failure the typical failure points are. Um and f first off, the environment we're working in today, and you kind of acknowledged it, the world is changing very quickly. Customer buying behaviors are changing faster than ever, that you've got new technologies that are opening up completely new business models. uh a large business can get disrupted by a single single person with a laptop.

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Yeah. Leveraging AI tools um and the macroeconomic conditions are are always changing. So >> we we can't just in the in the you know maybe in the last century and even to this day I've found companies have an an annual operating plan process where they might start in September and create their plan for the the following year they lock in on a plan and then they execute throughout the year. Well that doesn't cut it anymore because things are changing. And what I talk about in the book is you need to re revisit that strategy throughout the year and just ask yourself what's changed in the last 2 or 3 months and um do we need to maybe pivot or adopt our strategy? Maybe, maybe not. But let's at least look at it as you know lift our heads up, look around at the environment, what's going on with our competition, what's going on with technology change, and most importantly, what's going on with our customers? And let's ask ourselves, are the plans that we put in place at the beginning of the year and budgeted cross functions and uh are those still valid?

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And if not, what do we do about? >> Do we need to possibly change our our priorities? Do we need to possibly um rep prioritize? We need to reallocate resources. Um so part of it is learning to be more dynamic than ever be ever before. Um and in terms of failure modes though, um the other um the other one that I see over and over again is we tend to load our our scarce resources to capacity or even beyond capacity and and tell them to execute. And that's really setting up our project teams in in in the innovation world that I work in where where you have project teams that need a certain level of resources cross functionally and sometimes those resources are shared with other projects or other businesses. You need a way to allocate those resources. So the resources are real and when you say we're going to invest in your project that you're going to get the resources that you feel you need to execute to your plan. And when you load to capacity and beyond um the the whole the whole pipeline of projects that you're working on, you end up getting lots of constraints. There's always bottlenecks or certain bottleneck functions and and without the visibility into where those constraints are, leadership doesn't have a way to um to to make decisions either to outsource or or shift project timelines in order to free up capacity for those bottlenecks. Um, yeah, I'd even go so far as suggesting that you need to plan with a a buffer. Maybe maybe you only plan to 15 to 80 80 or 85% of capacity knowing that conditions are going to change and projects aren't going to always deliver exactly to the plan. Um, because it's better to say no to some things and do less and improve that throughput. So the metric needs to say needs to change to throughput not uh how many how many how how how busy are if we're keeping people 110 150 15% utilized and I've seen that then u we're setting ourselves up for failure and those bottlenecks don't always happen in engineering or or the scientific uh area if it's a if it's a a pharmaceutical company or a a healthcare company that the the bottlenecks typically happen in some support functions like regulatory affairs or manufacturing or quality it the then that bottleneck's going to slow down the whole pipeline. So that understanding that resource allocation pro process is really leadership's job is is to the way you take strategy and execute on a strategy. It's always about decisions on where you're going to put those scarce resources. And if you're not doing those efficiently, if you don't have the visibility into where the constraints are, then then you're going to run into problems >> in execution.

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>> Yeah. [clears throat] >> Yeah. And what role you based on your experience again does the organization structure overall play whether the su whether the strategy succeeds or or fails. >> Yeah, that that's an important question. So you have that as part of the the governance of the decision making. Most of the companies I work with are very large. You might have a corporate strategy and then beneath the corporation at the corporate level you have maybe three or four different segments. Within the segments you have multiple business units. Within the business units you have multiple product lines. So there's this hierarchy and you need to make sure decision-m is happening um number one closest to where uh you have the understanding of what's going on in your markets. Um so you could argue that decentralized decision-m is is important but it also has to connect back up to the higher level corporate segment strategy. So um figuring out that org structure, that corporate structure and where resource um allocation decisions need to be made is an is an important one. It's and and it gets even more complex when you're sharing resources. Some companies they'll uh they'll develop platforms or digital uh technology that that crosses over business units >> and that means you have shared resources um and some support functions like let's just use regulatory affairs as as an example that might be a centralized function that sits that that um where you're sharing resources across different business units. So um it's it really important to figure out where where to govern uh and at what what um level in that hierarchy you're making those investment allocation decisions.

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And I the rule of thumb I use is you're you're making those decisions where the people are are allocated to projects and that's typically at the business unit level for these large companies. Um so at the business unit level where you have a cross functional leadership team each of those leaders needs to align on project priorities and figure out how do we staff our our teams for success at that level but at the same time corporate is managing a portfolio of business units. So you have to get the the governance um structure in the right place and make sure that you're empowering with the decision makers that know their businesses and and it might be the P&L level or the business unit level. And then you always have to be able to roll up the um uh the projections to the right level above that so you can make sure that everything is in alignment. So it's that cascading effect. corporate strategy cascades down to the segments to the business units and then back up through the project execution and the data and making sure top down and bottoms up are aligned that strategic alignment is really at the at the crux of what this portfolio management discipline is all about. >> Yeah. Yeah. Absolutely. And um for for executive leadership when when they have endorsed the strategy based on your your experience where they they can see the early signs or indic where where they can actually look for the indicators to see either strategy is progressing where it is succeeding or there are signs that strategy potentially is heading in the right wrong direction and they need to intervene. >> Yeah. the form I think where it all comes together is what I'd call portfolio review. And in most organizations um a a quarterly cadence uh makes sense, but some organizations where you might have a 10-year development life cycle, it's not it's not that frequent. In other organizations, like I worked in the cell phone industry for a while and and a cell phone's life cycle is, you know, at the time was 6 months at best before, you know, it's becoming old technology.

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So um you might want a more rapid cadence. So it really is the the cadence of those portfolio reviews really depend on the the uh the industry the markets um and how crowded your your pipelines are with how many projects. So there's a number of factors that go into deciding that. So if we assume it's a quarterly cadence, that's where you go in and check and say, okay, here's our product line road mapaps, here's our here's our strategy and ask the question, what's changed in the marketplace? What what's changed regarding our customer behaviors? Has something happened regarding competitors? Are is there a threat of disruption? Are there some weak signals coming? Do we need to start thinking about um uh an an S-curve in technology? And um so you you need to uh again look at um uh what what's changed so you can revisit that strategy and then um and then it becomes a conversation about are the are we investing in the right places and you often need to always be thinking what should we not do in order to accelerate the things that we should do. So when you when you roll up the portfolio, there's typically, you know, there should be a prioritized list of projects that are in alignment with your strategy, but there's always going to be some what we might call uh pet projects or zombie projects or projects that are languishing that we're investing in but aren't quite quite getting the bang for the buck we expect. We need to call those out and make some tough decisions and um and and really ignore the sunk costs and and look at going forward.

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Does it still make sense to invest in this project when we have this other larger opportunity in a larger growing market coming? I worked with a client recently where they were spending over 50% of their R&D dollars on aging an aging pro product line um where they most of their money was going to kind of keeping it alive in terms of sustaining and maintaining an aging product line and they were never able to say to kind of cut that off because they they their incentive was to meet their next quarterly numbers. And if we cut off and and move that investment to a a faster growth market um that put their short-term um investment prof their short-term return at risk. >> Um so you that's where you have to make some tough decisions and decide um do we have a balanced portfolio? Are we investing enough in the long term and or or the medium term? Because if you keep if you keep just focused on the short term, you're going to eventually get leaprogged or disrupted. So you having that balanced portfolio is another metric we like to look at at at the portfolio review. If our strategy is to grow double digits, we can't keep investing in safe product line extensions or incremental innovation. We have to have some high-risisk reward kinds of projects in our portfolio. And um so uh that project mix is another another factor that you need to really think about. Is it if we if we want to grow a certain at a certain rate, does our is our product is our product mix the right mix in order to um to uh achieve that objective.

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>> Yeah, rightly said. And and I want to unpack many of the points you just said a little bit more details later. But um just on looking at this whole problem from uh uh another angle of investment planning um and as you said um the the traditional way of investment planning is no longer be becoming relevant uh but many organizations still continue to do annual investment plan right um and the behavior generally you see and you would have come across this in many organizations that yes there is a very good strategy that has been outlined there is a good alignment at the board level executive level etc. But when it comes to the the corporate annual investment planning that's where it starts derailing in the sense that every department they come with uh uh they come with their own priorities. Um they you start seeing plethora of business cases each business case focusing on their department's lo local local ambitions. Um while the business case itself as a standalone may be justifiable but it may not actually directly relate to the strategic intent that organization wants to go go to right and all of a sudden now you see uh tens of hundreds of initiatives emerging across the organization. Um right and and my question basically to you is how organizations and leadership in particular should address this behavior because this happens I seen this happening many times where there is a very good strategy but when it comes to the investment planning starts fading away that is the first potentially point where things start derailing.

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>> Yeah. Well, it's in leadership needs to for for for starters, they need to uh supply the teams at all levels of the organization with some some guard rails or some boundary conditions. Our strategy, you know, where to play and how to win for us, you know, looking at our core competencies, where the markets are growing, where the customer uh challenges are. Um we need to outline that so we're not off building flying cars. where where there's a strategic fit question that needs to be asked. So, it needs to be made clear to the organization so they're not coming to leadership or the decision makers with um projects that don't necessarily fit the direction the the company is going, however that is defined. Um so, so that's that's an important um important part. The other thing I'd say is you can't just rely on the financials. um when there's high uncertainty, when you're going after high-risisk reward opportunities, there's going to be lots of unknowns and uh those unknowns are based on a set of assumptions. So, um you need to uh you need to have customer evidence that that or strong evidence that shows we're we're progressing this investment or this project uh in the right direction. Uh it's not all about the NPV or the ROI. There are some qualitative criteria we need to look at.

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For example, um well, number one, does it fit our strategy? Where where we want to go with the with the organization? Um but there's also things like um operational leverage. Are we going to leverage our our infrastructure, our core competencies? Do we have a right to win in this in the marketplace for this this opportunity that you want us to invest in? Um and and there's also risk that needs to be um understood. These aren't things that are hard to put a number on. There there's lots when there's lots of uncertainty. Um so some companies turn to a scoring mechanism. They might turn to like a rubric where they score strategic fit, operational leverage, some of these some of these more qualitative criteria. But there's no algorithm that's going to tell you how to prioritize your projects or how to invest your projects. That's just a starting point for a conversation where the right people that understand the markets get around get around the table and have a conversation and decide what we're going to invest in, what we're going to say no to. Um, and they they they have might have the financials or a risk risk adjusted financials for the project, but they also are thinking about that qualitative criteria as well.

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And at the end of the day, it's a conversation um where you get in front of the whiteboard and figure out what what are the we have to draw the line somewhere. or what do we what are we going to say no to in order to pursue some of these these opportunities. >> So those are the are the two main things understanding qualitative and quantitative criteria and agreeing on what the criteria is so it brings objectivity to the decision process. Too often it's the the hippo or the the highest paid person in the room, right? The the um you want uh agreed evaluation criteria so when you do make a decision everybody everybody knows uh what what that what what you're going to weigh the most. um and you can uh you can uh quickly get to to a decision and even the teams that are presenting their projects know you know how they're going to be measured. One one last thing I just thought of is is is more cultural. I think it's okay for a team to come to leadership and say we recommend that we don't invest in our project because we went went out talked to some customers and found out that they they will not pay for this or there's not a a scalable business case here. So when you have a culture where it's okay to fail, where it's okay to um recommend that we do not invest in a project, that says a lot.

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And instead of, you know, looking at as a failure, you looked at it as that's a win because we saved our our our company from investing in further in that we know is not going to win in the marketplace. So look at all the money we saved. Now those those engineers, now those uh the people on the team could go work on something that's more valuable for the company. So there's a cultural side of this as well and and that's that's easier said than done but uh in most companies when your project gets canceled it's view viewed as a failure um and and that that's that doesn't that kind of culture doesn't change overnight. >> Yeah. Um in the the strategy uh planning and execution uh part there is always a track tension between the as you said the the longerterm ambitions and where we should be disproportionately investing to re realize those longerterm uh goals but at the same time uh every organization has um its own uh I would say incremental annual OKAS that they need to meet the whether it's the financial um targets every year they need to meet and so and so forth. Um and that there is always distraction as to how much they should allocate funds to that uh realize those longerterm goals uh which is potentially the accelerated initiatives etc. Um where and how much they should allocate to this um uh to this programs or initiatives which result deliver only incremental value just to meet their yearly targets.

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Is uh is there any kind of pattern magic formula there as to how much organizations should for allocate to the strategic investments versus the incremental investments >> the shorter term um there's no magic formula because it it really depends on your strategy and if you have an aggressive growth goal you need to have that mix is going to be very different than steady incremental growth. Um and the the hard part is once you establish that invest nicks, you know, a lot of companies look at it as investing in the core adjacencies and more transformative high-risisk reward kinds of opportunities. If you put it into those three buckets, the numbers 70 2010 gets thrown around in terms of percentages. But that's just a starting point for a conversation. It really every individual company can um make their own um investment mix. um percentages, if you will. Uh where I get nervous is when when you when you say it you want some investment in the longer term and then when you actually roll up the projects, you're you're actually spending a very small amount if anything in those longer term because the the the the near-term is going to win out every time to make because that's really the way uh a lot of leaders are incented. They're incented to hit their quarter overquarter numbers. So, it's hard to talk about this topic without getting into uh incentive systems and how leaders are are measured. But the really, you know, the the the the leading companies out there have figured out that, you know, it's a combination.

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Uh, you know, you're measuring your leaders not just on the short term, you're also measuring them on progress towards that next that next generation of uh product lines. And again, I'm talking products in my world. it's products, solutions, services, whatever it might be. So, um, investing um, enough and you don't have to, uh, when it comes to investing in those longer term high-risisk reward projects, we're not saying, um, bet the farm on one or two projects. We're saying there's something called metered funding. Let's just invest enough to learn. So when you're in investing uh let's say you kick off a portfolio of a long-term types of projects in that those high uncertainty um where there's new sources of growth outside of the core business. Let's invest in a portfolio and just invest in small increments or tranches of funding enough for the teams to go out and derisk quickly and identify what are the big unknowns. not just technology unknowns but also um business case viability unknowns or um the customer need unknowns and let's really understand that customer problem before we and then let's invest more in in in these tanches. So um the worst thing you could do is is throw millions of dollars at a at a new a new growth source opportunity and and the teams are going to spend that and then you find out you know then you don't survive first contact with the customer. So learning how to meter meter your funding for those longer term um but having having the overall budget to establish a portfolio of those longer term uh new source new growth sources uh kinds of projects is important um and and uh uh and and every company's going to have their own mix.

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>> Yeah. And how important it is in your view to get um the shareholders aligned to the this vision and this strategic plan. Uh where um uh they they need to be sometimes across the fact that you need we are investing into this particular capabilities to realize certain outcomes after 3 years etc. um which might mean that our incremental yearon-year um um growth for in certain product portfolios may remain just moderate for some time. Um it's and how how you convey that message to to the shareholders and then get them aligned. >> Yeah, I I think it's educating them on the realities of your marketplace. I mean, you know, why do you come, you know, why does why did SpaceX get the kind of valuation it got when it went public? You know, the shareholders are are counting on the future that they can't point to any one project that's going to get them uh to realize the a return on a shareholder investment. So um the the it really is about understanding what's going on um in your markets, what's going on with the pace of change, the pace of technology change, uh what new business models, what disruptors threats there are in your markets and painting that picture for your shareholders.

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um and and and your board ultimately to where they they understand that um uh you have to have a a more balanced you need to shape your portfolio a certain way and that might mean uh sacrificing short-term growth for for the long term. I mean you look at companies like Garmin I write about Garmin in my book. I mean they were in a position in the in the early 2000s where they they were making um GPS devices And then cell phones took off and you don't need a GPS device on your car, a separate device on your car anymore. Yet, they're still around today and they've grown tremendously in market value because they were thinking they were thinking about um they saw this disruptive threat coming and they diversified their portfolio. They they got into to other uh they leveraged their their core competencies and got into a bunch of other different categories in order to um while one category their main business was was was dying, they got into a bunch of other growth categories like fitness watches and and and and um uh there's a whole there's a whole list of of of new categories that they went after and and and they're still around for that reason. I mean there's there's the other example that that academics like to use is is what happened to Kodak versus Fuji film. Kodak, you know, they they went down and didn't embrace digital the way and then fu Fuji invested their technology in skincare and and things outside of of the analog film markets and Fuji um was able to overcome >> and and what happened to Blockbuster with arrival of Netflix? Yeah.

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>> Yeah. Yeah. So, you know, we we make this sound easy and there's a little bit of a halo effect going on. After the fact, we can look back and play Monday morning quarterback, but uh we certainly uh um need to learn some lessons from that. And and when communicating with shareholders and the board, um that's where um it's almost like uh the the the CEO needs to explain why you're not going to see the growth uh that you're in the short term. uh we're going to take some of that and uh invest in in where the market's heading, not where we are today. And for the following reasons and um I mean, you know, Apple, all the all the leaders that we all know of have have been able to do that. Nvidia, they they they they are able to articulate to the the board and shareholders um why why that the uh the the the investments that got them here aren't going to get them there in in a nutshell.

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>> Yeah. Yeah. Okay. Let's shift our focus to uh the portfolio management aspect of this uh because that's another angle I wanted to explore with you as to how it helps for successful strategic execution. Um now we know that um the strategy let's assume that strategy has been well defined there is a potentially some positive funding that has been allocated and but some many times what happens is when the project start um in investments commence uh many organizations take the approach of project based investment then uh let's say a capability based or in nowadays product based investment approaches to to this um uh to for a strategic portfolio and what I mean by that is um that the project is stood up it delivers certain value for in year right and then project gets born wind down right and and that that that whatever capability has is has been how big that remains half big there is no further continuous evolution of that capability to deliver you continuously deliver your future outcomes for for the business. Um many organizations still have not devoted to that capabilitycentric or productentric way of investments. Um what where do you see that in terms of um what what is the behavior change that needs to happen within organizations and what portfolio strategy they need to adopt to do this more longerterm capability and productcentric investment. So if I understood your question correctly um the model of investing in a project launching it then moving on to another um >> that's right that's the behavior many organizations have instead of looking at this build a capability and completely then use that capability to deliver new features products and continuous evol behavior is not there for many organizations. Yeah, there there there's there's techniques like product line road mapping where you're not just thinking of the next product, you're thinking of the next one, the next one, the next one, and then when do you have to jump to a new S-curve? When do you have to jump to a new platform, if you will, um that spurs another generation of projects. So, um and there's a technique called futureback. Some call it different things, but we're looking out 10 plus years, where do we want to be? And then how do we what are the stepping stones to get there? So you're never just thinking, you know, one and done. You're thinking we have a strategy to be a at a certain place in 10 years.

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What are the building blocks, whether they be products or technologies that where we're going to we're going to get there? We're not going to get there. We're not going to wait 10 years to launch our first product. We're going to we're going to come out with this product in year one and then we're going to enhance it this way and then we're going to we're going to leverage a new technology that wasn't available in year one. in year four, you know, and and thinking through that technology and product line roadmap. Um, and I I I like to to think of it as stepping stones to get to that that future state uh of where you where you want to be. Apple was has been excellent at at doing this. Now, that you know, nobody can project with a crystal ball. Nobody has the crystal ball to understand exactly what's going to be needed in 10 years, but you have the ability to pivot along the way. So you have more of a north star. We're we're marching to we think the market is going to need this completely new this new um uh business model or new or new service or new new product. And um uh along the way we have to recognize that the path there is not going to be linear. There's going to be based on what we learn along the way and what changes happen in the market. But that north star doesn't change and we let's make let's make sure that that's um a viable um customer centric thing that we we know the customers are going to want. We're solving a major problem that that that that isn't solved today.

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So um that's the that's the approach. You need to you need to have those product line road maps. You need to revisit them at your quarterly portfolio reviews to see what's changed. Do you need to modify some things? Maybe our projects aren't aren't um uh launching on time for one reason or another and we need to we need to uh uh tweak them or or or or change them. Maybe we don't have the resources like we thought we would have to execute. So it's it's not a it's not it's it's an evolving plan. Um so but we need to revisit it throughout the year and not just in the annual planning process. >> Yeah. And one of the challenges I see in the portfolio management is not necessarily just funding the the important initiatives but also and I think you touched base on this but also have um courage to stop initiatives which are no longer relevant to our strategy right um and but the fact on the ground remains that many are many initiatives continue to drag because those could be let's say pet projects for certain sponsors some could be polit critically motivated. Um uh so from good portfolio management and governance perspective what are the import what objective criteria etc that uh in your organization should consider to really assess projects on for their relevance for future strategy and have that honest conversation whether we we should continue to fund them or we should the funding to something else. Yeah, the the the um you should always be thinking about rationalizing your portfolio and it it might be because the e economic conditions changed like the last recession we had, it forced companies to to to rationalize their portfolios. They had to do they had to do more with less.

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In other words, so um they had to do what I'd call a pipeline cleanout and they said, "We're we're going to have to to to kill some of these these poor projects." But to your question of how what kind of criteria you use to figure out um what to say no to to free up capacity to do to the things that are really going to move the needle um you know most companies will look at some kind of ROI metric whether it be NPV IR or payback um those are pretty standard um and they're based off projections so I always encourage companies to really understand what are the major driver assumptions of the business case for your projects and um let's really test those assumptions that you're making and build our confidence in those business plans that we're making those decisions off of. As you get into higher uncertainty territory, then you get into more complex um uh analysis tools that allow you to try to put a number on uncertainty. So things like Monte Carlo analysis or earn value, there there are certain techniques where you can use to um better un that incorporate the risk um component. Um, the thing that I've been heavily leaning on the last maybe decade or so is uh the evidence. Um, just getting out of the building, talking to customers, running experiments on those high impact unknowns, those assumptions that you're making. What has to be true for this business case to work? You know, Scott Cook from in it famously said, um, we had we had lots of failures who, you know, their initial business case looked awesome, right? So, you know, when you're dealing in high uncertainty territory, when you're going into new markets with new technologies, then um your business case is almost worthless because you're, you know, we know we're just guessing at the at the uh the growth rates because it's it's never been done before by definition. So, those hockey sick growth curves um are can be meaningless. It's more important to identify what are the high impact assumptions that we're making and let's go and test those assumptions and it it could be technology assumptions. It could be um the business case is what is the business model uh assumptions are we making? How much can we charge? Um what is the cost structure? It could also be the um the desiraability uh assumptions that we're making. We're assuming that you know people are going to want to order a taxi on their phone. um and be picked up by a stranger. So what are those um what are those uh uh unknowns or what are those assumptions or hypotheses we're making across those different dimensions and then um let's go let's go test those and and build our confidence and the testing that we do is something we call call to action experiments. Let's run an experiment. We don't have to build. A lot of companies make the mistake of rushing to build something before they've answered the question. Is this even if Is this even a viable scalable business? So, there are a lot there's lots we can test with customers without even building anything. Um, there's lots of techniques out there to to to um to to get that uh value exchange and learn whether it be um uh uh asking for the customer's time to observe a demo or um or a letter of intent to to buy the product when it's ready. um and because customers are going to typically tell you what you want to hear. They're gonna say, "Yeah, sure. That sounds good. That we would buy that." And then when it comes to actually spending money, they they give you a different answer. So, um that's where the the uh strength of evidence becomes very important. It's easier to give somebody your your email address than it is to give them your your social security number. So, one is a higher bar than the other. So, when we're running these experiments, let's get that evidence. Let's set a benchmark and say or a threshold. Um uh three out of every four people are going to uh show up for a three-hour meeting, a three-hour demo on this new idea that we have. Uh and when we ask and we and you know and and it's only 1%, then we know that something's wrong in our assumption and we need to maybe pivot or um move off that project to something that's looking more promising. So that evidence strength is a is a real important way to uh build the confidence uh instead of just relying on the financials.

[00:44:45]

>> Yeah. [snorts] and and what approach organizations can consider in effectively managing their limited talent pool than the resourcing cap capacity um in delivering their their strategy because many organizations many people still think that um funding is the most important input to to for successful execution of strategy but um at least my observation has been and I read somewhere as well that um it's not necessary funding but more about the availability of your limited capacity and how you optimize it. That is the more bottleneck bigger bottleneck because most organizations work within a fixed capacity model these days. >> So how do you from portfolio management perspective as well? How do you >> make sure your your your talent is properly allocated to the most strategic initiatives um to which will deliver better value to you? Yeah, often the the constraint is not money or capital equipment. It's it's typically in most organizations I work with, it's it's people with a certain skill set.

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>> So that gets you can't you can't do effective portfolio management without uh looking at your your your people your people resource allocation. >> So they go hand in hand. So you have to do an honest assessment of supply and demand. What what is our capacity in our people? what are the different roles, what are the different skill sets we need to execute our our overall portfolio plan. And um when you when you have the right tools in your system, you can, you know, whether it be full-time equivalent people by role, you can you can project out what we're going to need over the course of uh 12 months or or more or in some cases when you're starting out, it's less. Um and where are those constraints? So, you have to always be looking and managing that. Uh like I said when we when we when we started our conversation um you're always looking at um where where the constraints are so you can be proactive about dealing with them. What happens too often is when we see that skill set or that that human resource we need to put towards our our initiative or our project. We typically often find out uh and we're uh at the last minute and we're very reactive and that's where things start to break down. You get a lot of churn in your pipeline. So it's that visibility which comes with good planning tools and um when we see that there's a constraint what do we do about it and it's not always about stopping projects although that we've already talked is is one approach the other approach might be to outsource maybe that's that bottleneck that that chronic bottleneck function maybe there's a third party that can do that to to handle some of the um to allow us more flexibility to flex capacity without hiring a bunch people. Um, so that that might be an option. And [clears throat] then you might want to stagger your project so everything's not not um headed towards a pinch point or a bottleneck in your in in that skill set.

[00:47:48]

too often there's that that uh specialty skill set that's wanted on every project team and there's only one of that one or more you know a few of those people to go around or you know it it it we're we're talking a lot about people but it could be in one company I work with it was certain certain type of lab equipment but on the it's more often than not it's the people and u having the visibility of where the constraints are and being proactive about it is the best way to manage that. >> Yeah. Look the other uh uh angle I wanted to unpack with you was how effectively measure the the the success of the strategy itself. Um because what I have seen many times is or when organizations come up with the initiatives etc most of the success measures are more operational in nature as to the how effectively they are managing budgets what is how effectively they're delivering projects uh and milestones uh within times etc. While they are good for effective tracking of the project, these measures do not reflect tell us anything about whether we are succeeding in our strategy or not. Right? So what are the real success measures that executive leadership would be looking looking for um in your view that any organization a good portfolio management should be focusing on?

[00:49:13]

>> Yeah. what you're talking about. I mean, I've been part of teams. Um, I've learned some hard lessons. You we got the product to market on time. We won all kinds of awards for our our efficiency and effectiveness at delivering the product. We hit our schedule milestones. We hit our budget and it failed in the marketplace. So, it's it's not just executing on the project, it's also making sure we pick the right projects and and we're investing in in the right projects based on our customer needs and where the markets are heading. Um, and the only there's the one way to measure that is your standard return on R&D investment or your um, one metric I like to use is the amount you're spending on wasted development. So wasted development spending is basically just what we're spending on projects that either don't make it to market or fail in the marketplace. Um, we it's never going to be zero, but we need to make sure that that number is trending in the right direction. Um, so uh there's there's return on R&D investment. Um but those are mo very much lagging indicators.

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You're not going to find out if your overall innovation process, your innovation pipeline, your product development pipeline, it you know some of these projects might take three years to get to market and then um they ramp up over the course of several years to to to uh to peak volumes. Um so the that return on investment can be a lagging a lagging indicator um or I should say return on your innovation investment. Um the the more leading indicators I think you have to keep your eye on are things like progress metrics. Um uh uh what is our learning velocity is is is one way to measure that. Um h how how quickly are we uh learning about the viability of our of our new projects, our new initiatives um and and learning quickly and learning to say no quickly so we can invest in other things. So uh gathering those kinds of learning metrics is is more of a leading indicator of uh and then investing after it's showing promise. Um those are some things you can you can look at um that aren't that aren't like after the fact.

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Um but yeah overall uh the board the shareholders going to look at your your growth from innovation. There's there's vitality metrics is the other one that are is very common. what is what is our our revenue from new products? You know, whether it be products that are, you know, still on the the ups slope of their their life cycle. Um, you know, what is our our uh what percentage of our revenues coming from new and that that example I gave earlier about the company that was spending lots of money on an aging product line, their vitality metric was was terrible. They were they were spending their R&D dollars just keeping an old product line alive. So if you looked at their their their vitality metric, it was very poor. So they weren't replenishing uh in a continuous way to keep to keep uh their customers uh buying more. So that's vitality is another important one. >> Yeah. Um so no as we start now wrapping down I uh I wanted to get your thoughts on on the AI strategies around AI in particular because I don't think any conversation nowadays can can be complete without um without having anything on on AI any discussion on AI um as organizations start building their AI strategies which most of the organizations are doing uh these days um what it means in terms what is there any specific consideration that that is now popping up surfacing that organization should consider when when to build AI strategies um in your view and particularly the the measures and the investments and the risks considerations around AI strategy?

[00:53:09]

>> Yeah, I I think of AI like any other technology. You know, I I'm constantly working with my clients and advising them to fall in love with the problem, not the AI solution. Let's first understand what is the use case, what is the problem that you're solving with this technology, with this AI technology. There's wonderful things that it can do to open up new business models, new opportunities, but we're we're often too quick to jump to those solutions without really making sure that there is a is a important underserved problem out in the marketplace that it's going to solve. So that's the first thing I would say. Um and then um uh le leveraging lever it just the number of opportunities it's opening up in my world where um I'm helping companies to improve the effectiveness of of new product development and innovation. There are some amazing things that we're already see starting to see with regard to um better schedule predictability. for example, um by learning by using uh LLMs to really understand your history of delivering projects of a certain complexity. If you can uh uh understand the if you have the data the the projects you have the actuals and the plans and you can learn from the the variances that you're seeing over time you get you get a starting point for teams to to plan. So for example there if your project complexity is low, medium or high let's say it's medium complexity then you can look at at least get a um a a project plan and some of the risks you uh the the the smart the smart schedule uh AI can assist with scheduling based on history. So that's one area where I think I see um us starting to leverage AI in in in the innovation space. Another one is the resource allocation challenge that we talked about where again based on your history and your your resource requirements for certain uh project complexity categories. Um you can leverage AI to figure out what your resource profile is going to look like depending on a cert certain parameters.

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Um you can and and over time you get better better uh uh planning accuracy on your resource profile which leads to better throughput leads to better um better understanding of where resources need to be allocated. Um so that those are two areas and then optimizing your portfolio as a whole um le leveraging AI and I don't think we're quite there yet but leveraging AI to to figure out what is that optimal uh portfolio where we're going to maximize the value of our portfolio. Um so it's it's understanding the the project data as the input making sure that um uh you know we I think we've learned by now that AI is only as good as the data sets that you're you're you're le you're you're you're leveraging right so um you can start over time I think we're going to see some some um uh not only faster but smarter decision- making on on managing that port shaping that portfolio based on based on the uh uh what what what the the data is telling us from past performance. What it won't help us with is you know th those future needs and and and coming out with solutions that have never been done before. So we just have to always keep in mind that at best it's it's leveraging the past in order to inform us to make better decisions for the future. So, it's more today it's more of an assistant, an extra person on the team. Um, that's going to I mean, I'm using it more and more. My clients are using it more and more. Um, but more as um uh another player on the team that that is uh but you know, it's not quite at the point where it's making decisions for you, but it's certainly augmenting the work that you're doing. It's certainly making it more efficient. So when when we talked about setting up experiments to validate assumptions in a in a business model for a new product or a new offering, um it can do amazing things very quickly to to help you design an experiment or to to help you uh figure out what the high impact um riskiest assumptions are going to be.

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Um, and it can it can uh help help you um kind of scan the marketplace and get a lot of uh a good good uh data and and insights. Um, so we can we can and and and what I'm reading about a lot lately is the ability to come up with prototypes and and um low fidelity prototypes, getting them in front of the customers and learning. We can do that quicker than ever before with with vibe coding and things like that. So, um, uh, the problem with that though is you still need to make sure that you're solving a problem. So, again, you can you can come up with solutions very quickly and test those solutions, but you you need to make sure you're testing >> the viability of the business model. You're you're making sure that you're solving a real important customer problem >> regardless of the AI. >> Yeah. Cool. Uh, on that note, Noel, thanks thanks for your time. I think this was a really wonderful discussion.

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Um um there were there are definitely many takeaways for our audience. Um I would say that um my takeaway in particular Noel is uh the the strategy execution is not just a delivery problem. [music] In fact, far from it. It's it's a it's a reflection of uh the the operating model, the incentives [music] for for the leadership, the how the the budgeting work, the the the funding cycle works, how the the portfolio management works in terms of uh uh optimizing or identifying the most important initiatives [music] and importantly what initiatives we should pause. Right? So there are so many aspects to these uh to to really make sure the strategy really executed correctly. So thanks again for >> you. Yeah, that's why I I I the title of the book is portfolio management but linking strategy to execution. >> Exactly. >> I view it as a critical capability [music] um for exactly what what this this discussion has been all about. but it's executing that strategy and it doesn't it doesn't get a lot um lot talked about a lot but it it's certainly an important important discipline that uh uh is really that that connection point between strategy and execution. So can't uh can't emphasize that enough.

[00:59:46]

>> If you found this discussion valuable, please follow and [music] subscribe to Enterprise Tech Talk and thanks for listening. I look forward to seeing you in the next