The portfolio approach to digital transformation: 4 keys to success

Structured entry and exit

Individual investors keep a close watch on their stock portfolios. To maximize value, investors regularly revisit the makeup of their portfolios, introducing or exiting investments, thereby ensuring regular churn in their portfolios. IT leaders must adopt a similar approach in the context of digital transformation.

“For their digital projects’ portfolio, IT leaders must have a time horizon,” Rabra says. “There are times when private equity firms are invested in enterprises. They have a typical time frame of staying invested for four to six years before exiting. So, CIOs can’t stay invested in indefinite projects.”

Rabra says, “There must be a churn based on a structured entry and exit criteria. Technology is changing fast. If it’s gen AI today, it could be something else tomorrow. When IT leaders decide to build a portfolio, they shouldn’t start adding technology projects randomly. They must enter keeping the technology-business alignment in mind. Similarly, they must be ready to exit if the PoC [proof of concept] doesn’t meet the expected time and effort or if a project is not moving in the desired direction.”

“Technology decision-makers must evaluate the project at a predefined timeline — 6 or 12 months. Adopting a portfolio approach doesn’t mean one has to stay invested at the cost of the health of the portfolio,” he adds.

Manage stakeholder expectation

The advantage of adopting a portfolio approach to digital transformation is that CIOs can place several technology bets at the same time.

“IT leaders may initiative five different things simultaneously, but when there are so many projects running in parallel, they can’t execute everything on the same day. They must define clearly to the leadership team that they would take time in going live,” Laxshmivarahan says.

“The portfolio of programs would need to be managed through stage gates. So, CIOs must prioritize the projects based on their value, which could typically be 18/24/30-month period and communicate it clearly to all the stakeholders. Expectation management is crucial for the success of the portfolio approach,” he adds.

Technology leaders could also do well to include a buffer of a couple of weeks when communicating the timelines to the top management. Although meeting the deadline is always commendable, in case there is a delay, the buffer will help ward off the pressure and stress from the IT team.