Systems thinking in portfolios

Before we begin to define the how systems thinking is interrelated with portfolio management, let’s define what systems thinking is? Systems thinking as defined by Peter Senge (The Fifth Discipline, 2nd Ed 2006) is a framework for seeing interrelationships rather than things, for seeing patterns rather than static snapshots. A system can be any group of interacting, interrelated or interdependent parts that form a complex and unified whole that has a specific purpose aligned to a strategic direction.

With systems thinking, organisations can identify what mix of business change initiatives will give the required capability that is currently missing. By using tools such as benefits dependency networks (that identify the strategic drivers, spending objectives and benefits) organisations ensure that there is no overlap in the capability delivered by pipeline and in flight programmes and projects across the organisation. As we have an overview of the whole system it is also possible to prioritise those programmes and projects in order to deliver the most value to the organisation as a whole relevant to the investment budget.

Similarly, portfolio management, particularly the portfolio definition practices that are concerned with the selection of the right projects and programmes is also about preventing the wrong programmes and projects from continuing as part of a continuous cycle of investment decision making when balancing or optimising the portfolio. That is, the totality of an organisation’s investment (or segment thereof) on changes required to achieve its strategic objectives.

Effective portfolio management together with the support of Portfolio, Programme and/or Project Support Offices helps organisations make decisions about implementing the right changes to business as usual via programmes and projects. Portfolio management is a coordinated collection of strategic processes and decisions that together enable a more effective balance of organisational change and business as usual. It is not concerned with the detailed management of these programmes and projects; but rather it approaches the management of change programmes and projects from a strategic viewpoint.

If an organisation does not have a standard portfolio or systems perspective then it is very likely end up:

  • Initiating programmes and projects that duplicate effort, impact the same resources and the stability of the business as usual environment.

  • Initiating programmes and projects that on the surface are a good idea at the individual or sub-organisation level, but upon further investigation are actually counterproductive to achieving the organisations strategic direction and objectives.

Answers to the following questions will inform organisations about the appropriateness of the selected projects and programmes. That is:

  • Are the selected programmes and projects together with the normal operational work sufficient to achieve the strategic objectives of the organisation?

  • Are the selected programmes and projects necessary in the context of the wider strategic objectives we want to fulfil?


What are benefits of systems thinking?

J. Alex Sherrer (author of Project Management Road Trip for the Project Management Professional) says that systems thinking is necessary for all complex problems because it focuses on the whole (not just the sum of its parts). The benefits of systems thinking when aligned to portfolio management are that it can:

  • Spark innovation by encouraging questions and exposing new possibilities and options not seen when components are looked at individually.

  • Help identify and manage risks stemming from relationships and dependencies between programmes and projects at a portfolio level.

  • Improve communication and reduce business silos because of attentiveness to interdependence.

  • Raise awareness of wider strategic and long term business focused objectives.

  • Lead to products, services and results that are better designed and concentrated towards customer needs rather than wants.

  • Allow faster response to rapid changes. By increasing organisational awareness of change through a willingness to take in new information, organisations will have a distinct advantage over competitors who tend to isolate themselves.

  • Improve our leadership skills to inspire and empower others to do their very best in the pursuit of strategic direction.


How systems thinking addresses programme and project complexities?

“Systems thinking approaches to address complex issues in project management” by Sankaran, S., Haslett, T., & Sheffield, J. (2010) proposes that the boundary of a system is the scope of interest or concern for an organisation and can change as the scope of interest changes based on the political, economic, social, technological, legal and environmental factors.

The parts of a system inside the boundary interact with each other but also with the environment that exists outside the boundary. A programme or project may have a boundary based on its initial scope but this boundary could change as the scope changes. The programme and project teams inside their respective boundaries could have interactions with external stakeholders if they are considered to be part of the environment.

A systems view takes inputs from its environment and transforms them into desired project outputs and capabilities while enabling programme outcomes and benefits. In a programme and project, the business requirements could be considered as inputs that are transformed by the delivery team into products or services as outputs. A system has structure that defines its parts and their relationships and uses processes or a sequence of activities to perform a function. As such, programmes and projects set a high-level scope at initiation of what must be included. That is,

P – Processes, business models of operations and functions including changes to operational costs and performance levels
O – Organisational structure, staffing levels, roles, skills requirements and changes to organisational culture, style and personnel
T – Technology, IT systems and tools, equipment, buildings, machinery, accommodation requirements
I – Information and data requirements, changes from existing to future state, including details of any new developments or redevelopments

In summation, systems thinking does not necessarily replace effective portfolio management, but can complement it by simplifying complex problems and making them easier to understand that a system is more than a sum of its parts and the dynamic interactions between the parts. Systems thinking like portfolio management facilitates collaborative working in pursuit of the organisation's strategic objectives. In doing so, portfolio management ensures that limited funds and other constrained resources are allocated to optimise strategic impact and then coordinates delivery and maintains strategic alignment.



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