Use Zero-Based Prioritization to Reevaluate Your Project Portfolio

The effects of COVID-19 have left many program and portfolio management (PPM) leaders juggling a backlog of postponed investments and a slew of new requests — all within finite budgets. To evolve the strategy, PPM leaders must challenge current portfolio prioritization.

A zero-based approach provides the most transparent and defensible approach to reprioritize project portfolios in today’s disrupted environment, especially as organizations shift or accelerate strategies, such as digital transformation. 

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Recent research by Gartner Director Analyst Mbula Schoen and Managing Vice President Lee Weldon explains the challenges and opportunities of zero-based prioritization.

This article recaps the key points, edited for clarity and length.

Why zero-base portfolio prioritization?

Zero-based prioritization puts all initiatives — projects, programs, products or services — on hold and brings spending conceptually down to zero. This creates a fundamental change in mindset. Executives no longer need to justify why they’re stopping an activity. Instead, with the portfolio now empty, they must justify why an activity should be allowed back into the portfolio.

Zero-based prioritization requires a heavy commitment of management time and attention, so use it as a one-off opportunity to reset your portfolio. Continue to use more traditional, continuous-planning practices to fine-tune your portfolio each year.

Five steps to successfully zero-base portfolio prioritization

Using zero-basing for portfolio prioritization is effective, but not necessarily pain-free. It requires an extra effort from PPM leaders to provide the requested information, as well as time and attention from decision makers to review the proposals. It is important to help stakeholders to understand what the ultimate goals are and how progress will be tracked and measured. 

Gartner recommends that PPM leaders take five key steps when zero-basing portfolio prioritization.

No. 1: Identify the correct stakeholders and sponsors 

This ensures that the portfolio links explicitly to business priorities. Communicate from the start why you’re taking this approach and the expected outcomes. 

Identify senior or executive business leaders who will sponsor this as a top-down business initiative and make sure stakeholders understand the challenges you face with the budget. You’ll gain little buy-in for an extensive review of the portfolio if key decision makers feel there are many obvious places to cut costs and reprioritize activities. Ensure that key decision makers understand that the demand pipeline is still driving more requirements into an already full portfolio.

Read more: Fuel Digital Business With Product Management

No. 2: Use a framework for prioritizing initiatives 

Before analyzing a portfolio, you’ll need a framework that enables you to compare all new and existing projects in a similar way to assess their priority and business value. For example, segment projects into one of these categories:

• Mandatory. These projects must be done. Typically, they comply with regulatory requirements or resolve an issue that would otherwise lead to significant loss of sales, delays in invoicing or delays in financial reporting.
• Transformation. These projects build the future core competitive advantage of the organization. They must link explicitly with the organization’s strategy and focus on creating new markets or business models.
• Core differentiation. These projects build the capabilities that enable the organization to stand out in the market. Ensure that there’s a clear understanding from decision makers of what belongs in this category. 
• Growth. These projects focus on growing the business within the current business models.
• Improvement. These projects seek to deliver operational or capital efficiency. They also include projects that provide maintenance or basic improvements.