Use Zero-Based Prioritization to Reevaluate Your Project Portfolio

The COVID-19 outbreak has reduced revenue, disrupted supply chains and depleted workforces across industries. As a result, executives need to challenge existing initiatives to enable a thorough examination of the total portfolio and free up resources for new strategic initiatives.

But what is the most transparent and defendable approach to reprioritize project portfolios during the pandemic and beyond?

Reset the portfolio to zero

To reset the portfolio, executive leaders should use the principles of zero-based prioritization, which starts by putting all initiatives (i.e., projects, programs, products or services) on hold and conceptually bringing spending down to zero.

“Zero-based prioritization brings a fundamental change in mindset,” says Mbula Schoen, Director Analyst, Gartner. “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.”

Everyone should be aware of the cutoff point, after which further activities in the portfolio won’t be allowed

But first, set the target on spending and agree on a framework to assess and classify all projects. An example of a framework to categorize the projects can be: Mandatory, transformation, core differentiation, growth and improvement investments. 

Next, build the portfolio back up from zero, piece by piece, until it reaches the target. “Everyone should be aware of the cutoff point, after which further activities in the portfolio won’t be allowed,” says Schoen.

• 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.

Cancel or postpone all other projects and activities that didn’t make the final portfolio until the next approved budget

If projects near completion have not been included, determine whether you allow them to finish by assessing the expected benefits and the relative importance of completing the project, compared with projects already identified as high priority.

Once done, formally approve the renewed portfolio together with the other key decision makers. Communicate the projects that will stop, start and continue. Cancel or postpone all other projects and activities that didn’t make the final portfolio until the next approved budget.

Executive leaders may face some challenging results, such as too many mandatory, core or transformational projects that may require revisiting the process.