What’s the Difference Between Demand Management And Strategic Portfolio Management?

November 19, 2020 | By Donna Fitzgerald

Demand Management and Strategic Portfolio Management

Demand Management is predicated on the assumption that a specified group of people have the “right” to ask for work to be completed to their specifications. Strategic Portfolio Management (SPM) begins with the assumption that strategy drives the work that is accepted into the queue. Continued investment in a strategy is also predicated on the projects or products delivering value – financial or otherwise – greater than the investment.

Demand management is the theory behind help desks. If your software breaks and you have a warranty (which all employees have with company-provided software), you have a right to have someone fix your problem. Additionally, demand management operates on the urgency principle. How many people are impacted by whatever isn’t working? If the answer is a lot of people, fix it immediately. If it’s a smaller number, use FIFO.

The stress of RTB demands

Today, most IT organizations have matured to the point where they have created a hybrid system we call gated-demand management. Under a gated-demand system, business users have a right to ask for an unlimited number of new things, but someone other than the business unit itself has a right to determine if it is in the company’s interest to perform the work requested. In theory, this should help constrain the never-ending demand for more “run the business” (RTB) activities, but in practice, according to Gartner, 60 to 70% of IT spending still gets sucked into RTB.

What’s important to stress at this point is that RTB demand is infinite. Human beings are incredibly creative, and the more data or knowledge a worker has, the more “formatted” data they will want. Eventually, AI and machine learning might turn the tide, allowing organizations to match demand for data to the supply, but it’s probably safe to say we aren’t there yet.

The advantage of SPM

If demand management thinking has been proven to create a bias toward RTB priorities, how can adopting Strategic Portfolio Management help? SPM, when done correctly, begins with the notion that scarce resources need to be consciously invested in strategic goals.

Most companies have between three and five articulated strategies, and one of the strategies – we hope – should be Operational Excellence, which we define as new investment in current operations. This means that an organization can decide upfront how much of a share of the investment pie the Operational Excellence “strategy” should receive. Using the concept of SPM rather than gated-demand management would allow an organization to set the RTB percentage consciously rather than organically.

Adopting SPM has further advantages. An underlying principle of SPM is all projects chosen in service of a specific strategy must have a defined value and – by extension – be executable. The value need not be monetary; it simply needs to be measurable in some manner, so that management has an ongoing record of whether the investments are moving the organization closer to the realization of the strategic goal.

Demand management works for help desks and break-fix work, and while gated-demand management is a positive and natural evolution, in today’s highly competitive world, organizations need to do something more; they need to adopt Strategic Portfolio Management.  For those willing to make the journey, SPM provides a framework for transitioning to a strategy-focused organization.

For more information on adopting SPM please download our whitepaper.

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