The first step in portfolio direction is to identify the organization's main activities.
Here are the three main types:
• Change actions (for example strategic programs, change projects)
• Incremental actions (for example improvement projects, systems updating, continuous improvement)
• Ongoing actions (for example administration, operations and maintenance)
Many organizations also consider mandatory actions (such as conformity projects or regulatory requirements) as a distinct type of activity. However the organization divides its activities, it is important that there be no overlap between activities and that every area is covered.
The decision to invest in a portfolio direction is highly dependent on the organization's corporate strategy. For example, if the organization is in a turbulent environment and needs to be highly responsive, it will invest more in change activities. If, on the opposite end of the spectrum, it is in a stable environment and occupies a good market position, it will invest more in ongoing activities. If the investment strategy is not clear from the start, the organization will invest its resources in activities that will not support its strategy.
Once the organization has decided which percentage of its resources it should invest in changes--incremental and ongoing--it must develop selection criteria that these actions should fulfill. For example, criteria might indicate that change actions must support market penetration, a strategic initiative or help resolve a significant issue.
In general, every investment decision of the portfolio direction should ultimately increase the organization's responsiveness and competitiveness.