Friday, April 29, 2011

Three C's and a D

The other day, with a good friend, Alex Walton, principal at 3PM LLC, I was expounding on a favorite topic: applying a dose of system engineering to portfolio management. I call it "three C's and D".

A bit cryptic? Well, not so much when you spell it out:

Coupling, coherence, cohesion, and diversification

The short form explanation looks like this:



Can you actually manage these things from the perch of a portfolio?  Yes, so long as you're not too hung up on metrics, as in: "you can only manage what you can measure". In some respects, there are only notional explanations for these concepts with corresponding notional ideas [metrics] of success. Nevertheless, "I'll know it when I see it" can be valid as management doctrine.

Here's a little explanation:

Coherence

Coherence is what gives rise to reinforcement and to synergies. Coherence gets its power from phasing and sequencing....in other words, timing. Take 20 people and let them chat at a party and you have--to the macro listener--noise; but phase things correctly and you could have a choir. In other words, from noise a song!

The phasing aspect of coherence gives rise to a success criteria, phase error. We tend to think of things being "highly coherent", or exactly in phase or in sequence.

Coherence also gets its power from consistency and commonality. I once did a project with a company that claimed they had 2M customers. When we cleaned and consolidated several  customer databases, and imposed rules of consistency and commonality, the company really only had a few hundred thousand customers. The rules for sales customers were incoherent with the rules for service customers until we got the relationships right and imposed common data rules

Another idea behind coherence is optimization. In portfolio management it's common to try to optimize for the larger good. In effect, create the conditions that reinforce the highest goals to the greatest degree, even if lesser goals are foregone. If you've ever studied the Theory of Constraints by Goldratt, then you understand the idea of coherent flow-down of goals so that the organization is not working against itself.

So it is with projects in a portfolio: sometimes, real success only comes with the right phasing, the right timing, and the adherence to common rules.

Cohesion

Cohesion is what makes things stick together and perform under stress; to accept tension among parts and keep on going. In a portfolio, it's a matter of making good on the overall business value proposition, and doing so under stress.

The qualitative idea is weak or strong cohesion; ordinarily the metric is strength under stress, which for projects is tolerance for failure.

Strong cohesion means that if one project, or some aspect of a project, fails in some sense, the tensions created among projects because of failed dependencies are not crippling to the business outcomes. Cohesion requires redundant or alternate paths to customer satisfaction through the network of portfolio projects.

Cohesion also requires effective conflict resolution under stress, and it requires that individuals and teams are prepared to give commitment and accept accountability even if all is not as they require.  Portfolio managers establish these principles of behavior and make demands for adherence.  Managers also establish and manage the incentives for cohesive behavior, and manage the resource pool for redundancy and stress relief.

Indeed, one principle of agile methods--though not exclusively an agile idea--is that hockey stick heroics to pull the project through at the end are to be avoided.  Cohesion eventually breaks down with sustained overcommitment.

Coupling

Coupling is well understood notionally: it's the idea that one effect or outcome directly influences another. Generally, we think of coupling as being loose or tight, referring to how well one effect is transferred onward. Insulation loosens the coupling between outside and inside, etc. In projects, loose coupling is usually the desired quality. A failure in one project is not coupled into the next is the idea. In portfolios, the same is true. We want high coherence and strong cohesion but loose coupling. And, all three together is sometimes a challenge.

As in the insulation example, barriers, sometimes physical barriers, are the best way to loosen coupling. A virtual team is about as loosely coupled as a team can get. A co-located team is tightly coupled. On the other hand, it's harder to get cohesion in a virtual team, and correspondingly at the portfolio level, the more barriers among projects the more loose will be the coupling, but the greater will be the challenges of obtaining other good qualities.

Diversification


Most of us understand diversification from the financial portfolio experience: when one investment is down, another is up, and the overall result is within a range of acceptability. If all investments are really independent of each other, the range of results is compressed by approximately the square root of the number of investments in the portfolio--the square root of N rule.

The same is true of project portfolios. The secret sauce is independence. If coupling is not loose, independence is forfeited, and so also is the power of diversification forfeited.

How to sum up?

Perhaps I'll just say there's a place for system engineering in project management.









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