How do we compare actuals with projections? Another deadly sin is making your OpEx portfolio view all about the projections. Ultimately, projections are just an individual's or a team's best guess. You must set up a standardized means for capturing actual investment results. This may mean manual tracking of investments or tapping into automated systems, but it is critical that you demonstrate to initiative owners that they will be held accountable for investment results. More important than the accountability is the fact that tracking results enables the performance of past investments to inform future projections. If a marketing investment is projected to have a 10 percent response rate but ends up with only a 3 percent response rate, CPM managers can use the tracking of actuals to inform and improve future-year projections. This closed loop on investment performance improves projections and, ultimately, decisions on OpEx investments.

Phase 4: Optimize With your business case for corporate portfolio management established and sold, and with a standardized view of what an investment is, how to project investments' costs and benefits, and how to collect the information, you can enter the optimize phase of a CPM initiative with a true view into the portfolio of your organization's OpEx investments. In this phase, your company will make decisions about resource-allocation trade-offs within the portfolio. The nerve center managing the CPM effort can propose trade-offs, but ultimately it is not realistic to believe that it can force these reallocations. Ideally, business units whose resources are being considered should be part of and driving these decisions.

At American Express, an investment review team was convened; this group brought participants from the business units together to negotiate with one another for resources. This ensured a level of sponsorship and engagement to the resource trade-off decision process. Ultimately, it also led to tens of millions of dollars being reallocated across business divisions. The resource-allocation trade-offs made in the optimize phase of implementing CPM may involve shifting OpEx investment dollars to more risky projects or to projects that will grow a historically underfunded business unit or strategy. As you look to optimize the portfolio, be sure not to take a one-size-fits-all approach by boiling all decisions down to ROI or NPV. As investment amounts get larger and time periods and results become more unpredictable, the decisioning criteria and frameworks you employ will also have to change.

One of the key aspects of the optimize phase is that you must kill underperforming projects, and you must not fund unattractive projects. Making these tough decisions gives the portfolio management discipline credibility. If every proposal that starts as part of the portfolio gets funded, you're just creating bureaucracy. The idea behind CPM is to create a strategic discipline for picking the meritorious ideas. Certain OpEx investments that are started don't turn out as expected, and some proposals seem less promising once they are put through a rigorous process for projecting their benefits. These projects deserve to be stopped or not started. The first time the corporate portfolio management process kills an initiative, people will sit up, take notice, and begin to take CPM very seriously -- which will force better decisions around discretionary OpEx and, ultimately, enhance the company's value.