Another benefit of CPM is that it leads to a more meritocratic organization. Employing CPM to manage discretionary OpEx makes strategic resource allocation real; it's not just given lip service. Those areas and individuals who deliver results and who develop and execute the best investment ideas for OpEx are the ones who receive the funding. Creating a marketplace for all discretionary funding focuses the organization on the best ideas and on rewarding the people who deliver those ideas.

Corporate portfolio management also makes a company more agile. When times get tough, most companies respond with proclamations from senior management that belt-tightening is required across the board. With the insight that CPM provides into OpEx, an organization is able to segment spending based not just on category (e.g., technology expense versus R&D expense versus marketing expense) or by geography, but based on whether an operating expense is customer-facing, or whether it is generating returns (and what level of returns it's generating). When the environment dictates that investments be cut or held flat, the CPM effort enables an organization to be smarter about which areas of OpEx it should focus on in its cost cutting.

Organizations that optimize discretionary OpEx resource allocation find that the results of the effort get a lot of attention. CPM allows a company to go from talking about its portfolio of businesses to actually managing its business as a portfolio of unique opportunities. These opportunities in marketing, R&D, IT, operations, and other areas have different financial and strategic benefits -- and risks. Through proper management, the portfolio of opportunities can deliver consistent, above-market, and better-than-the-competition growth.

Moving toward corporate portfolio management requires changing the decibel- or personality-driven, siloed, and suboptimal approach to spending that is inherent in the typical budgeting process. The return for taking on such a major change is a process in which initiatives compete for resources on a level, data-supported playing field and the best ideas are coveted and rewarded. A consistency of action, vision, and performance is the end result of applying CPM to discretionary OpEx. Currently only a few top-tier organizations have reached this goal, but it is something that all organizations which aspire to long-term growth should -- and can -- focus on.

Anand Sanwal is the vice president, corporate portfolio management and strategic business analysis, at American Express, where he has built and now manages the company's corporate portfolio management discipline.

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