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|In: Architecture|Last Updated:

I’ve been heavily involved in application portfolio rationalization and management (APR and APM) over the past few years. They’re complex disciplines. As a consultant, I don’t mind a bit.

In case you aren’t familiar with APR and APM:

What’s the point? Rationalizing the applications portfolio accomplishes several useful results, among them identifying and making plans for dealing with: (1) unused applications that should be decommissioned; (2) weak applications that should be improved or replaced; (3) redundant applications that should be consolidated.

That’s APR. APM? The point of establishing an ongoing application portfolio management practice is to make sure the company doesn’t recreate the applications mess once the APR process has cleaned it up.

Why “portfolio”? APR and APM are built around the idea that your applications portfolio is analogous to an investment portfolio. The corporation invests in it and expects a return.

Also, like the funds and equities that make up a portfolio of financial investments, some applications are stronger than others. The mix continually shifts as time passes, and so, just as a fund manager sells weakening equities and buys newly promising ones, the application portfolio manager should constantly re-evaluate the applications that make up the company’s application investment portfolio.

It’s a persuasive argument, to the extent that arguing by analogy is ever persuasive. But it fails on three fronts (at least).

First, in a portfolio of financial investments, each individual holding has a market value that’s its only value. But in an application portfolio, holdings have value to the extent they support business capabilities, functions, processes, and practices.

Which means determining the financial value of an individual application is a challenging exercise in creative metrics. Unless some other topic distracts me, we’ll talk about this in more depth in future columns.

Second: The holdings that make up an investment portfolio are not dependent on each other. You can sell one without that sale having even a slight impact on the value of any of the others … unless, of course, you’re Warren Buffett and lots of other people pay attention to your investment decisions. (If you are Warren Buffett … call me.)

Where was I? That’s right: Independence. In an application portfolio, few “holdings” are entirely independent of other applications in the portfolio. You can’t just sell one that’s underperforming and expect everything else to seamlessly continue, nor can you add one without having to integrate it into others.

The Department of Redundancy and Duplication Department

Imagine you undertake a thorough APR assessment. Among the findings, you find seven different raw materials inventory management systems. Clearly, you need to establish a standard — either one of the seven, or an entirely new one — and consolidate.

Clearly, that is, until you take a closer look and realize each came along with one of seven business acquisitions that occurred over the past few years.

Consolidating inventory management systems means one of two alternatives — either standardizing the inventory management process across the seven independent business units that use them, or implementing an inventory management system that’s flexible enough to accommodate seven different ways of managing inventories.

Except that by the time you’ve achieved that level of flexibility the result might be just as difficult to support as, and far more disruptive than leaving the seven systems you have alone.

There’s no such thing as rationalizing the applications portfolio. My major premise is that there’s no such thing as an IT project. My minor premise is that rationalizing the applications portfolio would amount to chartering a bunch of IT projects. My conclusion: There’s no such thing as rationalizing the applications portfolio. Q.E.D.

Every single application in the portfolio is embedded in business functioning somewhere in the enterprise. Change any holding in the portfolio and you change how the business runs.

Oh, and, by the way, if you’re IT and want to rationalize the application portfolio, the portfolio changes had better result in more efficient and effective business functioning, because … aw, c’mon, you don’t need me to spell this out for you, do you?

Why not start with APM?

Here’s another binary choice in your APR/APM decision tree: You can rationalize the portfolio (APR) and then institute the means for preventing a recurrence of the problems you undertook the APR to solve (APM). Or, you can institute an APM practice and put it in charge of rationalizing the portfolio. It’s iterative and incremental APR.

APR first means documenting the current state, designing the desired future state, and planning a program to close the gap. APM first means constantly achieving better but never getting to best. But as the definition of “best” constantly changes, achieving it couldn’t be done anyway.

The KJR Conclusion: Better is better than best.

# # #

Do I have to say this? If you need help rationalizing your company’s applications portfolio, let’s talk. Because if you call anyone else you’ll hurt my feelings!

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|In: Digital|Last Updated:

You heard it here first, but, he said it better, “he” being Professor Ravi Bapna of the University of Minnesota’s Carlson School of Management; “it” being a discussion of “Two Things Companies Should Do Now to Set Up for a Post-COVID-19 Future.”

Well, okay, he actually said it first too — beat me by a week.

Professor Bapna’s recommended two things are: (1) upskilling your workforce, because “as organizations shift to an AI-first world, they need a workforce which understands the world of data, analytics, and AI”; and (2) re-thinking operations and strategy toward an “AI-first strategy.”

So let me up the ante with KJR’s Thing One and Thing Two: AI-based business modeling and anticipatory customer re-identification.

AI-based business modeling

While our pre-COVID-19 fascination with Digital transformation frequently led to little more than Digital superficialities, it did lead to one salutary change in executive thinking — recognition that increasing revenue is just as legitimate a strategic outcome as cutting costs. It didn’t, sadly, overcome the metrics obsession that’s the root cause of management’s over-reliance on cost-cutting, but it was a start.

Briefly, the issue is that connecting a cost-cutting effort to an actual cost reduction is, for the most part, pretty simple, while connecting revenue-enhancement efforts to actual increased sales is frustratingly multivariate.

What’s needed to manage effectively isn’t more and better metrics. It’s the ability to model complex cause-and-effect relationships.

Start here: For many companies, strategic change isn’t really strategic in nature. Planning is based on the unstated assumption that the business details might shift from year to year, but the basic shape of the business doesn’t change. The buttons and levers management can push and pull to make profit happen are constant.

To the extent this unstated assumption is true, it should be possible to direct the attention of machine-learning technology to a business’s inputs, outputs, and operating parameters so that, after some time has passed, the AI will be able to determine the optimal mix for achieving profitable revenue growth.

And in case you’re curious … no, I’m not remotely qualified to delve very far into the specifics of how to go about this. That would call for deep expertise, and I’m a broad-and-shallow kind of guy. I do know someone who built this sort of model the hard way, and she verified that yes, it can be done and yes, machine learning would be a promising alternative to doing it the hard way.

Anyway, while I’m a broad-and-shallow kind of guy, I’m not so shallow that I can’t suggest Thing #2, which is:

Anticipatory customer re-identification

Right now, as pointed out here a couple of weeks ago, most businesses are just trying to survive until the future gets here. And please don’t misunderstand. Succeeding at this will, for most businesses, be nothing to sneeze at (insert your own COVID-19 snark here).

But smart business leaders will take their planning to another level, and it has everything to do with their expectations regarding what the economy will be like once the crisis has passed.

My own, everything-I-know-about-economics-I-learned-on-a-street-corner expectation is that as we’re reaching Great Depression levels of unemployment we shouldn’t expect the post-COVID-19 consumer population to look just like it did before we started self-isolating.

As with the Great Depression most working-age adults will be employed, so there will be consumers to sell to. If we use the Great Depression as the benchmark of our worst-case-not-including-total-societal-collapse analysis we’ll figure about 20% unemployment as the basis for customer re-identification — my just-invented term for Figuring Out Who You Want to Sell To.

The KJR point of view: There will still be consumers and they will still be spending. Fewer and less, for sure, but still well above the zero mark. The affluent and wealthy won’t go away either, and it wouldn’t surprise me if many do quite well in the aftermath and decide this is an excellent time to buy stuff.

I’m not going to try to identify specific consumer segments here. That’s for you and your fellow strategic planners in the business to do. What I’m recommending is that business leaders shouldn’t wait to find out who will be spending what, and shouldn’t undertake their survival efforts based on an expected return to status quo ante.

Make your adjustments based on positioning the business for the consumer marketplace to come, and which segments within it you want to cater to.

And yes, that includes those businesses that don’t sell to consumers, because in the end, no matter how long the business-to-business-to-business value chain, it’s always consumer spending that pays for the steps in between.

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