Portfolio approaches to tackle complex challenges. Notes on an emerging practice

By Gina Belle and Giulio Quaggiotto

The soul searching is on. Both the public and development sector are increasingly aware that traditional ways of understanding problems and implementing interventions are ill suited for complex, fast changing challenges. Alternatives have been suggested (e.g. by proponents of problem driven iterative adaptation), agile approaches have been called for, while complexity and ‘system thinking’ have moved from niche to the mainstream. Directed improvisation and navigating by judgement are part of the new vocabulary. A brave new world is emerging, but old practices are proving very entrenched.

The stakes could not be higher, with trust in public institutions and their ability to effectively deliver value in decline globally.

In the last few years, in particular, we’ve seen the increase of calls for the public and development sectors to adopt more experimental approaches, across a spectrum that goes from speculative design and probes all the way to randomised control trials. As the incoherence of linear planning and single point solutions with issues like climate change or rapid urbanisation become increasingly apparent, organisations are starting to explore “portfolio approaches” as a way to better come to grips with complexity. One can only really understand a complex system by interacting with it, and the dynamic management of a portfolio provides a stronger basis for accelerating learning and adaptation than the rigidity of five year plans.

For the past two decades we’ve** been responding to a key question — what new approaches, frameworks and capabilities are required (to enable decision making and commitment to transformative action) in increasingly complex, interrelated and uncertain problem spaces? The result is a System Transformation Framework that has been applied extensively across the public and private sectors to design and manage portfolios that are more coherent with the identity and intent of those seeking to produce transformational effects, better able to manage and adapt to a changing context, and that leverage ‘Sensemaking’ to generate ‘Actionable Intelligence’ to induce an acceleration of impact effects.

The craft of portfolio management in the social sector is still emergent, and there aren’t many available reference points to go by. In order to fill this gap and take stock of ongoing efforts, colleagues at SITRA recently hosted a workshop in Helsinki which drew a broad spectrum of participants: from international development organisations to national ministries, from municipalities to foundations and NGOs. This was a chance to share the experience of translating elements of the System Transformation Framework (more on this below) to organisations such as UNDP and Climate KIC, as well as compare notes with practitioners such as Narrate’s Tony Quinlan. (Slides from the workshop and a recap by our wonderful host Mikael Seppälä can be found here).

Our experience tells us that there are a few recurring questions when organisations start to explore portfolio approaches:

• How is running a portfolio different from “just having a bunch of projects” or pilots? This seems rather basic, but the term portfolio is often used quite loosely, which is not always helpful
• Why is a portfolio approach more suitable to dealing with complex challenges? And is a portfolio approach suitable to all kinds of domains, or does it mostly apply to innovation activities?
• What are the organisational capabilities (needed) to effectively and dynamically manage a portfolio? How can we get started when our existing systems and structures are geared towards linear planning and predictability?
• Is portfolio ultimately about the management of projects or investments (the way the term is often used in common parlance) or is it about accelerating organisational learning?

The gathering confirmed the interest from several organisations in delving deeper into these questions, to start articulating elements of a practice (and how to avoid the trap of “portfolio approaches” becoming the new “design thinking” or “design toolkit” that gets applied inconsistently or lost in translation). In this sense, it was particularly interesting to compare different approaches to support reflections on what it takes (and what needs to be let go of) to apply and build these capabilities, and where each organisation might start.

So what are the key components of a portfolio practice that ignites systems transformation?

In Helsinki we explored System Transformation Framework** (below) through the lens of the 4 dynamic portfolio management capabilities at its heart. Each capability — and the questions underpinning it — point to an organisational development journey that can be supported by protocols (e.g. the Sensemaking and acceleration protocol developed by UNDP) and, crucially, new social, learning and decision making dynamics that support commitment to transformative action. This is not the case of a consultant producing a report on a portfolio and sharing it with management: it is a new organisational capability that emerges through specific social interactions that are designed for the organisation to develop it over time.

**Generated by Chôra Foundation

So how can we begin to unpack the craft of portfolio management? It may be useful to think of 4 distinct practices, each meant to answer a set of questions:

1.Portfolio and option design

• How can we design a portfolio so that it becomes a learning and sensemaking system within a problem space?
• What breadth and diversity of activities (strategic options, projects, programs, experiences, investments) do we need at play in the problem space?
• How do we deliberately design each activity so that it can help us discover new capabilities, resources, models and transformational opportunities?

2.Portfolio composition

• How well is the portfolio connecting to and supporting the organisational intent?
• Do we have the breadth and diversity we need? What do we select and why?
• How well is this set of activities positioning us to generate intelligence and produce transformational effects in the problem space (current and potential value)?
• What role does each individual activity play in the portfolio to generate intelligence and produce transformational effects?

3.Portfolio experience

• What partnership modalities will create the best conditions for constant action-learning from our activities?
• How can our activities be iteratively (re)designed to help us discover new capabilities, resources, models and transformational opportunities?

4. Portfolio sensemaking & intelligence:

• How can we make sense, generate intelligence, and layer the learnings from our activities over time to accelerate and multiply the impact of the portfolio?
• How can we generate strategic arguments to support decision making and commitment to transformative action?

Supported by a series of hands-on exercises — and examples of organisations like Climate Kic and UNDP that are at different stages of adopting it, the framework seemed to provide a useful basis to initiate a discussion on elements of a nascent practice and compare notes on different approaches one might take at each stage of the journey. Going through the motions of a portfolio composition exercise or a sensemaking session helps clarify how running a portfolio is different from “having a bunch of projects” and why deliberately designing spaces for collective reflection on the portfolio is essential to accelerate learning and increase coherence of interventions.

Furthermore, the discussion highlighted one fundamental difference between portfolio approaches and traditional planning/visioning. In the latter, one starts by defining an ideal state and tries to work backwards from there. A portfolio logics accepts that complex dynamics are ultimately unpredictable, and starts from the world “as is” and existing assets to probe and adapt one’s way into preferable future scenarios.

Finally, we drew up an initial list of organisational competencies and mindsets needed for active portfolio management. It includes:

Qualitative reasoning- Possibility, judgement, robust arguments & narratives

Curiosity- Being open to surprise, pursue obliquity

Active Listening- Listen to learn & to generate, not to evaluate or correct

Visual representation- Spatially representing problem spaces to support shared understanding, portfolio design and intelligence generation

System Thinking and pattern recognition- Identify structural elements, observe relationships and dynamics

Action Learning- To have an experience you must be in it and out of it — it is a riff

Reflective questioning- Ask what might be done, don’t tell what should be done

Transdisciplinary- Working beyond disciplines to find new concepts, frames and approaches

So… where do we go from here?

Our impression from the workshop — and the rather active social media exchanges around it — is that there is appetite to further explore and articulate elements of a portfolio practice, and compare notes among organisations that are exploring them. Quite a few participants commented on the fact that there are elements of portfolio management in what they are doing already, but having a language to articulate them can help being more deliberate in applying them as well as finding areas for growth.

As for the question “where do we start?”, at least two possible trajectories emerged from the experiences presented: On the one hand, an organisation like Climate Kic was able to embrace all 4 elements of the framework at the same time because of management buy-in and a deliberate, strategic shift away from single point solutions toward system transformation. In the cases presented by Tony and UNDP, the entry point was provided specifically by sensemaking as a way to start building new competencies around an existing set of ongoing activities or projects. Here again, in the pursuit of an approach that can better connect transformational intent to transformative action there are clear entry points, but no single or simple pathway. Much depends on organisational leadership, structures, mindsets, and context.

We are keen to follow up on our wonderful hosts at SITRA’s offer to start building a community of practice around portfolio approaches. If your organisation is already applying portfolio tools or is starting its journey in this direction, do get in touch — we are @ChoraFoundation @ricap_undp