Pcubed Portfolio and Resource Optimization

Petroleum Products Company, Portfolio Optimization, Downstream Operations

The Challenge

The Company had an annual process to assess the strategic and financial value for Downstream operations of a multi-billion dollar capital expenditure portfolio. The strategic fit of capital projects was assessed in a qualitative manner such that quantification of strategic benefits of a selected portfolio was not possible. Comparison of the strategic impact of capital projects across the refining, marketing, and transport divisions of downstream competing for scarce capital funding was difficult to do in an objective and transparent manner.

The Pcubed Solution

The Downstream Strategic Planning team engaged Pcubed to define a methodology for assessing the strategic value of proposed capital projects using the Analytic Hierarchy Process with strategic business drivers and metrics applicable to Downstream strategy as it related to capital projects. Pcubed also defined a process and road map to allow the Company to progress to a full cross-divisional capital portfolio optimization for all proposed Downstream capital projects projected to begin with three years.

The Value and Business Benefits Delivered

The new approach to selecting capital portfolios provided a basis for achieving annual reductions in capital expenditure of $500MM and allowed the company to target industry best practice of Growth & Improvement capital expenditure equivalent to 100% of Depreciation, Depletion, and Amortization.

A common set of strategic business drivers was identified for the entire Downstream organization with metrics applicable to each of the divisions (e.g. Refining, Marketing). An improved view of the strategic alignment of the capital project pipeline was provided for senior management which facilitated a more structured, transparent approach to capital planning and prioritization for the Downstream organization. The Company was provided with a deployment road map to help ensure successful implementation and adoption across all Downstream divisions.

Petroleum Products Company, IT Portfolio Optimization, Corporate Functions

The Challenge

The Company had a significant multi-billion annual IT spend dispersed across multiple corporate functional departments and IT functions embedded in Upstream and Downstream business units. The lack of a central process for prioritizing IT projects and managing their execution led to duplication of effort, lack of alignment to enterprise strategy and poor execution due to the number of IT projects taken on. There was no means for assessing the strategic impact of IT projects and limited information on the financial return projected from IT projects.

The Pcubed Solution

The CIO hired Pcubed to pilot a portfolio optimization process with the Corporate IT functions that could later be applied to all Enterprise IT projects. Pcubed implemented a process for assessing the strategic value of proposed IT projects using the Analytic Hierarchy Process with strategic business drivers applicable to enterprise strategy as it related to IT projects. Pcubed also defined a process and road map to allow the Company to progress to a full cross-divisional IT portfolio optimization for all proposed IT projects across the enterprise.

The Value and Business Benefits Delivered

On an annual basis the portfolio of Corporate function IT projects for the subsequent planning year was optimized based on strategic value to the enterprise. Over the course of the first two years the organization realized cost savings of over $120MM on approximately $350MM of annual spend as result of duplication or misaligned projects identified.

In addition, Pcubed left behind a structured, transparent approach to project planning & prioritization based on a set of pilot business drivers applicable to Enterprise IT. Senior executives were given a view of the degree of strategic alignment in the IT project pipeline and the organizational capability transferred to scale the process enterprise-wide.