How portfolio management is helping the Navy divest old tech, invest in new

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The Navy has a big appetite for modern technology, but also a lot of technology debt. One answer to that problem: a move to portfolio management. Officials think by focusing their acquisition management energy on portfolios, not individual products, they can embrace commercial technologies more quickly while also saying goodbye to expensive legacy systems.

The new approach is well underway within the Navy’s Program Executive Office for Digital and Enterprise Services (PEO Digital), one of the Navy Department’s main organizations for buying and building enterprise IT capabilities.

It’s a departure from the Defense Department’s usual way of thinking about acquisition. Rather than program managers focusing on programs, as they’re defined in the DoD budget, they’re now in charge of portfolios of capabilities. Starting in 2021, PEO Digital eliminated its traditional program management offices and reorganized itself into eight portfolios as part of a broader initiative called modern service delivery.

“Portfolios, to me, are a way to take the burden off from a traditional program and project management view,” Louis Koplin, the office’s acting program executive director told attendees at the Navy Department CIO’s annual IT conference in Norfolk, Virginia last week. “We want those to be cohesive portfolios and products, aligned towards an integrated mission outcome view. Sometimes we’re asked to provide all of the features, and we then discover that the whole is less than the sum of the parts. The portfolio view allows us to break that paradigm, and lets us shed some of that daily toil of project and program management that seems to actually impede our ability to deliver the outcomes.”

Officials say part of the goal is also to help those managers be less protective of any individual technology solution, and to adopt new ideas more quickly.

But now that the technology adoption aperture  is open a little wider, it’s also created a need for new filtering mechanisms — or “funnels” — to help the Navy understand its overall IT environment, which commercial technologies are good candidates for adoption, and when it’s time to divest legacy systems.

One way PEO Digital is doing that is through something called the Technology Business Management (TBM) framework.

“What’s great about that is it helps us find the right level of capability discussion for the right audience. If we’re going to talk to the budget folks or the congressional staffers on the hill, we can say we’ve got four major portfolio areas: digital workplace, cybersecurity, IT platforms and IT infrastructure,” Koplin said. “I can say, ‘Those are things that you care about, that I care about,’ and we can talk about where are we on the journey to improve those capability outcomes. We’re not going to talk necessarily about named products, but it gives us a way to do that. And if they say, ‘Well, what do you mean by digital workplace?’ I can say I have two product groups in there, client computing, and communication and collaboration. And this helps us consistently talk about capabilities. We’ve got things that are going to move in and out of the portfolio, and we know that by segmenting it in this way, we can consistently be prepared to do that and move the cattle through their respective chutes.”

A second big change is to start thinking about technologies in terms of four “horizons.”

Horizon 3 is made up of technologies that exist in commercial industry, and that the Navy is only starting to experiment with, through programs like Small Business Innovation Research. Horizon 2 is when the Navy has started to put more serious money into scaling a technology into pilot programs with a clear place in one of its portfolios. Horizon 1 is made up of products that are in full production mode with a focus on continuous upgrades, and Horizon 0 covers systems the Navy is ready to decommission.

And organizing technologies into that final group is critical, said Justin Fanelli, the Navy Department’s acting chief technology officer.

“Horizons is an agile framework that came from top consulting firms, and it says three to two to one to zero is the only way you divest. We have a parking lot full of cars, we keep having cars pulling in on top of other cars, and we can’t even get cars out effectively right now,” he said. “New private sector organizations have no tech debt, and that’s why they’re so agile; the longer you’re around, the better you have to be at divestment. This is why we have horizons: You need to do trade offs.”

A third new framework the Navy is using is called “World-Class Alignment Metrics (WAMs).” That’s how the Navy decides which IT solutions might make sense as a candidate in one of its Horizon 3 entry points.

“We’ve got many folks who are perhaps proposing pilots this week. How do we know which of these good ideas is better? The way we are going to choose among them with all those opportunities is with WAMs that are outcome and mission-driven,” Koplin said. “It’s a consistent evaluation framework that lets us say we’re going to measure everything within certain swim lanes. We’re not going to compete a new laptop against a cyber situational awareness tool. But it gives us a way, within the portfolios and sub-portfolios, to say, ‘Oh, this is going to move the needle a lot,’ or ‘That’s going to maybe move the needle not so much.’”

Outside groups have also been urging the broader Defense Department to move toward portfolio-centric approaches. In its final report in January, the Atlantic Council’s commission on Defense innovation adoption specifically raised PEO Digital’s approach as an example of how organizations can make better technology decisions more quickly. And in March, the Congressional commission on Planning, Programming, Budgeting and Execution (PPBE) reform also urged DoD and lawmakers to move from a program-centric management approach to portfolios of capabilities.

Fanelli said there are very clear signs that the portfolio approach is letting the Navy examine and adopt more new technologies than it ever has before. One data point: The Navy has made 10 times more Small Business Innovation Research (SBIR) awards over the past 14 months than it had in the decade before that, he said.

And Congress has shown a good degree of interest in helping to solve the “valley of death” problem: getting those programs from those early stages to one of those more mature “horizons.”

As part of its version of the 2025 defense appropriations bill the House Appropriations Committee approved last week, the lawmakers advanced language that would significantly increase the funding for a broader DoD program called Accelerate the Procurement and Fielding of Innovative Technologies (APFIT). Under APFIT, DoD would have $400 million dollars available to help companies bridge the valley next year, up from just $100 million in 2022, when it was first created.

“The funding is compounding right now, because they want technologies to transition to programs of record, and you have to have a service and PEOs signing off on these things. We jumped on it,” Fanelli said. “If we have data that says this is a order of magnitude better than anything we’ve seen before, who’s going to beat that conversation? If we can get more funding for our warfighters, those are first downs. But if we can prove [the value] to our warfighters, put gear in their hands faster, and change the way that they operate, everything else takes care of itself.”

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