5 Steps to Portfolio Management
Product Portfolio Management (PPM) has often been positioned as an upfront process that is used to select which new product projects should be started. Once that decision is made then it moves into product or project management. I believe Portfolio Management is a horizontal process across the entire innovation value chain. It is not just about selecting the right new product or project upfront. Portfolio management practices could and should be used throughout the lifecycle of a product. There are many decision points that need to be made throughout the lifecycle, such as analyzing market opportunities and deciding which ones to focus on, and in determining which features to put on the roadmap. Principles from portfolio management such as portfolio balancing and managing the portfolio mix can be used to decrease the total investment risk throughout the product development cycle. Maintaining a certain balance of innovation types in roadmaps and product releases so that you have the desired total risk based on the radical, semi-radical, and incremental innovations that are put into a product release.
In the Robert Cooper’s book on product portfolio management, he states the three main goals of portfolio management very well. First is to maximize the value of the entire portfolio of x (products, features, market opportunities, family activities, whatever you’re managing). The second is to balance conflicting factors in your portfolio such as risk vs. reward, attractiveness vs. ease of implementation, etc. The third is to align the portfolio to strategy (product, corporate, or personal). If you simplify portfolio management it consists of 5 steps:
1. List Alternatives
2. Identify Selection Criteria
3. Identify Ranking Metrics for Alternatives
4. Weight Selection Criteria
5. Determine Execution Capability
The first thing to do is make a list and identify all of your options. Once that is done, a set of selection criteria needs to be defined so that the selection is defendable and repeatable. Ranking metrics for each criterion need to be identified so that the options or alternatives can be ranked. The selection criteria need to be weighted based on their relative importance to your organization. Often times these weightings will change and be impacted by the current business driver of your organization. (Ex: increase sustainability, reduce cost, increase revenue, etc.) When this step is completed you have a ranked set of alternatives (opportunities, features, products, etc.) based on weighted selection criteria. The last step is to determine the capability of executing on the alternatives. This looks at resource demand and availability information to help select and sequence preferred selection in context of feasibility. Each one of these steps has best practices and approaches to performing them. In the future Portfolio Management Blog Series I will address each step individually.
If your company has adopted customer relationship management, marketing or sales will have customer managers whose job it is to manage portfolios of customers. They have to segment that protfolio to determine the lifetime value of a customer and how much they will invest in a customer. Whose customers are these? Yours, the PM.
Marketing communications has to sell the buying criteria in competition with the buying criteria of your competitors. In a sense they manage a portfolio of buying critera and other messaging. Those buying criteria would seem to need a product manager. Whose buying criteria are these? Yours, the PM.
Similarly, communications channels are sold like a product. You might have a forum where you capture user generated content. So you have protfolios of channels. Whose channels are these? Yeah, yours, the PM.
And, all of this amounts to networks of investment and transactions whether cash, or info, or one more customer step closer to the sales funnel. Who owns this network? Who coordinates across all these portfolios? Well, you do? Did you notice?
All of these things, and those minimal marketable feature sets, are just classes of assets that put cash on the table, classes of assets that you manage with the same tool, portfolio management.