The Case for Portfolio Management
Innovation and acquisition are two popular ways companies grow their portfolios. However, with 50 percent of all new products failing, 46 percent of all research and development dollars spent on cancelled or failed products and the failure rate of mergers and acquisitions hovering between 70 and 90 percent, portfolio planning is critical. Product portfolio management is a fundamental part of what product managers should be doing. In Pragmatic Institute’s November webinar, Mike Smart and Nils Davis of Egress Solutions, Inc., discussed the challenges companies face managing their product portfolios. Here are some highlights from their discussion. To listen to the entire webinar, click here. There are two parts to portfolio management: analytics and planning. Analytics requires companies to assess their current state and determine where they are. Planning requires companies to determine where they’re going, how to invest resources for the best results, what their pipeline looks like and how to achieve portfolio goals. Planning also helps companies decide what to do about the products that aren’t going to make it. The objective of a product portfolio is to determine the optimal product mix and product investment to achieve business goals. Use R-W-W to analyze your portfolio: • Is it real? • Can we win it? • Is it worth it? Many product companies and most product portfolios include too many products. And often, there are too few high-value products in the pipeline. This results in a portfolio that isn’t balanced across risk and value, doesn’t align with the organization’s strategy and doesn’t deliver the value it should. It’s important that companies with two or three products in production practice portfolio management. The big questions to ask are: • What are the organization’s goals? • Where should we invest and how much? • How are the products doing? Move away from the notion that if a company has $1 million to invest and five products, it should allocate $200,000 for each product. It’s easy for a company to fail in portfolio management by overwhelming its resources so it can’t actually complete any projects. A company can’t succeed if its products don’t do the things they’re supposed to do. That requires killing underperforming products and even some promising products to keep a sharp focus. Creating a high value, high impact portfolio will maximize the return on a company’s product innovation investments and maintain its competitive position. It will also achieve the efficient and effective allocation of resources while forging a link between project selection and business strategy. For more information about portfolio management, listen to the full webinar with Mike, Nils and the Pragmatic Institute team.
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