Effectively managing the product portfolio is a cornerstone of business planning for any organization. A well-structured portfolio drives growth and is also fundamental in creating and maintaining alignment between daily operations and strategic objectives.
Achieving this alignment requires a meticulous approach involving continuous assessment of sufficiency (of product offering), managing change, addressing performance gaps, (re-)prioritizing projects, and integrating plans with the rest of the business.
Developing Marketing and Project Master Plans
Creating a Marketing Plan is the first step in developing a Portfolio Plan. It involves market segmentation and analysis to determine ”where to play,” plus a strategy with objectives and plans to describe ”how to win.” The marketing strategy and plans develop into a Project Master Plan that lists the initiatives, programs, and projects that contribute to achieving the business’s strategic priorities.
Assessing Sufficiency and Validity
At the heart of managing the product portfolio lies the question of sufficiency. Are there enough projects in the pipeline to deliver the expected growth in revenue and margin over the next two to three years (or beyond, depending on the nature of the industry)? However, this is not just about the number of projects but also that they are viable and properly resourced. A Project Master Plan should not be built on wishful thinking. Instead, there must be a high degree of confidence in its successful execution, and this is subject to continual monthly review.
The Portfolio Review – Adapting to Change
The Portfolio Review is the first step in the Integrated Business Planning (IBP) cycle. Integrated Business Planning is a process that connects the strategy to execution to achieve business results. IBP is a platform to analyze cycle-over-cycle changes and their impact on current plans. This involves understanding volume and financial variations and the underlying assumptions driving these changes.
Each month, the Portfolio Review asks these core performance questions to manage any gaps between the strategy and business plans.
- How are we doing?
- Do our plans meet business needs?
- Are our plans and assumptions still valid?
- Do we have any gaps?
- What are we going to do?
Addressing Gaps and Prioritization
Change is inevitable, and effectively managing it is essential to ensure performance remains on track to achieve strategic goals. Understanding where gaps exist is the first step towards resolving them. Naturally, not all gaps can be closed immediately. An effective IBP process allows for both their early identification and a long-term perspective, typically spanning 24 to 36 months, to address them.
From a portfolio point of view, gap-closing plans may well involve the reprioritization of projects or resources. Balancing available resources with project requirements is key; projects deemed crucial for closing gaps take precedence, while others may need to be deprioritized to accommodate resource constraints.
Managing Integration of the Portfolio within the IBP Process
The clue is in the name. Within an Integrated Business Planning framework, integration between the individual steps is fundamental. The outputs of the Portfolio Review, including cycle-over-cycle changes, gap analysis, and prioritization decisions, serve as inputs for subsequent steps.
Two critical integration points are demand and supply planning. The demand plan (and resulting financial plan) encompasses units, revenue, and margin projections. The supply plan must ensure the availability of resources to fulfill the demand generated by the product portfolio.
The Portfolio Review (PR) owner, typically a vice president of product management or product marketing, takes accountability for approving the PR plans before they’re passed onto the next step in the IBP process (the Demand Review). The PR owner is also accountable for ensuring that gap-closing actions are communicated and executed.
Creating Options
Operationalizing strategy is the fundamental remit of Integrated Business Planning. Without this, there will likely be a disconnect between strategy and the operational plans being executed. The Portfolio Review is vital in ensuring business leaders have options in the most uncertain aspect of business planning.
Without a robust funnel of initiatives, programs, and projects, companies are forced to commercialize less-than-ideal options. By contrast, companies with a robust Portfolio Review find they have developed more options and can have more choices in what they commercialize. Consequently, the demand and supply organizations benefit from a much more timely, reliable, valid, and sufficient portfolio plan upon which to base their plans as part of the IBP process.
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