You have just completed the “one-time” optimization of the portfolio, or you are about to undertake the effort. But what is needed to ensure your portfolio operates at peak performance on an ongoing basis?
If you are an executive who is concerned that there is no person or role in your organization that makes portfolio decisions, you are not alone. The sad reality is too often, in too many companies, no one is “at the helm” to make portfolio decisions on a regular basis. But a combination of strategy, performance metrics, processes, technology and analytics can go a long way to guarantee that the right decisions are made at the right time.
- Strategy: No decisions about the product and customer portfolio should be made in absence of a well-conceived strategy and the discipline to execute it. GM, at one point, developed specific brands focused on different market segments and price points. Over time, those brands lost their strategic focus and expanded into other brands’ territory – to the point where GM sometimes was competing with itself.
- Organization & Performance Management: How companies organize – around products, around customer segments, around functions, etc. – can have a significant influence on their ability to effectively manage the portfolio. There is no “one size fits all.” But the organization should be aligned to the overall strategy and P&L authority should be given to leaders who have control and authority to make decisions on the portfolio. Dell, for example, was famous for organizing around very focused geographies and segments during the years where it had its fastest growth.
- Performance Management / Measures: It is surprising how influential performance metrics can be, for both good and bad. We once performed a strategic analysis on a newly-launched product line, where we discovered that 80 percent of the company’s customers for this product were unprofitable. When we presented the findings, one senior executive reacted, “I can’t bring this to my peers. We are all incented on growing customers.” Yes, that sounds silly, but the point is that having the right performance management capabilities and the right metrics to manage to portfolio can make an enormous difference. For example, product managers that are incented only to develop new products will do just that, and ignore the existing products that could provide greater sales and profit lift.
- Portfolio optimization tools: Today’s business world is about change, and rapid change. Your one-time portfolio optimization effort will not (and should not) remain the same over time. Unfortunately, many well-meaning executives and teams do not have the analytics tools to make informed portfolio decisions on an ongoing basis. Should you drop prices on product X in channel Y? What impact will that have? What are the secondary effects on other channels or brands? Should I exit this product line altogether? Decisions like these are complex and there are myriad of options. Having the right dynamic optimization tools that can account for all the changes in the portfolio, and can allow companies to make smarter choices and maximize company performance.
Actively managing the product and customer portfolio has never been more challenging. But with the right tools, management routines / processes and metrics, your company can achieve a competitive advantage and grow sales and profit faster.