Effectively managing your product portfolio is essential for successful business planning in any organization. A well-structured portfolio drives growth and is fundamental in creating and maintaining alignment between daily operations and strategic objectives. Achieving optimal alignment necessitates a careful and ongoing assessment of product range sufficiency, managing change, addressing performance gaps, re-prioritizing projects, and integrating plans with the broader business.
Developing Marketing and Project Master Plans
Creating a marketing plan involves market segmentation and analysis to determine “where to play”, plus a strategy with objectives that should 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’ strategic objectives.
Assessing sufficiency and validity
The question of sufficiency lies at the heart of managing the product portfolio. 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)? This is not just about the number of projects but also whether 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) process. IBP connects strategy to execution to achieve business results; it serves as 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 managing it effectively ensures performance remains on track to achieve strategic objectives. Understanding where gaps exist is the first step towards resolving them. Naturally, not all gaps can be closed immediately. The benefit of an effective IBP process is that it allows both their early identification and a long-term perspective, typically spanning 24-to-36 months, to address them. From a product portfolio point of view, gap-closing plans may 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.
Integrating the product portfolio with IBP
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. In contrast, the supply plan must ensure the availability of resources to fulfill the demand generated by the product portfolio.
The Portfolio Review owner, typically a vice president of product management or product marketing, takes responsibility for approving plans and implementing gap-closing actions before they reach the next stage.
Creating options
Operationalizing strategy is the fundamental responsibility of Integrated Business Planning. Without an IBP process, there will forever be a disconnect between strategy and reality. The Portfolio Review is a vital step in ensuring business leaders have options in what is often the most uncertain aspect of business planning.
Without a robust funnel of 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 pick and choose what they commercialize. Consequently, the demand and supply organizations benefit from a much more timely, reliable, valid, and sufficient product portfolio upon which to base their plans as part of the IBP process.
Are you struggling to achieve the right inventory levels, launch products on time, or integrate your portfolio management process with your demand and supply management processes? At Oliver Wight, we’ve worked with organizations across the world to help them improve their portfolio management through Integrated Business Planning. Learn more about how maximizing the value of your product portfolio can drive growth for your organization in our white paper, ”Deploying Strategy With Integrated Business Planning – The Portfolio Review.”
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By Donald McNaughton and Timm Reiher