What the Devil is a Portfolio, Anyway?

Download PDF

By Don Creswell, SmartOrg

Portfolio. The term means different things to different people. Mention portfolio management and some think of resource management. Others think of collections of projects to be compared on various value dimensions; or managed as a stream of projects under development. BU heads and finance may consider “strategic” or “business” portfolios. The meaning of the word portfolio is ambiguous unless used in context. In this article, the context is around product development; selecting and managing products and services from ideation to commercialization to optimize value.

Investopedia defines portfolio management as “The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance. Portfolio management is all about strengths, weaknesses, opportunities and threats … and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.” (Emphasis is mine.)

Portfolio Chart

To optimize the return on your investment in product development, you need to consider two types of portfolios in parallel: the strategic or business portfolio (“doing the right projects”) and the operational portfolio (“doing the projects right”). I prefer “business portfolio” rather than “strategic portfolio,” recognizing the need to focus on creating business value throughout development and commercialization.

The business portfolio provides the information management needs to make tradeoffs among competing projects based on their value vs. risk. The business portfolio supports two fundamental decisions: “can we do it?” and “if we can do it, how much is it worth?” Portfolio-analytics help identify the best projects to select for development, which to feed and nurture and which to kill early to preserve value.

The operational portfolio provides management with data and information to guide decisions around allocation of resources (capital, time, budgets, and people) to deliver the value addressed by the business portfolio.

Data that supports each of these portfolios needs to be updated throughout development to avoid “doing the WRONG projects RIGHT” or “doing the RIGHT projects WRONG.”

Portfolio Navigator® supports business portfolios; the PPM Optimization Workbench™ integrates SAP operational software with Portfolio Navigator to support both types of portfolios within a single environment.

SmartOrg Announces Portfolio Navigator 4.1

Portfolio Navigator V4.1, the latest version of SmartOrg value-based management software, is now available for shipment to new customers and as an update to current customer software.

Version 4.1:

  • Goes mobile and is now accessible via Firefox, Opera, Chrome and Safari, in addition to Internet Explorer. Portfolio Navigator, available “in the cloud” or installed on company servers is also compatible with the iPad.
  • Increases the visibility of resources in making decisions. Graphics reveal the impact of resource constraints.
  • Improves data transfer, with an integration to SAP project / portfolio management software, improved APIs and web services, and bulk import / export capabilities via Excel.
  • “Twisties” enable you to hide/show sections of input screens.
  • Adds warning about unsaved data.
  • Enables creation of project, sub-portfolio and master portfolio optimization functions.
  • Enables creation of cumulative probability graphics (“S-Curves”).
  • Supports messaging to individual users or selected users.

Current licensed users may update to V4.1 at no additional software charge. In some cases, there may be professional fees required to support data migration from legacy systems; for details contact info@smartorg.com.

David Matheson's Visions article

Monthly Webinar

Portfolio ChartStarting in January, SmartOrg consultants, clients and alliance partners will present monthly webinars that will focus on all aspects of creating higher value from NPD and Innovation. Watch future newsletters for details or visit our web site for dates and times.

Second Annual Life Science CEO Forum

Meet us at the Life Science CEO Forum in Jacksonville, Florida. SmartOrg will lead a workshop on Portfolio Optimization.

2-4 February 2012 | Jacksonville, FL |

Life Sciences CEO Forum