In our “Executive” Series of blog posts, we’ll address some topic from a perspective more relavent to product leaders.
If I were to ask most product execs why it’s important to make product development investment decisions based on a clear strategy and compelling data, they would probably briefly grimace with frustration and condescension before summarily kicking me out of their office (and maybe the building). I get it. On the surface, it’s a silly question. Yet most of the companies I’ve worked for and with had at best a murky process for determining how they allocate precious revenue among the offerings in their portfolios.
Most people in tech know the term “portfolio” refers to a company’s collection of offerings. For the sake of simplicity, we’ll focus on a company with a portfolio of software products. Although some might assume that execs would periodically check in which each other and adjust investments in the portfolio as needed, I can assure you that many very big, very successful companies have nothing that might be called a “portfolio process”.
The portfolio process must answer two very important questions:
- Do we have the right things in our portfolio?
- Are the things in our portfolio appropriately funded?
Of the two, I see more organizations that are aware of the importance of answering the second question. Much of the pain I see, particularly related to market growth and loss of competitiveness, stems from a failure to adequately answer the first. Successful, mature organizations become execution machines. This transformation from a more tactical, creative mode to “steady-state” involves a high level of specialization and often the proliferation of separate business units that are so focused on their own success they forget they are part of a portfolio. This constellation of silos surfaces a clear problem: Who’s in charge of figuring out that something is missing from the portfolio? There are many reasons that market titans are sometimes lethally slow in responding to market disruptions, especially new product categories. I can assure you that at the root of this lag is the fact that no one has accountability for finding these gaps early and coordinating the appropriate response.
A successful portfolio process relies on a shared perspective of what’s in the portfolio. Again, many would assume that organizations can easily identify their roster of offerings. In practice, many organizations have a fractured view of their portfolio. We recommend defining an “offering taxonomy” defining the kinds of offerings, e.g., product, service. The following table enumerates a reference set of offering types.
In a second step, all offerings that have received investment (whether they’ve been released or not) should be captured in a unified list and classified based on the taxonomy. This can be a time-consuming and contentious process. An important aspect of this “offering inventory” is ascribing a single accountable person for each offering. For example, each product should have a product manager who is accountable for that product’s overall business success. The offering inventory should be captured in a dedicated system or a general repository with the appropriate level of security. Going forward, material changes to this list will be the result of a decision made as part of the portfolio process.
In the next post in this series, we’ll shift gears to a more execution-oriented topic, exploring two “practices” comprised by the portfolio process. Spoiler alert: periodically reviewing what’s in the portfolio is not enough?
What are your experiences with the portfolio process? Does your company have a good one?