The portfolio management is an essential feature for strategic thinking. We need to know where we want to be in three to five years from now. Even in uncertain times, were tomorrow is not certain (it actually never is …), we need to know where we want to be in in future. A longer horizon is also very o.k.
How do we get there? The first ingredient is todays position. Where are we today? What is our market position? How are we perceived? How does our portfolio look like? This is maybe more difficult to define than the future portfolio. The future portfolio may contain many wishes. For the definition of today’s portfolio, we need to be honest to ourselves.
When we have both components, we can actually make decisions that will bring us from today to the future. We may need to adapt on the way to future, but this is not problem. A well-defined future portfolio will serve as a guiding star, just as the North Star, no matter how rough the sea may be.
It is a great idea to use the formalized Business Model Canvas. Adapt it to your needs. Do not overdo. Less is sometimes more. The business model canvas should however be the minimum. Sometimes the easiest way to start and to get into the right mood is to get started with what we have today. Pick a product and try to fill in the sheet. Do not be surprised, if you are struggling to fill all feeds in the beginning. Some products in our today portfolio may not be perfect. This is O.K. We discover it right now and right here. Before we treat these products with a value proposition analysis, we finish the analysis of the current portfolio until we have a draft of all relevant products. 80% solutions are fine. Remember PDCA…
At this point, we forget everything and imagine how our world can look like in 3-5 years from now. Do a little time travel and imagine your then current portfolio. What are your products? How will you generate our income? How will you be seen by your customers? How will you be positioned in the market? Generate you current portfolio in future. This is your future portfolio. In writing. You may have a short glimpse at the “Quick Start” article.
Now we have our desired future portfolio – we can call it the challenge. Todays portfolio could be called current condition. Sounds familiar? Good. This nothing else than the Toyota KATA by Mike Rother. We now take Mike’s ideas and understand that the next target condition is then nothing else but our (then automatically) approved projects that bring us from the current portfolio to our future portfolio. Everything that is not along the path from current portfolio to the future portfolio is not a project we should run. Automatic project approval, right? Stuff that is not bringing us from the current state closer to the future portfolio is not in scope – or a clear indication that we may need to adapt our future portfolio if the value proposition analysis indicates an interesting project.
Building a strategy for future is interesting and cool. However, projects with focus on future will pay off in future, not today. Somebody has to pay the running costs and finance the investments into future. This is todays business. We need to balance the capacity for our activities between work for tomorrow, today, and yesterday. Respect Investment Horizons.
So, in consequence we now have highlighted two components of Portfolio Management:
- Capacity allocation – realize you can utilize your capacity only once
- Target orientation – define what you want to spend the capacity for
What is now still missing is to determine the order of tasks/activities. This is however home turf for agile methods if topics are small. For larger ones, we ask Eric Ries and go for innovation accounting.