At its core, Product Portfolio Management is about enabling better decision making.
In our next series of blog posts, Michael Menard, co-founder and president of GenSight, shares his insights into Product Portfolio Management and the critical role project and portfolio selection plays in any organization’s growth.
“If you can’t describe what you are doing as a process, you don’t know what you’re doing.“
W. Edwards Deming, Management Author and Consultant
Portfolio selection is not an event. It’s a process. Lack of a defined business process is the number one reason for failure to implement portfolio management. Business process improvement is common in every major corporation in the Western hemisphere. This is because process design and implementation are at the core of disciplined quality initiatives. Yet, most of these initiatives suffer from shortcomings. Some companies fail to align technology with their process. Others deliver only incremental improvement, lacking the insight that leads to genuine breakthroughs. And for a few, process improvement takes on a mystifying life of its own, speaking its private, incomprehensible language increasingly detached from reality. We can start by asking two fundamental questions: what is a process, and how do we design one?
A process is like a recipe. I have a great recipe for New York style cheesecake. It calls for three eggs to be folded in, one at a time. One day, I mistakenly blended in all three at once. That trivial change made a completely different cheesecake. It was lumpy and tasted unusual. Unusual is the word I prefer to use. Other people who sampled it had a different word. However, when I made it again following instructions in the proper order, the cheesecake tasted great.
If we do anything more than twice, we should define a process. Once we have done so, we should continue to improve upon it. In absence of a defined and documented process, subsequent actions become experimental. Process design is an investment that’s easy to understand. But somehow while the idea of process design usually gets an enthusiastic response, actually doing it—and doing it right now—gets shelved.
We can never get better at decision making without a defined process. For that we need to agree upon criteria. Research has shown that many of us habitually make the same type of decisions independent of context. We humans are creatures of habit, as well as a moody bunch. We like to think we have the logic of a Star Trek Vulcan, but we’re actually subject to influences beyond our control. Who hasn’t been clear about the right thing to do, while doing something else? Without a process to guide us we can be swayed by many factors, some unseen. Process keeps us on track by pointing to what’s relevant.
Ad Hoc Problem
Projects are often selected at the local level in organizations with business units, departments, states, countries, and continents. While local decision making may be valid, having different processes and criteria for making them are not. Project valuation, prioritization, and selection need to take place in a holistic environment where the likely impact and interdependencies can be understood. Can an ad hoc decision-making process take into account the ripple effect of its actions on other business units, or the organization as a whole?
In a fragmented decision-making environment, not only will the processes vary, but decisions will rest on diverse criteria. This is the exact opposite of a holistic approach to PPM.
Complexity Busting
The best-in-class project-selection process reduces complexity. It accelerates good decision making. Complexity is a problem all of us have to deal with. And it’s a problem that’s not going away anytime soon. The scientific law of entropy shows that the universe’s trajectory is toward disorder. We know from experience that sensory overload leads to lack of focus. What is relevant becomes indistinguishable from what is not. A well-documented, pressing issue for businesses is coping with ever-increasing complexity. There are hidden factors and unintended consequences as the systems we build become more capable and sophisticated. This is why a holistic view of the entirety of portfolios is necessary for a successful outcome. We must be able to see what’s hidden by complexity in the same way a functional magnetic resonance imaging device reveals internal organs of the human body.
Continuous improvement and process simplification is an ongoing task. Any project selection process should be made up of inputs and outputs to achieve a stated goal: the right mix of projects in a portfolio. However, without a defined process, inputs and outputs become random, ineffective, and confusing.
When a defined process is implemented well, the return can deliver dramatic payback. In our next post we will explore payback on Product Portfolio Management and the three key areas in which return on the investment from PPM comes from.
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Related Reading:
The Key to Faster, Better Decisions in New Product Development
Managing Risk in New Product Development
Three Things to Consider When Choosing Product Portfolio Management Software
