We’ve all seen the problems that product teams face with how they run their portfolios of initiatives. But, even when a team starts with a clear and focused road map and well aligned stakeholders, reality has a way of intervening. New opportunities arise. Customer needs change. The initiatives that were included in the portfolio at the start of the time box cease to be as relevant as other initiatives that were not included in the portfolio.
Many problems product teams have with the initiatives and products they include in their portfolio are caused by the breakdown of the planning process at the exact moment it is needed the most.
Start With Strategic Anchors, Not Feature Lists
Your portfolio planning process is only as strong as the connection to your business strategy. This is a principle that is obvious but for some reason almost never put into practice. Most teams begin with the list of features they want to build, and then attempt to retroactively justify them within a strategic portfolio of projects.
Start With Strategic Anchors. The basis of portfolio planning is strategic and if this component breaks down then the whole of portfolio planning breaks down too. There are three strategic anchors for the application at hand: Market position goals define where you need to be in 12-18 months to win. This drives portfolio allocation between innovation, optimization, and competitive response. Without clear positioning goals, you’ll spread resources too thin across competing priorities.
Market position goals for 12-18 months. These will define how you want to position yourself in the market to win. They will determine the split between innovation, optimization and competitive response and will guide the overall portfolio allocation.
Even a deeper investigation into the resources of your teams and departments will not uncover all of the hidden constraints. There is a lot more to building a successful product than simply having the money to spend and the right number of people on your team. You need to take into account the amount of technical debt that currently sits across your product portfolio, the limitations of your current platforms and the specific organizational constraints around bringing in new people, etc. As a result, just because you have the budget and the headcount does not automatically mean you can spend it.
Second, when evaluating whether to include a product or service in your portfolio, use the success metrics that matter for your strategic anchors. In other words, if your market position goals are focused on growing revenue from current customers, then the success metrics that matter are growth in terms of revenue from existing customers. Also, be sure to include in your evaluation the opportunity cost of including the product or service in your portfolio – in other words, what other good alternative would you have to forgo in order to invest in this product or service. I recommend that you maintain a list of declined opportunities, in addition to a list of approved opportunities, in order to understand the alternative options that you forgo when you invest in a particular product or service.
Once you have established your strategic anchors, the rest of your items can fall into place. Items brought up by stakeholders can be quickly evaluated against the company’s goals. If an item is not aligned with the market position goals or does not fall within the bounds of available resources then it would not be considered for inclusion.
Build Prioritization That Survives Contact With Reality
While ideal prioritization methods are based on several assumptions, those methods do not hold in most real-world product development environments. Thus, product managers cannot truthfully apply most prioritization tools to their portfolios.
Use Rolling Time Horizons
When planning a portfolio of projects to work on, the typical way to structure a plan is to work within three time horizons, or Rolling Time Horizons. The near-term horizon, typically the next quarter, contains the most detail for a feature by feature basis for near-term execution. The medium-term horizon, typically the next 12 months, contains a set of themes, each with rough estimates for the required resources to implement. The long-term horizon, typically the next 2-3 years, contains the organization’s strategic bets and required capability build-out to achieve strategic objectives.
Having the ability to make changes to the details of your roadmap whilst keeping the vision intact is important for surviving in today’s fast changing world. I’ve seen teams down for months (or even years) because a change in the market required a change in the long-term vision for the portfolio, but the near-term roadmap was too detailed and took months (or even years) to rewrite.
Weight Opportunity Cost Heavily
Every portfolio decision has a cost of other not selected projects. These costs are usually severely underestimated because of two reasons: First, declined opportunities are not visible to anyone as opposed to projects that have been approved and are running on a daily basis and receive most of the attention. Second, it is hard to estimate the potential value of a not selected project. Therefore, a backlog of not selected projects should be maintained in addition to the backlog of approved projects. This way, when priorities are changed and new opportunities surface, there are already projects in the backlog that have been reviewed before
The same could be said of the portfolio of products: if one were planning a portfolio of projects, it would be very helpful to have a list of declined projects as detailed as the list of currently-executing projects. Then, as priorities shift, all of the previously-considered options would immediately be available for reevaluation.
Make Roadmapping a Continuous Process
Typical teams run a roadmapping process at the start of a quarter and then treat the roadmaps as ‘locked and dairy’ for the rest of the quarter. This is too slow for today’s fast changing market to respond to market movements, competitive actions or customer feedback.
My weekly portfolio review helps me to keep my direction on track. I review how we are doing against the strategic “anchors” that we set, discuss any new information that may affect our strategic bets and make some portfolio “resource allocation” decisions as required. All of this can be done within an hour and it is focused on making the few key decisions required to keep us on track. All other status updates are best handled through a good set of dashboards.
It is also very important to log all of your decisions and the reasoning behind them. When you come to review your portfolio decisions at a later time, it will be very useful to have all of the relevant information at your fingertips to determine why you made certain decisions and to check that your current portfolio is on track to meet your objectives.
In very complex portfolios with a large number of products, it is advisable to use a dedicated product portfolio planning platform in order to support the planning processes and to make the complete product portfolio structure transparent.
Align Execution With Portfolio Strategy
Scaling the above processes for a large number of products in a portfolio across different locations is challenging. The biggest challenge is the gap between the above planning process and the execution of the strategies and goals of individual products on a day to day basis by local product teams. Most product teams are optimized for local performance and make decisions that are in the best interest of their product. In many cases, these decisions will create conflicts with other products in the portfolio. Those conflicts can only be resolved at the portfolio level. However, by the time between the local decisions and the realization of the conflicts at the portfolio level is often too long to do anything about it.
Each team’s work should contribute to the success of the portfolio. This requires more than communicating the high-level priorities of the portfolio and the strategic goals of the company. Each team needs to have clear guidance on how to make trade-offs between optimizing for their local product and contributing to the broader goals of the portfolio.
Hold cross-product meetings on a regular basis. In these meetings, it will become apparent where the local optimum of a product conflicts with the optimum of other products in the portfolio.
Scale Through Systems, Not Just People
Growth of a company leads to an attempt to replicate portfolio planning with more meetings and more people involved in planning. Unfortunately, this only leads to more overhead in terms of time spent in coordination, but no better decisions are made.
Create systems that will deal with most of the portfolio’s day-to-day decisions, and have them highlight the rare exceptions when input from other stakeholders is required. Establish clear decision rights (who makes what type of decision and when), and use these to obviate the need for tedious rounds of consensus seeking when making decisions, particularly those that are mundane and occur frequently. Similarly, for the factors that you will use to make your portfolio prioritization decisions, establish a small set of criteria that you will use to make your decisions, and which will guide your portfolio prioritization on an ongoing basis.
The goal isn’t perfect plans.
Improve your portfolio prediction over time. Use your portfolio prediction as input for your analysis on how well your portfolio prediction matches reality. So if you’re constantly wrong about say new product initiatives then update your evaluation criteria for new product initiatives.
Scaling your portfolio planning to meet the growing complexity of your company does not have to mean having to create ‘perfect’ plans for the future. What is far more important is to create a system of feedback loops that improve your planning over time. Tracking the performance of your predictions against actual results will highlight where you are consistently wrong with certain types of initiatives. Reviewing your evaluation criteria for these ‘problem children’ will help your team to adapt quickly to any inaccuracies in your planning. This is how successful companies thrive in uncertainty – and fail when subject to the same uncertainty.
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