"Portfolio management for dummies"

Cambridge Product Management Network
Portfolio Management for
Dummies
Andrew Dickenson
Thanks to our sponsors

© Product Focus www.productfocus.com
Agenda
 Introductions
 Portfolio Management for Dummies
 Questions & Answers
Andrew Dickenson
Founding Director
2

Product Focus – who are we?
Europe’s leading product management & product marketing training business with
a focus on technology-based products
3
Video testimonials Training Reviews & assessments

Free resources on best practice
4
Sign-up at: https://www.productfocus.com/resources/
More than 21,000 readers

May 3rd & 8th
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Product lifecycles and how to use them to make decisions
Software tools for product managers
7 things you can do to put product management in the driving seat
Roadmaps in an Agile world
Creating a strategic product plan
Upcoming webinars
5
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 Learn industry best practice
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7
Reviews and assessments
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| 8 of X |www.productfocus.com© Product Focus
Portfolio Management for Dummies
8

What matters varies by context
Well-funded
Risk averse Risk takers
9
Small portfolio Complex portfolio
Money’s tight
Yourbusiness
Immature market Mature market
Yourmarket
Shrinking Growing
Yourproduct
Needs tweaking
Needs massive
investment
Low profitability Highly profitable
Just launched Mature

Portfolio management – what’s the point?
 Portfolio management is used to
 Allocate budget & resources optimally between
multiple products
 Identify areas of potential improvement
 Balance the product mix to ensure profitability,
achieve short revenue goals & long term revenue
growth/sustainability
 Manage & balance risk
 Ensure alignment between the company’s products
and its corporate strategy.
 To show that you’re on top of things, have a
plan and a rationale about your decisions
10
We’re trying to avoid this!

Cycles and horizons – have you got the balance right?
11
Product Lifecycle
Horizon 3
Create genuinely new business
Horizon 2
Nurture emerging business
Horizon 1
Maintain and defend core business
Time
Value
Gartner – 3 horizons of growth2
1

What’s the target – market share, revenue or profit?
12
 Before you start thinking about portfolio analysis you need to know what you’re
trying to achieve
 Usually
 Market share growth / target
 Revenue
 Margin (profit)
 Hopefully one of these, sometimes two of these, sometimes all three!

Product lifecycle – market share, revenue or profit?
13

Product lifecycle – market share, revenue or profit?
14
Market
share
Revenue
Profit

Source : McKinsey’s Three Horizons of Growth
Three Horizons of Growth (company or product level)
15
Horizon 3
Horizon 2
Horizon 1
Time
Value
10%
20%
70%

Source : McKinsey’s Three Horizons of Growth
Three Horizons of Growth – Facebook example
16
Horizon 3
Horizon 2
Horizon 1
Time
Value
Mark Zuckerberg presenting Facebook’s 10-year roadmap in 2016

Tools to visualise the portfolio – is the balance right?
17
Invest / take profit / focus / exit ? Is the risk acceptable ?
General Electric / McKinsey MatrixBoston Consulting Group Matrix Ansoff matrix

BCG Matrix – portfolio visualisation – investment profile
Developed by Bruce Henderson,
Boston Consulting Group, 1970
18
BCG (Boston Consulting Group) Matrix

19

20
Circle size represents revenue

Poor economies of scale
Ride
the
growth
wave
21

BCG Matrix exercise
 Split into teams based on market growth rate
 e.g.
 Team 1 – market growth rate up to 20%
 Team 2 – market growth rate up to the maximum of all attendees
 Mark your products on the template
22

What to do with products – GE Matrix
23
Potential factors
Market Attractiveness:
The size of the market & rate of growth
Potential profitability
# of competitors and their strength
Barriers to entry
Risk e.g. volatility, longevity
Business Strength:
Current market share and its trend
Knowledge or IPR (Intellectual Property Rights)
Distribution channels
Brand reputation
Technology (not just IT)
Competencies
Quality
Innovation
Cost structure
Assets

GE McKinsey Matrix – so what?
24

Recognising risk – Ansoff matrix
25

Example – what conclusions would you draw?
27
Product revenue

Step 1 – Per product view from Product Manager
1. Bottom up view of product revenue for next 3 years
2. Build on basis of relevant revenue drivers – examples include:
 Sites @ xyz $
 Customer @ xyz $
 Transaction@ xyz $
 Users@ xyz $
 Capacity etc. @ xyz $
3. For each revenue driver state the revenue assumption (and what it’s based on –
market, real data, single customer, gut feel etc.)
28
Annual revenue
Product 18/19 19/20 20/21
Product A 0.22 2.16 3.50
Product B 0.03 0.30 0.48
Product C 0.01 0.14 0.24
Product D 0.08 0.60 0.52
Total revenue target € 0.34 € 3.20 € 4.74

Step 2 – Perform peer review (group session)
1. Do a product by product peer review of each teams’ input
2. Do the assumptions sound realistic, do you have any conflicting assumptions
or information?
3. Would you change anything you have produced on the basis of this data?
4. Document all assumptions / estimates and other reference information
5. Capture actions / suggestions to try and validate the assumptions
 Ask Sales for insight
 Look at marketing data
 Audit customer implementations
 Do competitive analysis
29

Step 3 – Consolidate for aggregate view
1. Take the peer reviewed data and create
an aggregate view
2. Map on the corporate target including
the Year on Year (YoY) revenue growth
objective
3. Add in any other known revenue lines:
 Subsidiaries
 Acquisitions
 Other products with stated plans or
business cases e.g. replacement products
 Other custom work / solutions business
30

Step 4 – Review the gap
1. How big is it?
2. What growth assumptions for individual products would be
needed to meet it?
 i.e. if all products could achieve 20% growth above assumed
revenue will the gap be closed
3. Are there any products currently outside of product
management’s control that could help close the gap?
4. Any new concepts that could have material impact in year 3
...could they be accelerated?
5. Any in-organic scenarios ( Mergers or Acquisitions, M&A )
that are factored into this?
31

Step 5 – Top down / bottom up validation
1. Looking at year 3 delta
2. Top Down
 What market data is available to support these markets sizes?
 Are there geographies / countries or regions that could be targeted?
 Any insight or trends in the market that could be considered – self service, digital enablement, free
trials, transaction based charging etc.?
 What are the competition doing?
3. Bottom up
 Looking at the revenue numbers (and growth to close gap) can the business deal with the implied
volumes
 Do we have the sales / marketing capacity to generate and service leads?
 Can the delivery teams deliver that many?
 Any scale or operational / capacity limits that would impact feasibility?
32

Step 6 – Agree plan for addressing the gap
1. Final brainstorm on the options for addressing gaps e.g.
 New services?
 Refocus resources and accelerate growth for key products?
 Stop certain services to free up investment and resources?
 Changes to commercial approach – pricing models?
 What USPs do we have that could be disruptive in market or drive revenue growth?
2. Review and prioritise them, based around agreed view of impact
3. Investigate and plan top 2
33

Summary – portfolio planning for dummies
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 Use tools to visualise the portfolio
 Agree the criteria for scoring the portfolio of products
 Have a common process for evaluation and prioritising investment in the portfolio
 Take the long view – what are the trends that will impact your portfolio and how are you
preparing to take advantage / avoid being crushed by these
 Focus your resources on the best opportunities

How we can help?
Public Courses
 Run every week or two
Private on-site training
 Delivered when and where you want
 Focussed on your issues e.g. a workshop on portfolio planning
Reviews and assessments
 Practical recommendations on how to implement world class product management
Product Management Leadership Forum
 An exclusive 1-day workshop for product management leaders focused on how to
develop world class product management
35

Q&A
www.productfocus.com
+44 (0) 207 099 567
36
andrew.dickenson@productfocus.com

"Portfolio management for dummies"

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