This is the second post in our series on doing more portfolio management with less project data. You’ll find the whole series here.
Data needed at each level of portfolio management. The only required data are the three items in the orange Beginner box. How much further you go depends on your people, your portfolio, and your goals. See the first post in this series for more information.
Getting Started: Beginning Portfolio Management
If you’re just starting out in portfolio management, the first step is compiling a list of your company’s active projects. This foundation will get you on the right track for basic portfolio management. Simply compiling this master list will lead to portfolio-enhancing conversations with your management team as you identify projects that can be combined, deferred, or shut down altogether.
But building a master list for the first time will require persistence. Don’t send out a spreadsheet and expect a crystal-clear list of all initiatives to arrive in your inbox. Ferreting out every project is deceptively difficult. Some projects are higher profile than others; many companies have a large number of under-the-radar, skunkworks projects, and even zombie projects that have been formally canceled—sometimes more than once—yet somehow refuse to die. You might also encounter more than a few redundant projects. Getting to all this information generally requires a combination of top-down assessments (where you ask each division or department to list its ongoing initiatives) and bottom-up investigative work (where you canvass teams to find out what they are working on day to day). Taken together, the dossiers you build from these two sources will produce a complete picture of what is ongoing at your firm.
Creating a Structured Inventory
Once you have that complete list, you’ll need to structure it in a way that makes the data useful and supports some initial analysis. Following a couple of key practices will help you develop that useful structure.
Develop a consistent, unique naming scheme for projects. Whether you have 10 projects or 200, it’s important that your entire organization is on the same page with project names. A consistent naming scheme, whether it uses ID numbers or a combination of a title and a unique ID number, will help head off misunderstandings about project status, funding, and other information. At the least, it’ll help you manage portfolio reviews. You’ll probably receive dozens if not hundreds of project updates as you compile your initial portfolio database and then, under deadline, update it for subsequent portfolio reviews. A naming scheme is critical to keep everything clear as all that information rolls in.
Classify your projects. Portfolio management is not only about building value; it is also about finding balance. To understand what you’re balancing, you need to classify your projects. For example, you need to distinguish projects that generate short-term returns from long-term moon shots, or balance projects across multiple strategic goals. What classifications you use ultimately depends on your company’s needs and the management team’s preferences—you can classify projects across two dimensions or two hundred. If you’re just starting out, we recommend a basic set of classifications:
- Project value type or objective (e.g., cost savings, revenue, safety, regulatory compliance)
- Primary project activity (e.g., product development, manufacturing yield improvement, product feature)
- Project product area, division, or functional area
- Strategic goal or goals relevant to the project
There are plenty of other classifying fields that can be useful, such as project status, project phase or stage, project manager, or region, but don’t try to gather them all up in one go. Start with a modest set of classifications that can be compiled easily as you build your initial inventory of projects. Portfolio management is a journey, not a destination—you can always add more fields later as your decision-making needs become clearer (and isn’t that the reason you’re doing all this in the first place?).
For each classification, think carefully about the allowed options. Devise a list of possible options that are mutually exclusive but collectively exhaustive, capturing all of your portfolio’s projects without creating overlap or duplication. For example, a ‘Project Origin’ classification could have the options ‘Internal Research’, ‘Acquisition’, ‘Partner’, ‘Existing Customer Contract’ and ‘Unknown’.
Making It Useful—The Innovation Landscape
Now you have a big list of projects with a few pieces of information about each of them. If you have more than a dozen projects, looking at all of this information in a spreadsheet will probably do little more than make you a bit dizzy. Here’s your first opportunity to get value from basic portfolio management: Your master list of projects can be rendered as an innovation landscape, which can help you identify:
- Redundant projects that can be consolidated or pared down
- Product areas languishing with a dearth of projects
- Product areas suffering from too many initiatives
Innovation landscapes are bubble charts whose axes are defined by text categories rather than numbers. Like a roulette table, an innovation landscape shows where the company is placing bets across divisions, regions, technology platforms, long-term vs. short-term revenue, and whatever other classifications you’ve chosen to track.
If your company is new to portfolio management (and sometimes even if it isn’t), the innovation landscape can be a revelation. It can illustrate graphically how your current projects align with divisions, product lines, or strategic goals. This kind of concrete visualization is an important first step toward better alignment of projects with goals. Often, the insights gleaned from an innovation landscape, together with the ability to identify project overlaps and synergies, more than justify this first level of portfolio management.
For example, look at this innovation landscape with about 250 research and development activities. The activities have been classified by market/product area on one axis and strategic thrust on the other. Several critical insights jump out from the landscape, like headlines:
- Most projects are focused on defending existing areas
- Few projects are aimed at generating new growth in new markets
- Most projects relate to Offering 3 (not coincidentally the largest source of revenue for the company today)
An innovation landscape for a portfolio of about 250 projects. This kind of visualization can quickly reveal critical strengths and weaknesses in the existing project portfolio.
Taken together, the project inventory and the innovation landscape let you answer several critical questions about your company’s portfolio:
- What are we working on?
- Where are there redundant projects?
- What areas are burdened with too many projects?
- What areas need more projects to support growth into the future?
Answers to these questions are tremendously valuable when you’re allocating precious R&D funds, and the time of your best and brightest people, to portfolio initiatives. The answers, and the data gathered to generate them, also set the stage for the next phase of portfolio management—for a glimpse of what that looks like, see the next post in this series.
At Enrich, we have deep experience helping companies benefit from portfolio management at every level of maturity. From startups with early-stage research portfolios to the largest life science companies on the planet, we’ve deployed processes and tools that help them all make better investment decisions. If you’re interested in learning how our tools (Viewport and the Enrich Analytics Platform) can help you level-up on your portfolio management process, drop us a line.
