We’re often asked, “What’s the best metric for portfolio management?” Executives and managers who oversee new product portfolios want one metric that will tell them, and their superiors, how their portfolios and the initiatives within them are doing. They want one indicator they can rely upon, whether in formal portfolio reviews or informal discussions. But there is no one right metric for all companies or all types of portfolios. In some cases, net present value nicely summarizes the financial case for each opportunity. In others, a simpler metric such as market size is useful (and may be all that is available anyway). Still other portfolios are best assessed using attractiveness scores rather than any hard financial criteria at all.
Don’t judge this book by its cover; take a look inside!
There is one common thread across all these situations: As the cover of a book hints at what hides within, a metric provides a glimpse into fundamental outlines—the potential value, cost, and risk—of an initiative. And just as it is hasty to judge a book by its cover, a metric is not a replacement for a deeper description or fuller assessment.
So when the metric tantalizes (or raises concerns), where should you turn for more information? The mistake many companies make is to jump straight from metrics into detailed business cases. As I’ve said before, long-winded business cases come with a lot of freight and generally little benefit. They’re tedious to write, out of date the moment they’re completed (and sometimes before), seldom read, and even less frequently updated as a project proceeds. During a portfolio review or in the heat of a discussion, it can take precious minutes—or longer—to comb through the business case for the assumptions that underpin a pricing forecast or market size estimate. Worse still is when the search comes up empty, because the key assumptions are not stated in the supporting documents at all. At that point, the review is pointless. Without the key assumptions, the portfolio review team has no way to understand what the metric actually means—or whether the initiative is worth supporting.
If the metrics and the business case are to support a productive, substantive portfolio review, the most important assumptions underlying each business case and each metric must be instantly available, stored within easy reach of executives and analysts. That means giving thought not just to the assumptions themselves, but to how they’re accounted for in your portfolio analysis systems and processes.
When deploying the Enrich Analytics Platform for clients, we make a point of ensuring that key assumptions and the data they’re built on are one click away at all times, even from a top-level corporate summary. Succinctly described and conveniently accessible assumptions enable conversations, whether at the division or corporate level, to dip into project specifics, giving executives more information about (and ultimately more confidence in) the business cases summarized in project and portfolio metrics. When executives are skeptical of the project metrics given in the portfolio, instant access to key underlying assumptions will keep the discussions moving in a productive direction—and perhaps suggest how metrics might be usefully redesigned.
Here are just a few examples of assumption types we’ve configured into Enrich Analytics Platform input forms for clients over the years . Which of these should you be tracking to add legitimacy and depth to your portfolio metrics?
| Competitive Landscape | A list of current and expected competitors to your product, including expected launch dates, current share, and product attributes. Contrast these figures with your estimate of share for the product in development. |
| Pricing Guidelines | A comparison of your product’s price with the pricing of current competitors, including your existing products whose sales may be affected. |
| Reimbursement Guidelines | A table summarizing the reimbursement outlook by region or country. This can represent a critical assumption when a product is dependent on insurance reimbursement for revenues (as is often the case for medical products. When reimbursement is an issue, pricing is also key, since insurers are unlikely to pay more for your therapy if other therapies adequately address the same ailment. |
| Product Quality | How does your product shape up against the competition across key product dimensions? For example, medicines consider attractiveness across specific attributes including safety, efficacy, and ease of administration. |
| Market Segmentation | What is the total market population, what segments should this population be divided into, and what filters must be applied to each segment to estimate the market share of your product? |
| Value Proposition | What is the value proposition for target customers? Will the product be the cheapest available, the easiest to use, the most powerful, or the most stylish? Be on the lookout for value propositions that change over time as a project progresses through the development life cycle. |
| Key Risks | What are the largest risks to the project meeting the next milestone’s goals? Which current activities are mitigating these risks? |
Here’s one more key lesson we’ve learned: When you’re developing a format to capture assumptions and supporting data, be as specific as possible. Provide carefully worded questions and text fields that require a structured response rather than just offering free text fields that invite generic descriptions or comments. Organize your text fields to capture specific pieces of information for every initiative. For example, the target product profile (TPP) table in the Enrich Analytics Platform screenshot below includes specific product attributes; completing it for the product in development, the current standard of care (SOC) in the market, and the standard of care that may be emerging can provide important insight into the likely value of your new product.
Available with a single click within one client’s Enrich Analytics Platform, the product profile tab gives context to the pricing, market size, and market share goals set for this project.
Further, your project teams should know how management expects assumptions to be presented, whether in a table such as this or in some other format with clearly defined parameters and inputs. Should information be presented in numeric form, in short phrases, or in paragraphs with supporting citations? If still more detail is needed for the type of reviews being held, add additional tables or follow-up questions to the standard project input forms. Just remember—the goal is not for project teams to replicate a 20-page business case, but rather to provide clear, succinct statements about key project assumptions. Those assumptions should, in turn, justify the inputs for each project that are used to calculate project metrics such as net present value.
There’s a “Goldilocks zone” for reporting key assumptions at the portfolio level: A 20-page business case is too much and dilutes the critical details in a sea of minutiae. On the other hand, if the assumptions are absent from the presentation altogether or too vaguely presented, each metric is like a cover without a book. Exactly where that Goldilocks zone is, though, differs for each business and each portfolio review process.
The Enrich Analytics Platform is designed from the ground up to accommodate a fluid mix of project inputs, the resulting project metrics, costs, milestones, and key assumptions. After more than a decade of working with teams to enable effective portfolio reviews, we have extensive experience helping companies produce “just right” assumptions reporting across a wide range of industries and project types. Contact us to talk shop about the assumptions your project teams should be capturing along with key metrics.
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