The Practical Side of Portfolio Management

Mike Smart: Principal Nils Davis: Principal Consultant

About Pragmatic Marketing

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!   Experts in technology product management and product marketing

!   Specialize in training

!   Trained hundreds of thousands of people at thousands of companies since 1993

About the Presenters !   Mike Smart

• Is founder and principal consultant at Egress Solutions, Inc., helping companies such Vista Equity Partners, NetApp, Apttus, BigMachines, VMware and others implement the Pragmatic Marketing Framework™.

• 25 years of high technology industry experience in a variety of roles including consultant with Pragmatic Marketing Inc.

!   Nils Davis • Is a principal consultant at Egress Solutions, Inc.

• 22 years of technology industry product management, including leading the Accept360 suite of product planning and portfolio management products.

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Webinar Objectives

!   Understand need for product portfolio management •  What is portfolio

management?

!   Provide a toolkit of analytics and techniques

!   Ensure your product pipeline is delivering value short- and long-term

Context: 50% Failure Rate

50% of all new products fail AMR-Gartner Survey 2009

46% of all R&D dollars is spent on cancelled or failed products Winning at New Products, page 9

More than 80% of corporate executives are unhappy with their company’s innovations, which is driven by (1) lack of customer relevance and (2) speed to market Accenture Innovation Survey, 2009 Innovation management breakdown is

the 2nd cause of growth stalls Harvard Business Review - “When Growth Stalls” - March 2008

Study after study puts the failure rate of mergers and acquisitions somewhere between 70% and 90% The Big Idea: The New M&A Playbook, by Clayton M. Christensen, et al, HBR March 2011

Case Study: Linchpin Internet

Challenge

§  Acquisitive – 19 products in 10 years

§  De facto solution in

some segments

§  Over time profits and market share have declined

Internal use only

Solution

“We are actively not selling an important new capability because it’s embarrassing”

— Senior Sales Engineer

§  Apply portfolio analysis

§  Identify opportunities to

revitalize existing products

§  Identify new product opportunities

Keeping the Wheels on the Internet

Growth-Share Matrix

0%

20%

40%

60%

80%

100%

120%

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40

Mar

ket

Gro

wth

Relative Market Share

Linchpin Growth-Share Matrix

Mobile Widgets Widget Testing

Widget Mobile Plus

Widget Monitoring Widget Code Analysis

Growth-Share Matrix

0%

20%

40%

60%

80%

100%

120%

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40

Mar

ket

Gro

wth

Relative Market Share

Linchpin Growth-Share Matrix

Stars Question Marks

Cash Cows Dogs/Loss Leaders

Mobile Widgets Widget Testing

Widget Mobile Plus

Widget Monitoring Widget Code Analysis

Growth-Share Matrix

0%

20%

40%

60%

80%

100%

120%

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40

Mar

ket

Gro

wth

Relative Market Share

Linchpin Growth-Share Matrix

Stars Question Marks

Cash Cows Dogs/Loss Leaders

Mobile Widgets Widget Testing

Widget Mobile Plus

Widget Monitoring Widget Code Analysis

What Did We Learn?

!   There is a “cash cow”

!   No new product pipeline (no “question marks”)

!   What we need from a new product

!   What we need for the existing products

!   Don’t wait until there’s an emergency!

Linchpin Is Not an Outlier

!   Most product portfolios •  Too many products/projects •  Too few high-value products in the

pipeline •  Not balanced across risk and

value •  Don’t align with the organization’s

strategy •  Don’t deliver the value they could/

should

•  (Data shown is from Robert G. Cooper, 2013)

Expected  revenue  from  new  products  in  two  years  =  ~50%  

Actual  investment  in  new  products  today  =  ~6%  

What is Portfolio Management?

!   Objective: Determine the optimal product mix and product investment to achieve our business goals

!   Use R-W-W analysis: •  Is it Real? •  Can we Win it?

•  Is it Worth it?

High Value, High Impact

!   Maximizes the return on your product innovation investments

!   Maintains your competitive position

!   Achieves efficient and effective allocation of resources

!   Forges a link between project selection and business strategy

!   Should be hygiene

When Do I Start? !   Immediately

•  If you have two or three products in production

!   The big questions •  What are my

organization’s goals? •  Where should I invest,

and how much? •  How are the products

doing?

!   Need to be able to assess: risk, value, cost, time to market, revenue, profitability, go to market

How Do I Do It?

!   Analyze current state •  Am I on track? Off track? •  Tools and charts

!   Plan for future state •  Where am I going?

•  Investment profile and allocation

•  Pipeline •  Kill/feed decisions

Analyze – The Toolkit

!   Growth-share chart

!   Pragmatic Marketing Solution Matrix

!   GE-McKinsey chart

!   Bubble charts

!   Project management-type visualizations

GE-McKinsey Multifactor Portfolio Matrix

Protect Position  §  Invest to grow at maximum

digestible rate  §  Concentrate effort on

maintaining strength  

Invest to Build  §  Challenge for leadership  §  Build selectively on strengths  §  Reinforce vulnerable areas  

Build Selectively  •  Specialize around limited

strengths  •  Seek ways to overcome

weaknesses  •  Withdraw if indications of

sustainable growth are lacking  

Build Selectively  §  Invest heavily in most attractive

segments  §  Build up ability to counter

competition  §  Emphasize profitability by

raising productivity  

Selectivity/Manage for Earnings  

§  Protect existing program  §  Concentrate investments in

segments where profitability is good and risks are relatively low  

Limited Expansion or Harvest  §  Look for ways to expand

without high risk; otherwise minimize investments and rationalize operations  

Protect and Refocus  §  Manage for current earnings  §  Concentrate on attractive segments  §  Defend strengths  

Manage for Earnings  §  Protect position in most profitable

segments  §  Upgrade product line  §  minimize investment  

Divest  §  Sell at time that will maximize

cash value  §  Cut fixed costs and

avoid investment meanwhile  

Bubble Charts

!   Good for status and planning

!   Can visualize four dimensions at once: •  X, Y location •  Bubble size

•  Bubble color

!   Create in Excel or other tools

Project Management Visualizations

!   Gantt charts

!   Roadmaps

!   Resource usage and allocation

!   Now we’re starting to cross into management, not just analysis

Product Portfolio Planning !   Resource and investment

allocation to assure the future

!   Build product pipeline

!   Planning criteria •  Diversification •  Risk •  Value •  Capacity

!   What to kill, what to keep, what to double down on •  Kill underperforming

products •  Kill promising products –

you can’t do them all!

Pipeline  

Resource  Assessment  

Market  Trends  

Strategy  

Not Just What to Do, But When

!   You can’t do everything

!   Overcommitting = certain failure

!   Grow new products to offset decline of old products

!   Visualization over time is valuable •  vs. resource capacity

Acquisitions

!   Can be fantastic for the portfolio •  Enable new products via

technology acquisitions •  Directly add new revenue via

product acquisitions •  Ideally, increases strengths,

reduces weaknesses

!   Using portfolio tools to help •  Understand the impact on the

portfolio •  Is it a cash cow? A question mark?

Or a dog? •  Include integration costs in due

diligence and planning

Stone  Widget  Tes:ng  

Mobile  Widget  

Management  

Linchpin  Widget  Tes:ng  

Linchpin  Widget  Solu:on  

Integrate  

Synergies  

Portfolio Innovation Model !   Use financial metrics wisely

•  Avoid expected value (EV = risk * reward) in early stages

•  Emphasize staged level of effort (LOE)

!   Use qualitative scoring in investigative stages

!   Iterative processes provide greater insight sooner

!   Apply more financial rigor later in lifecycle

!   Plan on several pivots

Preliminary Investigation

Fail-Kill Detailed Investigation

Fail-Kill Development Fail-Kill

Technical Success

Dec. Pt 4

Commercialize Fail-Kill Commercialize Success

Summary

!   High impact

!   Portfolio management = portfolio analysis + portfolio planning •  Reality-based •  Predicting the future

•  Balance risk & reward, align with strategy, capacity constraints

•  “Kill your darlings”

!   It’s hygiene - start now!

Need Help?

www.egresssolu:ons.net  www.productmanagement2.com    

Mike Smart - msmart@egresssolutions.net Nils Davis - ndavis@egresssolutions.net

Contact:

!   Contact Pragmatic: •  www.pragmaticmarketing.com/contact-us

•  Twitter: @pragmaticmkting •  480-515-1411

•  Rebecca Kalogeris rkalogeris@pragmaticmarketing.com

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