Task: Optimize Portfolio |
Optimize the portfolio by selecting the set of components that generate the most value and minimize overall portfolio risk.
Purpose
To regulate the transition of new work to the operational teams in a manner that promotes the balance of the overall portfolio against the set of strategic objectives, measurements, and targets To apply review and analysis techniques and models that can provide the required insight and effectively drive support systems and controls for executive decisions
Relationships
Roles | Primary: Product Portfolio Manager | Additional: Portfolio Analyst Portfolio Review Board | Assisting:
Inputs | Mandatory: Components List Consolidated Demand List Resources List | Optional: Product Roadmap Technology Roadmap | External: None
Outputs | Components List Portfolio Recommendations
Main Description
Develop and evaluate a set of potential portfolio scenarios, and select the set of components that generates the most value yet minimizes the overall portfolio risk. Validate and update the strategic targets and constraints against which the portfolio is balanced. Each target and constraint, in turn, represents a key dimension of the executive decision framework, such as these dimensions: Strategic objectives, such as time to market and cost leadership; Financial targets and metrics, such as return on investment (ROI), internal rate of return (IRR), net present value (NPV), and payback Capacity, in terms of personnel "headcount" (authorized staffing level) and facilities Technical and architectural constraints and objectives Risk tolerance thresholds Take the inputs to this task plus the strategic targets and constraints listed above to make recommendations to approve new work, reprioritize existing work, keep work as-is, or postpone or cancel components currently being worked on.
Steps
Validate and update portfolio metrics and targets
Understand and represent, as currently as possible, all of the conditions under which work is executed and the portfolio managed, so that the portfolio optimization can be performed in an effective manner. Update the portfolio targets and metrics to reflect changes in conditions such as financial constraints and market conditions. These can drive changes to the expected risk level, which can impact the portfolio risk tolerance, thresholds, and targets.
Develop or adapt portfolio analysis techniques and models
Modify the analysis techniques used to optimize the portfolio, as needed, to reflect the changes within the portfolio environment. For example, a sudden change to market demand might create the need to introduce a probability analysis (such as decision tree models) to support executive actions to temporarily divest a new platform, while understanding the impact on commitments made to critical customers. Another common source of change is rapid increases in the number of criteria needed to prioritize components, which might impact the design, structure, and weights of a scorecard.
Develop and evaluate portfolio scenarios
A common portfolio scenario is to accommodate a reduction in funding for a given fiscal year, in which case some work might be rescheduled for a following period. Another common scenario is to accommodate changes in market conditions and demands for a given product. Other scenarios to consider are the entry of new competitors in the market, potential withdrawal of an important supplier, and emergence of a new technology or platform. Any of those changes can cause substantial reduction or increase in the expected profitability of a given product investment. Understand the changes in conditions that might impact the portfolio, and develop corrective actions or required adjustments to the overall portfolio and its components to keep the balance of the portfolio optimal. Survey the internal and external conditions of the portfolio to identify such potential or actual changes. Develop a set of recommendations and submit them to the portfolio stakeholders and review board for consideration.
Generate and communicate recommendations to the portfolio
Make recommendations at the component level, for components to be approved, reprioritized or canceled. For example: Component A: Maintain as is Component B: Invest Component C: Retire Also, make recommendations of suggested assignments and responsibilities for the work in each component. Update the list of components to reflect changes in priorities, new components added, components put on hold, and so on. When the final recommendations are ready and documented in the required format, formally communicate those recommendations to the portfolio stakeholders and review board to ensure that all decision-makers are basing their positions and actions on common and validated information.
Properties
Multiple Occurrences |
Event Driven |
Ongoing |
Optional |
Planned |
Repeatable |
More Information
Tool Mentors | Reviewing Product Lifecycle Data with Focal Point
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