Gain Perspective with Portfolio Analysis

In many organizations, the end of the calendar year is an important milestone for assessing performance. This likely involves updating and reviewing key measures for each service or product.  This can be very helpful, but don't stop there.  Take another look at the entire group using a Portfolio Analysis.Traditional Focus:  Typical year-end and milestone reviews of performance focus on each individual service or product, and sometimes small groupings comprising service lines or product lines.  These reviews usually focus on evaluating trends, comparisons to budget, and checking the reasonableness of projections for the coming or remaining fiscal year. The measures under review may include volume, revenue, customer satisfaction, market share, and/or profitability.  This provides valuable information on the performance and potential of each service or product.  But now go one step further.

A Different Viewpoint:  Take another look at the entire group using a Portfolio Analysis. A Portfolio Analysis is essentially a single scatterplot where you use two measures (market share and market growth rate, for example) to plot the performance of each service or product. The graph is easy to construct; you can read more and see an example under the Information & Analysis Services listing on my web site.

Different Insights: This scatterplot is also divided into four equal size quadrants, making it easier to differentiate what performance is like in each area of the graph. For example, the upper right quadrant may be associated with high market share and high overall market growth. You might think that this is where you want all your services or products to be. But think of your graph as drawn on a table with a single center-post leg, and each of your plotted product or service points as having weight. If they all end up in the same area of the table at the same time, it will tip over. Instead, balance is the key. For long-term sustainability, it is better to have services and products in different quadrants of the Portfolio Analysis at a given time. For example, end of life-cycle products or services (bottom left quadrant) can be discontinued to free up the human resource and intellectual and financial capital needed by high growth offerings (upper right quadrant).

A Little Now for a Lot Later: Are you moving toward the unsettled state that comes from having most of your products or services “clustered” in one or two life cycle stages or market maturities? What can you do in the coming year to purposefully move toward a more balanced portfolio, with smoother operations and enhanced sustainability? As scarce as time may be, taking a little time now for a broader view of your portfolio may save you a lot of time (and a lot of headaches) later.

If you would like help applying the higher-level perspective of Portfolio Analysis in your work group or organization, contact me at your convenience.

Happy Holidays!

Jeffrey Schilling