Making better portfolio decisions
With a portfolio of products or R&D programmes, the situation is a lot more complex than simply determining the best strategy for each asset. Most people have more good ideas than money to fund them all. And the trade-offs are not straightforward:
- What is the right balance of near-term revenue potential to long-term value?
- Which is more valuable: a simple low-risk, low value product improvement? Or a high-risk early-stage innovation with blockbuster potential?
- If we had more resource, where should it be deployed to create maximum additional value?
- How does that compare with other investment opportunities within the company?
- Conversely, if we have to cut back on resources, where will we do the least damage?
- What does what we might learn from one project tell us about the prospects for another? And how can we exploit this to add value?
- How do we de-risk the portfolio?
These questions require a strategic approach to managing the uncertainty in the portfolio. This goes far beyond traditional portfolio management that merely emphasises the management of the resources it consumes.
A recent example
...had me designing and implementing the franchise strategy and planning process for a mid-tier pharmaceutical company. Working with the in-house project teams, I developed a clear understanding of the uncertainty in the portfolio and evaluated the likelihood that the existing portfolio would fulfill the company’s growth ambitions. We also evaluated growing the portfolio by licensing in new compounds and/or acquiring other companies. I was engaged with the company over several years, first doing the analysis, then training and mentoring an in-house team, and finally just troubleshooting the really difficult (and, for me, the more interesting) problems.