Business portfolio planning

12-14t20:59:38+00:ze product portfolio investments with business gic portfolio planning is the business process by which organizations determine the set of innovation and new product development (npd) investments they will fund—and those they won’t—to achieve their business lio optimization helps you strategically manage your product portfolio to make the right investment decisions, optimize the value of your portfolio, and allocate the most profitable use of l challenges companies express related to strategic portfolio planning and project portfolio optimization:“our portfolios and resources are not aligned with objectives and strategies. On extensive experience with many of the world’s leading brands, we advocate a four-stage process to overcome these challenges and develop mature processes in a company for strategic portfolio planning and project portfolio optimization to achieve exceptional results from innovation and npd four stage innovation maturity process model depicted above consists of:Stage 1: portfolio visibilitythis includes various levels of visibility starting with a tactical view of projects and initiatives in the portfolio for business leaders to conduct operational reviews of the portfolio to assess business or technical risks, and to identify red flags as early as way you can address any issue in the portfolio before it creates significant trouble for the organization. You will have complete visibility for portfolio reviews of timelines, costs, rewards, revenue trends over time, and portfolio 2: portfolio analysismanaging the portfolio is a business process with stakeholders working to make purposeful choices about where and when to invest resources for the future. It is no surprise that high-value projects often entail significant levels of leaders push the business toward more innovative products, it is important to ensure that the mix of investments is appropriately weighted toward high-value projects, with reasonable and known risk 3: strategic prioritizationmany companies have a tendency to think in “bottom-up” terms by creating an inventory of projects and rolling them up to look at their value or risk should rather consider a strategic portfolio planning approach to innovation planning, which represents a different way of thinking about both the planning process and the portfolio management should start with determining what the company’s strategies are, and then planning how to implement these strategies through effective strategic portfolio 4: dynamic planningcompanies need the ability to quickly adjust portfolios to respond to changing market and business can accomplish this by using product and project portfolio optimization to determine the best combination of innovation and npd initiatives and projects to meet your market and business an integrated strategic portfolio planning solution enables you to improve the speed and impact of decision-making across the entire enterprise innovation gic portfolio planning and project portfolio optimization solution capabilities enable you to identify optimal investment scenarios, ensuring fewer, bigger and better projects in your portfolio, and to align short- and long-term innovation and new product development activities with strategic priorities and financial targets. Simultaneously it offers an outstanding database for setting the correct priority of the projects within our innovation portfolio. Dieter jahn, senior vice president, university relations & research planning, more about how we can help you achieve better results with product portfolio planning and aperdownload "overcoming barriers to sustainable market differentiation – making product portfolio management real"onlearn more about sopheon’s accolade solution for your product portfolio ons? Us to discuss your needs with one of our product portfolio management solution specialistscontact us. 3 free articles planning the july 1986 lio planning has come a long way since it became fashionable in the late 1960s. Listen to these executives describe their experiences:“portfolio planning became relevant to me as soon as i became ceo. I just grabbed at portfolio planning because it provided me with a way to organize my thinking about our businesses and the resource allocation issues facing the total company. After two years of doing portfolio planning, i started to get concerned that the process of planning had become too onerous and in a sense had captured us. Concepts such as the portfolio grid and the product life cycle are very good in theory, but we found that they can get you into a lot of trouble if you really believe that what is theorized will actually happen. Ferguson, ceo, general comments reflect both the praise and the criticism often expressed today about portfolio planning. Yet while many continue to debate the merits of the method, no one has claimed that companies can succeed without coherent strategies and few companies are willing to abandon their planning systems altogether. Indeed, roughly three-fourths of the fortune “500” and many smaller companies with multiple product lines or services practice some form of portfolio planning. Thus rather than debating whether to plan at all, we need to understand how successful companies actually use (and modify) portfolio planning to their three years, i have studied how companies practice portfolio planning and have interviewed many chief executives, staff planners, and division line managers.

I have concluded that the companies that plan most effectively have learned these lessons:Strategy exists at several different levels, and planning affects the whole system—but no one planning technique or approach is sufficient to address all ng affects the whole organization, and the effects must be anticipated and managers need to clarify their objectives and adjust their expectations. Planning approach may have to change frequently to fit changing situations and levels of portfolio approach to strategic planning became popular in the late 1960s as a result of work done independently by the boston consulting group, mckinsey & company, and the strategic planning institute. Common to this work—as well as to subsequent studies—is the notion that a diversified company can best understand the performance and prospects of its different businesses by comparing them on several key dimensions. Armed with this information, the company can develop a classification scheme for its businesses that will aid it in making resource allocation decisions, formulating competitive strategies, and identifying sources and use of gh portfolio planning was designed to aid the overall strategy of an enterprise, in fact, strategy exists on three levels. Corporate strategy refers to decisions affecting what businesses the company will compete in and how it will allocate resources among those businesses. Widely diversified company has many different business strategies, and portfolio planning has a mixed effect on these. Yet if strategy is set solely on the basis of a business’s position on a portfolio matrix, problems may result. For example, portfolio planning typically recommends managing business units in weak markets for maximum cash flow. Melville, ceo of the norton company, said, “one of the biggest dangers of the portfolio concept is paying attention only to a business’s position on the matrix. Can also be misleading to equate market share and growth objectives with a business unit’s strategy. In short, portfolio planning can improve business strategy, but only when it is used cautiously and with other techniques for analyzing industries and lio planning has had its greatest impact at the corporate level, particularly in helping companies make divestiture decisions. The process of categorizing and ranking business units often throws light on likely disposal candidates—those units whose poor performance is rooted in weak market and competitive conditions. Equally important, portfolio analysis enables top managers to make divestiture decisions in a detached and calculated manner. Portfolio planning techniques highlight not only the low returns of poorly performing divisions but also their competitive standing and the prospects of their industries. Assuming that these are also weak, portfolio planning may then lead management to divest those divisions, with the result that the total company returns would rise three years after the introduction of portfolio planning, return on equity in the companies studied rose from three to six percentage points, largely due to divestiture of weak businesses. By helping make divestiture decisions easier, portfolio planning has strengthened the corporate strategies of many large, diversified gh portfolio planning is extremely helpful in deciding what businesses to sell, it is less useful in guiding management of companies’ internal growth and business development.

These executives indicated that, after several years of using portfolio planning, their companies were having problems generating enough growth and new business development opportunities. His vision lives on in ibm publications, which stress such goals as respect for the individual, customer service, and lio planning does little to add to such institutional goals. As a result, companies that already have clear institutional strategies must take care to adapt their planning efforts to reinforce their basic goals and missions. Companies lacking such strategies should not confuse planning with the institution-building activities that create great enterprise. Simply put, planning is not a substitute for top management leadership and lio planning can have some serious, unintended effects on the organization. The most important involve the mismanagement of mature businesses, the planning staff’s role, and the generation of growth most common problem with portfolio planning involves mature business units. This, in turn, can lead to divestiture of a previously healthy (albeit mature) business of the managers interviewed cited decisions to harvest businesses that inadvertently led, or nearly led, to the abandonment of those businesses. Ferguson, the ceo of general foods, said, “we had major problems in trying to run our mature businesses for cash flow. My managers would ask me, ‘don’t you want us to think about growth opportunities for our business? In retrospect, the concept of cash cow and mature business got in the way of both growth and innovation. Element of the portfolio approach has caused more heated debate than the role played by the planning staff. Jack welch, ceo of general electric, described the problem this way: “our planning system was dynamite when we first put it in. We then hired a head of planning and he hired two vice presidents and then he hired a planner, and the books got thicker and the printing got more sophisticated, and the covers got harder and the drawings got better. Last unintended effect of portfolio planning is that it often limits the thinking of managers in large companies and leads to conservative strategies. As one ceo observed, “i certainly didn’t intend for it to be this way, but we are now getting a lot fewer proposals to enter new businesses than when we started using the portfolio concept. First, portfolio planning conditions management to analyze a company’s existing businesses rather than new areas of opportunity.

The technique thus offers few insights into how to expand the scope of these businesses. Second, portfolio planning’s emphasis on market share often leads managers to define their markets as narrowly as possible to maximize their shares. While this approach can benefit business units that should concentrate on market niches, its use throughout a company can lead to a constant narrowing of the company’s business y, by placing undue emphasis on total costs and the odds against achieving high market share, portfolio planning can discourage managers and hinder growth. In contrast, new business development is usually accomplished through incremental development of many ming the e these potential drawbacks, most companies that adopted portfolio planning continue to use it. The most successful have overcome the drawbacks by modifying and adding to their portfolio analysis. These companies have taken care to address all three levels of strategy, found ways to control the organizational effects of planning, clarified their objectives in planning, and changed their approach as sing the sful planners take care to include all three levels of strategy in their portfolio analysis. Since, for example, business strategy cannot be set solely on the basis of the position of a strategic business unit (sbu) on a portfolio grid, shrewd planners also look at market trends, industry conditions, technological changes, competition, and their own strengths and weaknesses. As one ceo said, “we can articulate all sorts of values from the top of our company and make all sorts of plans to acquire and dispose of businesses, but if we can’t figure out how to compete successfully in our remaining businesses, those other things won’t matter much. The definition of business units is important to establish because it affects how managers of a unit perceive themselves and their competition. For example, an sbu whose scope is defined as x-ray machines is likely to compete more narrowly and thus miss more opportunities than an sbu whose scope is defined as diagnostic imaging companies where planning is most effective, top executives continually review the scopes of their sbus. In either case, corporate management aims to have the structure of its business units correspond to market realities rather than to internal factors as successful planners are willing to change sbu definitions, they are also willing to shift their priorities in response to changing market conditions. Yet when conditions in that business changed in the early 1980s, corporate management promptly initiated discussions that eventually gave low investment priority to these sbus. Jones, general electric’s retired ceo, emphasized the importance of such flexibility when he said, “if all of your sbus are in the same position on the portfolio grid year after year, then you’re not doing a very good job of strategic planning. The objective of strategic planning should not be to take your categorization as a given, but to have your efforts aimed at moving the sbus from one category to another. In particular, i examined the effects of portfolio planning on their strategies and on the organizational problems they faced. As part of my work, i developed three detailed case studies of companies with strategic planning: dexter corporation, general electric, and memorex.

As noted earlier, most strategic planning techniques—and portfolio planning in particular—help ensure the efficient management of existing resources but fail to generate enough new business opportunities. To overcome this problem, corporate managers must broaden the scope of their sbus’ activities, identify and pursue opportunities in existing businesses, and see that even small new business opportunities are not overlooked. The companies that have planned most successfully for internal growth have required sbus to identify new opportunities in their business plans and have penalized managers who missed planning systems are most deficient at the level of institutional strategy. Simply put, most planning requires neither spelling out basic values, goals, and principles nor shaping a vision of where the company is headed. In addition, they understand the need to manage the organizational effects of their planning systems. Recognizing planning’s bias against mature business units, for example, they stress the untapped potential of these units. As a group vice president of a large industrial company explained, “one of the businesses reporting to me is in a very sluggish industry. Worth loomis, president of the dexter corporation, expressed a similar view: “the secret of dealing with so-called harvest businesses is never to really harvest them but in a sense to put them in idle. That way, you are ready to put the business back in gear whenever an opportunity arises. Course, concrete actions, including new investment, must back up the assertion that mature businesses have opportunities. For example, general electric, a pioneer of portfolio planning, has invested aggressively in its mature businesses. A ge vice chairman explained why: “in the 1970s, we may not have invested enough in some of our mature businesses. We just assumed that if a business was in a slowly growing market it was not a very good business. Now we understand much better just how profitable a business can be even though its industry is growing by only 2%. Companies have also worked hard to ensure that line managers, not staff planners, are responsible for strategy and planning. Nonetheless, the company’s line managers make extensive and sophisticated use of portfolio planning techniques.

At ge, jack welch has cut the company’s planning staffs in half, with most cuts coming at the corporate, sector, and group levels rather than at the business unit level. The size of planning staffs is an important concern, a more central question is how the different levels of management interact in the planning process. Today, at most of these companies, staff planners prepare background research, line managers develop sbu strategies, and corporate and business unit managers negotiate categories and basic ying s the biggest reason for companies’ disappointment with strategic planning, and portfolio planning in particular, involves either failing to clarify objectives or setting unreasonably high expectations. Planning can be used for several different purposes, but it seldom provides a quick fix and is not a cure-all. Successful planners are realistic in their expectations and precise in their objective of planning is to improve the quality of resource allocation. By placing emphasis on the competitive performance of each business rather than on individual capital projects, portfolio planning can help ensure that resources flow to the most promising businesses and are not squandered on hopeless causes. Portfolio planning will lead to a rapid shift in a company’s business mix only if that company sells important units and makes large acquisitions. Of course, portfolio planning can lead to a shift in a company’s business mix without a major restructuring; for this to happen, however, top management must recognize that it will involve shifting resources among its businesses over several different approaches to allocating resources appear vividly in the contrasting uses of portfolio planning at allied corporation under edward l. At allied, hennessy used portfolio planning to justify a seemingly endless series of divestitures and acquisitions. At ge, while jones made some acquisitions and many divestitures, his main objective was to use the cash from the company’s traditional power systems and industrial businesses to fuel the growth of new efforts in engineered materials, financial services, information services, and medical systems. Thus with the help of portfolio planning, both jones and hennessy dramatically shifted their companies’ mix of businesses, but jones’s approach was much more gradual than hennessy’ another objective of planning is to improve the quality of business unit plans. Here the point is not to shift the mix of businesses via resource allocation but to ensure that each sbu develops a sound strategy. Instead, i work very hard to get all of our businesses to do things a little bit better each year. Third objective of planning is to ensure that key corporatewide issues, such as major technological, regulatory, or market changes, are addressed. Because these issues usually fall between businesses or span more than one sbu, companies may overlook them if they do not make an explicit effort to address different uses of strategic planning underscore the importance of clarifying expectations, since it is virtually impossible for planning to meet all these needs at once. In successful companies, top management typically uses planning for one purpose at a time, shifting to a different purpose as conditions change and new issues arise.

Realistic expectations and a willingness to change are the hallmarks of the most successful planning e its drawbacks, portfolio planning remains an important tool in most large, diversified companies. The challenge, then, is for top managers to address strategic issues in planning and to attend to their leadership role. In my research, i have observed eight practices that can help make planning truly strategic:1. Top management’s role must go beyond the buying and selling of businesses to building integrity in the company’s operations and commitment among employees. Unfortunately, portfolio planning’s emphasis on corporate strategy can undermine the importance of detailed industry and competitive analysis and thorough business strategies. Developing such strategies can help avoid some of the self-fulfilling prophecies (for example, that mature businesses will inevitably decline) that too often accompany portfolio planning efforts. Rather than acquiring businesses only to achieve growth, companies should make generating new opportunities a major corporate objective. To do this, top managers need to define their business units broadly so that new opportunities fall within their purview and to prod sbu managers to respond to technical and economic changes. A company facing tight financial constraints will want to use planning to identify divestiture opportunities and to maintain tight control of resource allocation. In contrast, when a company is most concerned about improving business unit performance or corporate understanding of the businesses, planning and resource allocation can be decentralized. In short, planning should serve the purposes of the ceo, address big strategic issues, and be consistent with the company’s financial and organizational capabilities. In companies where strategic thinking is prevalent, sbu strategies deal with the realities of market and competitive conditions, new opportunities are pursued aggressively, strategies adapt to external events in a timely and coherent fashion, and planning focuses on substance, not form. Strategic planning can play a key role in making strategic thinking a way of life. Until it does, however, the discipline of formal strategic planning is the best way to develop strategic thinking. Hall, “survival strategies in a hostile environment,” harvard business review (september–october 1990): 75; and richard g. Gumpert, “the heart of entrepreneurship,” harvard business review (march–april 1985): 85; and james brian quinn, “managing innovation: controlled chaos,” harvard business review (may–june 1985): 73.

Pearce ii, “the structure of generic strategies and their impact on business-unit performance,” proceedings of the academy of management (san diego, calif. Hamermesh is a senior fellow at harvard business school where he was previously the mba class of 1961 professor of management article is about financial management. 5 strategic portfolio planning n how sbus are evaluated using the boston consulting group n how businesses and the attractiveness of industries are evaluated using the general electric a firm has multiple strategic business units like pepsico does, it must decide what the objectives and strategies for each business are and how to allocate resources among them. A group of businesses can be considered a portfolio, just as a collection of artwork or investments compose a portfolio. In order to evaluate each business, companies sometimes utilize what’s called a portfolio planning approach. A portfolio planning approach involves analyzing a firm’s entire collection of businesses relative to one another. Two of the most widely used portfolio planning approaches include the boston consulting group (bcg) matrix and the general electric (ge) boston consulting group 2. The boston consulting group (bcg) boston consulting group (bcg) matrix helps companies evaluate each of its strategic business units based on two factors: (1) the sbu’s market growth rate (i. Because the bcg matrix assumes that profitability and market share are highly related, it is a useful approach for making business and investment decisions. However, the bcg matrix is subjective and managers should also use their judgment and other planning approaches before making decisions. These manufacturers now have to decide what they should do with these business, it is not good to be considered a dog. One strategy is to build market share for a business or product, especially a product that might become a star. The firm must also keep in mind that the bcg matrix is just one planning approach and that other variables can affect the success of general electric r portfolio planning approach that helps a business determine whether to invest in opportunities is the general electric (ge) approach. The ge approach examines a business’s strengths and the attractiveness of the industry in which it competes. As we have indicated, a business’s strengths are factors internal to the company, including strong human resources capabilities (talented personnel), strong technical capabilities, and the fact that the firm holds a large share of the market. For example, if a company feels that it does not have the business strengths to compete in an industry and that the industry is not attractive, this will result in a low rating, which is comparable to a red light.

In that case, the company should harvest the business (slowly reduce the investments made in it), divest the business (drop or sell it), or stop investing in it, which is what happened with many automotive 2. Companies with a medium rating on industry attractiveness and business strengths should be cautious when investing and attempt to hold the market share they have. If a company rates itself high on business strengths and the industry is very attractive (also rated high), this is comparable to a green light. Organizations that have multiple business units must decide how to allocate resources to them and decide what objectives and strategies are feasible for them. The bcg and ge approaches are two or the most common portfolio planning would you classify a product that has a low market share in a growing market? Factors are used as the basis for analyzing businesses and brands using the bcg and the ge approaches? Many businesses will engage in business portfolio analysis as part of their strategic planning efforts by categorizing the products they offer by relative competitive position and rate of sales 'business portfolio' in a business portfolio was quite extensive as the company had grown over the decades and now provides a variety of goods and found this helpful. Showed him our business portfolio that day and he could not have been more impressed with what he saw found this business portfolio of the woman's company was useful to understand how competitive they could be while understanding new strategies to improve growth and found this also might like... A savvy investor and a small business ing as a small business owner is not always as easy as it might be if you weren't the entrepreneur you are. There are a number of things that should be looked at carefully as a small business owner that you might get to overlook if you are ... Principles of needs & paste this html in your website to link to this ned in these ss portfolio dictionary by letter:The portfolio planning process, step by richard best | august 31, 2016 — 10:00 am are few things more important and more daunting than creating a long-term investment strategy that can enable an individual to invest with confidence and with clarity about his or her future. Constructing an investment portfolio requires a deliberate and precise portfolio-planning process that follows five essential 1: assess current financial situation and ng for the future requires having a clear understanding of an investor’s current situation in relation to where he or she wants to be. Determining how much risk that an investor is willing and able to assume, and how much volatility that the investor can withstand, is key to formulating a portfolio strategy that can deliver the required returns with an acceptable level of risk. Once an acceptable risk-return profile is developed, benchmarks can be established for tracking the portfolio’s performance. Tracking the portfolio’s performance against benchmarks allows smaller adjustments to be made along the 3: determine asset the risk-return profile, an investor can develop an asset allocation strategy. The investor can also assign percentages to various asset classes, including stocks, bonds, cash and alternative investments, based on an acceptable range of volatility for the portfolio.

An actively managed portfolio might include individual stocks and bonds if there are sufficient assets to achieve optimum diversification, which is typically over $1 million in assets. Smaller portfolios can achieve the proper diversification through professionally managed funds, such as mutual funds; through managed accounts; or with exchange-traded funds. An investor might construct a passively managed portfolio with index funds selected from the various asset classes and economic 5: monitor, measure and implementing a portfolio plan, the management process begins. This includes monitoring the investments and measuring the portfolio’s performance relative to the benchmarks. It is necessary to report investment performance at regular intervals, typically quarterly, and to review the portfolio plan annually. The portfolio review then determines if the allocation is still on target to track the investor’s risk-reward profile. If it is not, then the portfolio can be rebalanced, selling investments that have reached their targets, and buying investments that offer greater upside investing for lifelong goals, the portfolio planning process never stops. As changes occur, or as market or economic conditions dictate, the portfolio planning process begins anew, following each of the five steps to ensure that the right investment strategy is in place.