We at iProceed are so convinced of the value of portfolio management that we encourage all business executives to understand the basics. The application of portfolio management are many and some areas that we have helped our clients implement them are: (Related article: Principles of portfolio management)
- Businesses (sometimes referred to groups or divisions) within a company
- Product portfolio
- Portfolio of customers (slightly different from customer segmentation)
- R&D portfolio
- Project portfolio
- Risk management (Related article: Basics of risk management)
How does portfolio management approach help?
- No two things are alike in the business world. No two businesses or product lines or customer groups produce identical growth or profitability (or whatever other metrics you use to compare performances). Thus, you cannot treat them alike.
- Portfolio management approach allows you to allocate resources more efficiently. Or in other words, highest potential opportunities get the most resources.
- It makes the decision-making process more objective and fair. Since you use numbers rather than feelings to assess the performance of the portfolio, resource allocation is driven by metrics. So managers cannot passionately argue for huge resources (and often get them because they were able to demonstrate more energy to senior management) if the portfolio management analysis reveals that the actual potential is lower than other businesses in the portfolio.
- Entering new businesses or exiting non-performing ones becomes simple.