Each business unit should uniquely support the goals of the organization
A lot has been written about the importance of determining a clear strategic destination, and aligning your organization to travel toward that destination in unison. We’re not going to pile on. What follows, instead, is an introduction to a concrete, repeatable business unit tool that will help you actually get where you’re trying to go. We call it Portfolio Management.
Maximize profits by letting each business unit do what it does best
If your company’s strategy is like a compass that points to your “true north,” then ROIG’s Portfolio Management is like the street-level, turn-by-turn GPS app that helps you figure out the most effective and efficient way to get there for your teams. It’s a data-driven process that provides organizations the means to execute their strategy on purpose. It’s both a strategy playbook and an alignment tool that models your data with a variety of scoring techniques to determine each business unit's ROLE (the job it does for the company; how it adds value) and INTENT (where it is in its growth lifecycle; how much investment it warrants).
​
Before we get into the nitty-gritty of Portfolio Management and how it works, let’s take a look at what happens in the absence of it. We come from a retail background, so we know that retail leaders are a competitive bunch. Left to their own devices, individual business leaders–and the business units they’re responsible for – will tend to try to “do it all”: drive topline sales, margin, traffic…a kitchen-sink of priorities driven by a category-centric, tunnel-visioned view of the world. (And probably a bonus plan that rewards it.). That might be great for the individual leader (depending on that bonus plan)–and it might even be fine in the short term for the company. (More of everything!) But the truth is, every product category or business unit is different. Some are growing (and some are flattening out), some are margin-rich (and some
are commoditizing), some lend themselves to a broader solution set (and some simply do not have a natural “basket”).
And if you ignore these differences, and unleash every business unit leader to determine his or her own goals, they will naturally default to their hard-wired tendency to “do it all,” or at minimum, do what is best for their unit at the expense of others. The net effect is an increasingly muddled message for your customer and your own people. They won’t know what you stand for…because you won’t stand for anything.
- Stephen Covey
Portfolio Management is the means of setting business unit growth goals and strategic roles within the context of one anther and then purposefully allocating budget and resources accordingly. This lets categories (both products and services) specialize in what they do best and focuses them on a strategic set of individual objectives.
​
Portfolio Management is an important tool for leaders when making strategic decisions about categories and the allocation of company resources such as labor, inventory planning, space allocation, marketing, engineering, or R&D. When it’s applied with discipline and consistency, Portfolio Management becomes the primary mechanism for a company's planning and budgeting process. In fact, in a perfect world, it leads the process.
​
There are two primary components of Portfolio Management: the Role and the Intent of each category of product or service you sell.
ROLE
Defines HOW a category or business unit creates value for the company. In other words, what is the job it does for the company. Some examples include: Primary Business Driver, Profit Generator, Traffic Driver, and Emerging Business.
INTENT
Defines HOW MUCH the company will invest, maintain, or divest investments in resources;
Intent describes to WHAT DEGREE value is created. Some examples of this include: Aggressive grow, Grow, Maintain, Optimize, or even Exit
We’ve developed a seven step process that results in role and intent designations across your portfolio of business units, and establishes your ability to use Portfolio Management to guide your planning, goal setting, budgeting processes, and resource allocations.
​
Contact us to learn more about our seven step process and how we can help.
AI adoption is change adoption. The ROIG Group can help ensure that your organization is ready to fully capitalize on the benefits and avoid the risks. Contact us to learn how we can help.
Call
(952) 417-6394
Visit
6400 Flying Cloud Dr #110, Eden Prairie, MN 55344