Tech-Clarity Issue in Focus: Optimizing Product Portfolios with Advanced PPM: Applying Value Optimization to Portfolio Decision Making explains how companies can gain greater levels of product portfolio profitability by using value optimization techniques to make portfolio decisions. Describes how the basic best practices of PPM can be extended by Advanced PPM concepts.
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Table of Contents
- Introducing the Issue
- The Basics of Product Portfolio Management
- The Next Level of Portfolio Decision Making
- Realizing Optimal Portfolio Value
- About the Author
Introducing the Issue
Companies are gaining significant business value by implementing Product Portfolio Management (PPM) best practices. According to Tech-Clarity’s Issue in Focus: The ROI of Product Portfolio Management, effective portfolio management can improve both top-line performance and bottom-line profitability. PPM does this by helping companies align their product portfolios with business objectives, effectively allocate resources to their projects, and better execute product development projects.
Despite the value achieved from these standard PPM best practices, most companies fail to reach the highest possible levels of profitability because they lack a clear understanding of the potential financial value of the products in their portfolio. Part of the problem is that current best practices and technology lack an effective way to assess risk and uncertainty and can’t predict their impact on product value. These impacts can be in the range of millions of dollars. Decision-makers can’t afford to ignore this uncertainty, and can’t make optimal portfolio decisions without a realistic picture of the likely range of values returned from candidate projects in the portfolio.
To get the most out of limited product development resources, companies need to be able to optimize the value of their product portfolios in addition to managing them through a product development processes with standard PPM best practices. Advanced PPM processes and technology enable this by providing a systematic approach to determine financial value. As Tech-Clarity’s Maximizing Product Development Value report concludes, “Creating high value portfolios is much simpler when the factors that create and destroy value for a project are clearly identified, quantified, and managed over the life of the project.” The result is extending “on-time” and “on-budget” to “on-profit.” With this understanding, companies can develop portfolios that provide an optimal financial return based on sound business analysis.