The previous article "The Shared Services Battle: Surviving or Competing?" was about the state and future role of Shared Service Organizations with the urge to think according the best owner principle with a product and service mindset. In this article we focus on the portfolio management as a tool to professionalize this mindset.
Our customers’ processes are our products and services.
In the following, we aim to explore the different methods and techniques that can be employed for effectively managing a portfolio. We will delve into different aspects of portfolio management and provide a holistic view of the subject. The goal is to furnish SSO leaders with a thorough understanding on the field with insights and guidance in making decisions about their portfolios.
By leveraging portfolio management, SSO can shape a simpler, more effective product & service portfolio that can both reduce the burden of risk management and better serve customers. It connects strategy with product/service choice and helps SSO to be competitive.
In general, portfolio management is a useful technique for organizations to analyze and manage its collection of products, services, projects and/or business units to align it with the organization's overall goals and objectives, and to make better decision with its investments and allocation of resources.
As a starting point, ask yourself the guiding questions:
- Is our portfolio structure comprehensive from customer and internal perspective?
- With which products & services can we leverage a competitive advantage and scale-up value creation for customers?
- What are GBS criteria to classify and shape the product & service portfolio?
- What are the key GBS products & services today and future?
- How do we identify where to invest in?
Before it begins to sound too complicated, let’s compare portfolio management with managing a football team. Because managing a team in sports and managing portfolio in corporate organizations is comparable. In both cases there are two levels of considerations, a strategic and a tactical one.
Within strategic considerations teams usually plan in a time horizon of more than one season. Their horizon goes beyond surviving or winning a few games in a current season but shaping the right portfolio or in this case team to achieve the best results with existing resources and strengths. Some team managers focus on defensive strategies, others on offensive and only a few have enough resources to be best in both.
Having long-term goals for the next 5 or even 10 years is highly recommended.
Having long-term goals for the next 5 or even 10 years is highly recommended, but winning singular games is also about tactics. Each competitor needs to be analyzed before the game. Thus, each game needs best possible decisions regarding the line-up. Like with a business customer, you probably would not try to put on a field everything you have.
And like with each football player, you need to consider the (career) lifecycle of each of your corporate products & services and care about them continuously for best possible performance. Let’s call it product & service lifecycle management phases.
Phases within a product & service lifecycle management
Creating new products & services that suit the needs of customers is difficult enough. Considering the whole product & service lifecycle management to ensure business, risk and compliance requirements can be seen as an additional burden. Being typically focused on internal business, this can indeed be perceived as overengineering simple things. Thus, a product lifecycle process is often introduced due to first encounters with external business.
The development of a product & service culture won’t happen overnight. Establishing portfolio management needs a change management, triggered and sponsored by top-management.
The aim to be perceived as a partner of choice, pushes SSO to professionalize the products & services independent of the segregation between internal and external customers. And the development of a product & service culture won’t happen overnight. The earlier shared service organizations and respective departments start realizing the need for this cultural change from focusing mainly on operations towards a shift for product & service management, the better they can serve their customers in the long run.
In the following figure, we illustrate typical phases of product & service lifecycle combined with a possible classification of the BCG matrix in respective phases. In daily business we see that organizations establish high standards for developing and creating new products & services, but don’t have a strategy for dealing with existing legacy portfolio elements.
The lifecycle of products & services goes beyond the development phase. Understanding the maturity helps to make investment decisions in a systematic way for existing products and services and for potential white-spots.
Introduction phase (‘question mark’) is typically characterized with higher uncertainties and no sufficient data. Management judgement and entrepreneurial mindset have a stronger impact on decision making. Especially in the segment of digital products with scaling potential, evaluation requires to adjust the expectations towards the business case as it is potentially not positive with the first customer.
With respect to investment decisions, products & services in the growth phase (‘rising star’) are most promising to expect the best returns. Investment decisions can prioritize the continuation of product & service development or stronger market penetration to leverage scaling effects.
Once the tipping point of maturity is reached, the product or service can be categorized as a so called ‘cash cow’. The focus shifts to maximization of efficiency measurements in operations like shifting activities to lower-cost locations.
Decline phase (‘poor dog’) is hard to deal with on an individual product & service manager level but straightforward from the angle of a portfolio manager. Like with the football players, products & services eventually lose relevance due to changes of business needs and heavy legacy. Once leaders see products & services decrease significantly in e.g. revenue generation, they should see it as a chance to clean-up the portfolio (based on the assumption, that the decline is not related to poor sales activities). They can either send the product or service to phase-out and free-up capacities or see a potential trigger for innovation or reinvention of the product or service to better serve customers.
The phases are helpful to navigate the portfolio element towards investment decisions, they do not exist for their own sake. At the end of the day products & services are about results and not phases.
All the phases need to be considered during strategic investments. Each phase leads to different expectations on either taking development decisions or potentially focus more on sales or operation activities. These phases cover a typical approach on the product & service lifecycle management. Yet, we recommend extending the approach towards also classifying the products & services based on the underlying business models that describe how value is generated.
Next article: Talking about business models and portfolio strategy for SSOs