TEI 311: Portfolio Management and the PDMA Body of Knowledge for Innovators and Product Managers – with Steve Atherton

What product managers need to know about selecting and managing projects

This is the next episode in the series on a product management body of knowledge I’m doing every-other-week. We are exploring the Product Development and Management Association’s (PDMA) guide to the body of knowledge for product managers and innovators. If you are unfamiliar with PDMA, they are the longest running volunteer led professional association for product managers, existing since 1976. We’ve had an introduction to the body of knowledge in episode 307, explored strategy in episode 309, and today we explore portfolio management. 

Our guest, who also authored the portfolio management chapter of the PDMA BoK book, is Steve Atherton. Steve has over twenty years of professional experience in product management and related roles for some of the world’s largest industrial technology companies. He currently serves as the senior product manager for Fujifilm’s inkjet technology integration group, which designs and produces Nano-technology products for industrial applications. 

Summary of some concepts discussed for product managers

[2:23] What is a product portfolio?

A product portfolio is a set of products an organization is investing in that have certain trade-offs. Like an investment portfolio, a product portfolio should be balanced and diversified.

[3:19] What is the purpose of portfolio management?

* Choosing the right group of products to achieve balance.

* Aligning with your business strategy.

[4:51] What’s an example of a portfolio that reflects the strategic objectives?

All the techniques for developing a portfolio involve metrics that reflect the strategy. For example, if you’ve been working on cash cow products, and you want to be more innovative, you need a metric that captures innovation. That could be a simple pass-fail scoring or a more complex system.

[8:21] Who is involved in portfolio management?

Cross-functional involvement in portfolio management is very valuable, in order to…

* Capitalize on the organizational knowledge, allowing business leaders to make decisions by tapping into the knowledge and experience of everyone in the organization.

* Keep everyone informed and motivated, because they can see how their contribution fits into the big picture.

The level of complexity of the portfolio management system needs to line up with the decision-making pace of the organization. In some cases, a simpler system is better than a complex system.

Portfolio management includes choosing projects to put into the portfolio and managing projects while we’re working on them. We might slow down a project and use resources for something more important, or we might even kill a project in order to focus on better projects.

A facilitator is important to remind people of the context of portfolio management and understand that their individual projects fit together to move the organization forward in the direction aligned with the strategy. We can get protective of our work, so the facilitator helps us be objective and make good business decisions.

[16:59] How are portfolios created to reflect the strategy of the organization?

One approach is the three horizons. We might put 70% of our money toward making current products better, 20% to adjacent but new areas, and 10% to work that’s really outside the box.

A top-down method would be deciding that 80% of any new products must be strongly innovative, or 80% of new product development dollars need to go toward innovative projects.

A bottom-up method starts with setting goals. Then your innovation mechanisms come up with ideas, which are reviewed against the goals, and some projects may be cut to align with the goals. If you’re focusing on innovation but have a lot of cash cow projects,