Manage Your Product Portfolio Like an Investor

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A bit of a ramble on portfolios.

Every time I return to the draft of this post I tweak, rewrite, remove and add. Today I decided it’s better to ship “good enough” and move my investment elsewhere. I hope this still delivers enough value to you as readers…

Even with a good investment, wouldn’t you want to increase your chances of success?

I’ve been involved in annual and bi-annual portfolio reviews of varying quality over the last 7 years and been in the fortunate position to change and improve how many of those have run. With every review I think about how we can do a better and quicker job.

If your portfolio is anything like those I’ve seen in both my current and last employer you’ll have a mix of “no-brainers” and speculative work. Often those are run through the same process with mixed results. You may even have the luxury of standing teams from some areas.

When a project or bid reaches review, on the surface it’s in the proposer’s personal interest to minimize the level of scrutiny their plans receive. They’re busy trying to deliver a business and want to get their project moving fast.

I regularly see plans proposed at portfolio review that magically change within 2 weeks of starting and again within a single quarter. I’ve even seen plans delivered “late” and miss large parts of a review cycle and yet still be approved.

A cynic might say that the owner has secured their funding, now they’re free to change! Less cynically, this is simply what happens when early-stage plans and new projects hit reality. With the review cycle over the same apparent due diligence no longer comes into play.

With peer reviews of code, good reviewers are well-practised in what to look for and may even have checklists and standards. What tools, checks and support do reviewers of your portfolio have? Do they really work?

I frequently see other portfolio “smells” too.

  • Where a project is a continued investment in an area already in progress, these are often a shoe-in for the next cycle. This can turn into sunk cost behaviours.
  • If a project is recently started, we may simply assume that because the project is only just under way that we need to “leave it alone” and that it may be unfair to re-scrutinize a business case and plan.
  • Large revenue increases are predicted against short time scales on the promise of a new release. The time for these increases to actually occur is much longer. Furthermore, these are usually single-point commitments without agreed tolerances or ranges.

I’ve had the luxury in the last couple of years of being in a company that has a track record of actually shutting down projects early (occasionally not early enough) when claimed benefits fail to materialize or overruns occur, Yet even when those projects were set up, bold forecasts were made and operating tolerances against those forecasts were not negotiated.

I’m torn. Proper due diligence on all investment decisions seems obviously right but the case for funding a standing team to continue driving a nascent or even successful product forward is strong. As my CEO said to me recently – “It’s very hard to resist the man with the plan”.

The “VC” Investment Philosophy

Consider your product development organization as a Venture Capital company.

Every year you review funding and invest in a variety of options. Like VC, a smart portfolio and balance of risk/reward is important. You make some investments to sustain cash flow, some for organic returns and you hope to find the occasional (and mythical) “hockey stick” growth curve.

Balanced risks and a mix of investment durations is needed for a sustainable business and a regular review of those decisions is vital to your operating health. You may choose a multi-year investment in a loss-making area believing it’ll come good in future or drive sales for other products.  A year later the climate may have changed or the market may not have materialized. Do you kill the investment or ride it out? You can’t answer this question without understanding the context of the rest of your portfolio.

If it were lightweight enough and delivered better decision-making, I assert you’d want to your review your investment much more frequently. In my simplistic view of the world it’s like the different between a basic index tracker and the increased cost (for potential better return) of buying into a managed fund.


Treat your portfolio like a VC investor, consider taking every new product release (including new releases of existing products) like you’re going back to the dragon’s den to bid for another round of funding.

Don’t commit all your capital on an annual basis unless there is a truly sound reason to do so. Seed your investments with an option to increase investment in future or kill it early if it no longer looks valuable in your portfolio  (Real Options anyone?)

Picture this rather extreme “Dilbert” conversation…

– I want to improve my existing product, can I have some money to take these improvements to market?
– Sure what’s your business case
– Well the product is already in the market and profitable, I don’t know who all my customers are but I have lots –


I can’t tell you exactly which of my products is bringing the money in because we package it all up together under a single product line but all those existing customers give me support money every year.


They raise enhancement requests that they never expect to get fixed because we take so long to deliver and all new features we deliver are never on their version anyway.


Most of them don’t have any immediate plans to upgrade so basically we’re making millions from fixing defects and taking support calls. But I’ll make you a personal commitment to 1000 new customers as long as I can get every “must have” feature in the backlog implemented in a year.


And if I don’t meet my numbers it’s because we didn’t get all the features implemented
– Ok, I’m feeling flush and can’t be bothered to visit the race track this week – here’s a year’s funding,  I’ll see you in a year.

Let’s try again on some sounder (but still not perfect) footing…

– I want to improve my existing product, can I have some money to take these improvements to market?
– Sure what’s your business case
– Well, we have 200 customers on out of date releases. They have no immediate incentive to upgrade as what they have meets their needs but upcoming regulatory requirements plus opportunities in their markets mean that they will need to change and add the following 10 business processes.


Right now these are manual or slow and cost them on average $1M with a 3 month cycle time.

In order to take a viable upgrade to market we need to show a return on investment to our existing install base.


We believe with the right level of software support we can halve their costs and reduce cycle time to 4 weeks for the top 3 of these processes.

Providing this ROI to our existing install base will preserve M&S revenue.


Moreover, here’s the list of RFP responses we can’t compete on (and their value) due to these processes not being supported right now.


If we modularize these features and deliver them sequentially, here’s the first round of prospects we’ll be able to work with – plus we can charge an additional premium for some of these features.


Based on current team velocity and backlog, we’d like to focus on delivering a minimum marketable feature set by the end of next quarter to meet the top priority business processes however there’s some viable value-add work that we want to move forward on, can we have 6 month’s funding now and an option of a further year if we’re successful?
– Ok, I’ll tell you what. Here’s 4 months funding. Let’s have a checkpoint review in 3 months and assuming you’re within 20% of your target we’ll immediately release a further 3 months (7 in total).

If you can deliver on those, I’ll make sure you’re on the fast-track priority list for the next round but if things aren’t going well at the end of 6 months we’ll need to either shut the work down or push for a hard reset.

How soon can you have something to show me?

I’m grossly exaggerating and over-simplifying. It’s an extreme example to illustrate a point but which is a more compelling business case and conversation?

  • Which has clear priorities, measures of success and is believably achievable?
  • Which would you invest your personal million dollars in?
  • Which is more likely to be set up for success?

The impact of governance on portfolio and product management

Let’s assume your governance system is broken and you can “get away with” the first case. There’s more to explore!

Let’s imagine both of the above were products in the same active portfolio…

Scenario 1:  – Portfolio resourcing and opportunity cost
I have a constrained resource – developers. I can choose to invest those staff across all products in parallel and deliver slowly or focus on a smaller set, deliver faster and then move onto the rest. I know I want them all but surely there’s an absolute priority. Considering the business cases above, which will allow me to prioritize better?

Scenario 2:  – Portfolio investment in a downturn
We’re in a big economic downturn, our numbers are looking bad and we need to start cutting investment fast. Looking back at the business cases for our existing portfolio, which should I take out first and which should I keep?

Scenario 3:  – Portfolio collaboration in a tight market
We’re in a business team where each of us owns a given product or number of products. Again, the market is tight. Ours was the first business case above.

We have a choice. Fight our corner for our product’s success or collaborate with our peers to set up the best selection of new product releases based on overall market trends, install base, requests etc.

If we fight our corner, we risk sub-optimizing around personal goals at the expense of the entire group’s success. If we collaborate, we won’t get a new release for our product this year.

Which is the “right” thing to do?

Scenario 4:  – Improving product quality through your business case.
I’m a developer on a team. I’ve been working with the same product for 5 years adding new features continuously.

I like my job and want to stay. I don’t question why we’re adding new features, I’m sure there’s a good reason and I’m told that’s up to “the business” to decide.

I’m now halfway through writing a new feature and I don’t know what the user is actually trying to achieve.

Given the above business cases:

  • Which is most likely to have backup information that allows me to make a sound implementation decision quickly?
  • Which one has users I can talk to?
  • Which is the more motivating product to work on?
  •  Which one am I likely to actually care about any deadlines or commitments for?

 So What?

A sound business case** is just as vital to an agile team’s success as it is to our portfolio decisions. How many times are engineering teams really engaged in the business case for the product they’re working on – or are even able to challenge parts of it?

**When I say sound I don’t just mean it has great projections, I mean it stands up to truly solid testing – try the 200 questions technique for testing a proposal.

  • In your organization is it their place to do so or none of their business?
  • Is it more cost-effective to keep them out of the loop?
  • Really? How’s that working out for you?

We need to understand and explain what really meets our customer’s and our own business needs. Did the last release fail to solve their problems or do they have new issues?  It’s not just what “features” (and how many) the next version of the product should have. It’s who do they impact & how and should we even have a new version of that product right now relative to other priorities.

Time to re-check your governance systems and start thinking like a VC. Set up your funded start-ups for success, actively manage the portfolio without wasting resources, engage experts in decision making and business support and where a real new opportunity is seen, don’t just fire a single shot, try a spread bet on that market.

Beyond the initial investment, good VCs offer support, mentoring and critical feedback. They don’t just hand over money and quietly hope their horse will come in at the end of the race.

If you’re on any kind of portfolio review, do a proper job, ask tough questions and make sure your business is making sound decisions.

All of us as reviewers are empowered to do so, don’t let precedent or pressure erode your business sense. It’s our responsibility to test, challenge, verify and make sure we’re investing in the right spread of activities.

Be brave.

If you can’t see the value in an investment or feel your money is better spent elsewhere, tackle those issues head-on.

Some thinking for you.

  • Are your portfolio reviews being gamed because of a poor periodic funding cycle?
  • What operating tolerances have you agreed for each of your investments?
  • What would need to happen for you to be able to easily review your portfolio more frequently?
  • In your current portfolio are there any investments that smell bad?
  • Is your portfolio a good balance of risk, reward and cycle time?
  • If you had to shut down 10% of your projects next week, which would they be and where would you reassign that investment?
  • What critical questions do you (or should you) be asking of any investment?
  • Do those questions change depending on the type and scale of investment you’re making?
  • Are you truly “empowered” to change any of these things?
  • Who do you need to discuss this with?
  • What would really happen if you tried?
  • If you could change or improve 3 things in the way you review your portfolio, what would they be?
  • What’s truly stopping you pushing for those changes?

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