Beyond supply and demand – why portfolio management is the missing link for IBP success
07 Jun 2024
Blog
Let's be frank: your organization is at risk if you're not integrating portfolio management into your Integrated Business Planning (IBP) process. In today's fast-paced, ever-changing market, not paying attention to your portfolio is a recipe for suboptimal performance and missed opportunities that will impact the bottom line and the relationship with customers.
Undoubtedly, a static portfolio is a competitive liability. Companies that fail to manage their portfolio mix proactively risk being left behind by more agile, adaptable competitors.
Perils of neglecting portfolio management
To understand why portfolio management is essential to IBP success, it's worth looking at the principal risks and pitfalls of neglecting this business-critical process.
Firstly, without a clear, integrated view of the portfolio, organizations risk making sluggish or wrong decisions about where to invest their limited resources. In a rapidly changing market, it's too easy to get caught up in short-term firefighting and lose sight of the bigger picture. A robust portfolio management process ensures that resources are strategically aligned with long-term business objectives.
Secondly, neglecting portfolio management can lead to a proliferation of underperforming, unprofitable products. In our experience, it's not uncommon for organizations to find that a small percentage of their portfolio drives most of their profits. Concurrently, a long tail of underperforming stock-keeping units (SKUs) drags down overall performance. By integrating portfolio management into the IBP process, organizations can make data-driven decisions about what products or services to invest in and which to optimize or rationalize.
Thirdly, and perhaps most vitally, a lack of portfolio integration can lead to missed opportunities and competitive threats.
Take Kodak, for example. Once a dominant force in photography, the business failed to adapt its portfolio to the disruptive rise of digital imaging. Or consider Nokia, which went from being the world's leading mobile phone manufacturer to nosediving due to a failure to respond to the smartphone revolution. Despite inventing the Walkman, even Sony missed the boat on the shift to digital music.
Today, I am sure we will see many more examples of businesses not having the right portfolio at the right time as technology and customer behaviors change even more rapidly.
The case for integration
So, what does effective portfolio management look like in the context of IBP? At its core, it's about creating a single, integrated view of your portfolio that spans multiple time horizons and business functions.
This starts with clearly understanding the company's overall business strategy and objectives. What are the key markets and customer segments we want to serve? What are our core competencies and points of differentiation? What are our long-term growth and profitability targets? The answers to these questions should drive the portfolio strategy and inform crucial customer-centric product development, pricing, and investment decisions.
Next, the portfolio plan must be integrated with the demand and supply plans to ensure alignment and feasibility. This means considering not just what products or services to offer but how to bring them to market profitably and efficiently. What are the projected sales volumes and margins for each product/service? What are the manufacturing and distribution requirements? What are the resource and capacity constraints? By integrating these plans, organizations can ensure portfolio decisions are grounded in operational reality.
Finally, portfolio management should be a continuous, iterative process – not a one-time event. Markets, customer needs, and competitive landscapes are constantly shifting. Portfolio plans must be regularly reviewed and adjusted based on the latest information and insights. This requires a planning platform that enables real-time visibility, scenario modeling, and collaborative decision-making.
Portfolio integration with Oliver Wight IBP Powered by Board
Oliver Wight IBP Powered by Board allows organizations to create a unified view of their portfolio that spans strategic, tactical, and operational levels. Businesses can model multiple portfolio scenarios, assess trade-offs and risks, and make data-driven decisions based on real-time insights. They can also seamlessly connect portfolio plans with demand, supply, and financial plans to drive end-to-end alignment and optimization.
But the real power of Oliver Wight IBP Powered by Board lies in its ability to turn plans into action. With built-in workflow, reporting, and analytics capabilities, it enables organizations to track performance, identify gaps and opportunities, and course-correct in real-time. Portfolio decisions can be quickly cascaded across the organization, ensuring everyone works towards common goals and objectives.
Competitive advantage
In today's hyper-competitive market, the ability to manage the portfolio proactively provides an obvious competitive advantage. Organizations that can quickly adapt their offerings to changing customer needs and market conditions will be better positioned to capture growth opportunities and defend against emerging threats.
Yet most IBP solutions on the market don't offer portfolio management as standard. It's like purchasing an expensive car without windows. This can happen when the people buying the solution don't ask the right questions or know what the business requires for success.
By integrating portfolio management via Oliver Wight IBP Powered by Board, organizations can unlock a range of benefits, including:
- Improved alignment between strategy and execution
- Faster time-to-market for new products and innovations
- Increased profitability and return on investment
- Optimized resource allocation and capacity utilization
- Enhanced customer satisfaction and loyalty
- Greater resilience and adaptability in the face of change
But most importantly, a robust portfolio management process can help organizations avoid the pitfalls of complacency and inertia.
Take the next steps
If you're a business leader looking to improve your IBP process, we encourage you to consider the critical role of portfolio management. Integrating portfolio planning with demand, supply, and financial planning can drive greater alignment, agility, and resilience across your organization.
Of course, this is not a journey that can be undertaken alone. Effective portfolio integration requires a combination of process expertise, change management, and enabling technology. That's where partners like Oliver Wight and Board come in.
With decades of experience helping organizations transform their planning capabilities, Oliver Wight brings a proven methodology and best practices for integrated planning and portfolio management. And with Board's flexible, scalable platform, organizations can quickly turn those best practices into tangible results.
Ultimately, in today's fast-paced market, the ability to manage your portfolio is not just a nice to have; it's a critical source of competitive advantage. Organizations that can effectively integrate portfolio management into their IBP process will be best positioned to drive growth, profitability, and long-term success.
Contact us to learn more about Oliver Wight IBP Powered by Board.
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