Portfolio Management Squared

Portfolio Management is typically considered with respect to products. This restriction however ignores a very strong interdependency. Typically, complex products are systems, comprised of sub-systems. The people in our organizations that generate these systems are a system themselves, just like the organization that is a system in its own. The is a very close symbiosis of products and people. People develop and build products and products are developed and built by people. A certain product portfolio, needs a matching skill portfolio. That is true even when I am working alone on a small product. If I do not have a certain knowledge or skill, value to be generated by this knowledge or skill will not be in the product. A no-brainer for a one-person-team. It however also applies for bigger teams and even organizations. The product portfolio needs to be build by an organization with a certain skill and knowledge portfolio.

In the steady state with no change, product portfolio and knowledge and skill portfolio of the organization will match. For a slowly changing product portfolio, we can trust on organic adaptation of the organization. In the VUCA world, we are currently experiencing, we have to manage the adaptation because change is conducted at and accelerating velocity. Change ist faster than can be compensated by organic adaptation. We have to manage the change. Therefore: We manage the product portfolio by a method like Wardley mapping for example. If and when we do that, we need to pay attention to the matrix of skills and knowledge in the organization. We have a current state of the skills and knowledge portfolio. For our future product portfolio, we need to have a vision for the future skill and knowledge portfolio of the organization. And actually thinking about it: the people go first, because the people will design the future products, correct? It is people that change and design future. It is O.K. to have a product portfolio vision, but based on this we need to build the knowledge and skill portfolio vision. When it comes to realization of the product portfolio we first need to have new skills and knowledge before we have new products.

One step back. The portfolio needs to be managed. That means the technical portfolio needs to be managed by the leader responsible for profit and loss. The people portfolio of developer needs to be managed by the leader responsible for the development of the products. As both protfolio visions are necessary to guide us into future, both leader need to be aligned.

For portfolio management we need three horizons:

Strategic. Longer time scale: 2-5 years.
Tactical. Intermediate time scale: 1-2 years.
Operational. Short term operational. Less than 1 year.

These time scales refer to technical portfolio as well as people portfolio.

That means: On the operational side, product owner and people leads take the decisions. They work on the day-to-day scope. For the technical aspect, the product owner has the technical leadership for the product. On the longer time scale we need technical leader a little more detached from the daily operations supervising a larger number of developer. It is their responsibility to develop the product portfolio into the direction of the intermediate steps (target conditions) of the technical portfolio. In a classical setup this would be the task of a customer center head or platform development head. A person providing direction to the work of up to several 100 people in the organization. These decisions develop the current product portfolio in the new target condition portfolio. An even longer timer scale is needed for the development of the entire portfolio of a business segment towards the envisioned status in 3-5 years from now.

It is essential that each layer has decision autonomy, while at the same time the objectives are closely aligned between the layers. This alignment is facilitated top-down as well as bottom-up. Both directions are of equal importance. We shall however emphasize that some decisions with high economic impact not necessarily have to be made as consensus. Decisions influencing the daily operations need to be made by the people responsible for daily operations. When this is achieved, the next layer of management can concentrate on tactical decisions and projects focusing on a slightly longer time scale. A system needs to be guided and directed. Left on its own, only the immediate issues and topics will be in the focus and no sustainable long-lasting change or development will be initiated, nor will it be possible.

Exactly the same needs to be executed on the people side of leadership. The skills and capabilities of the operational squad in the organization needs to be suitable for the day to day operations. This is in natural conflict with the development of the people towards the skills needed for tomorrows products. In other words, on the team level, the team facilitator is responsible for the performance of the developer in the team. He/she will develop people with the focus on day to day operations. A department head, let’s say being responsible for about 100 people, has to make sure that the entire unit/department has the right skills and knowledge bring the products towards the target condition, i.e. the next step towards the future portfolio. Just like for the development of technical solutions, the organization will not develop itself. On an even longer time scale we need to have a person being responsible for the aligned development of several “department” towards an organization the can realize the challenge for the future portfolio. There will be conflicts between the layers. In order to develop the organization to the next level, a team will probably be hurt, i.e. a key person may be taken out to force the organization to re-grow the skills and knowledge. The drive towards resilience in organizations will never come out of the teams.

Once the three-horizon people development as well as a three-horizon technical strategy is started, the organization may develop into the direction of resilience, organization-wise and technical. We will have opened the door for “self-healing” structures in the organization.

Product portfolio management in conjunction with knowledge and skill portfolio management is a core competency of an enterprise in a changing world.

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