How an Investment Mindset provides the Foundation for Product Portfolio Management
Developing an investment mindset is critical when you are attempting to build long-term wealth. Without considering the outcomes of an investment, you are taking unnecessary risks with your investment capital. Take too many risks and your capital is gone.
Unfortunately, we don’t treat our business investments in technology with the same mindset. Instead of making decisions to fund work that delivers quantifiable value, we instead focus on lighter-weight benefits and the expected cost of the project. This lack of focus on setting value outcomes means that we may or may not be maximizing the wealth that we can generate from our technology initiatives.
What is an Investment Mindset? Simply put it’s a way of establishing a method of managing your investment portfolio. The way you manage your portfolio should be consistent so that you set investment guardrails related to your value outcomes. We do this by ensuring we follow a set of rules for investing which are tied to our strategic goals and objectives. By doing this we take out the emotions that can be involved with investing, especially when we are riding a wave of success.
So, what does an investment mindset look like for managing your Product Development Portfolio? It looks a lot like how professional money managers handle their investment portfolios. Just like these managers, your organization has a broad set of securities (projects, initiatives, enhancements, etc.) that you can invest in. And just like a money manager, you need to diversify your portfolio to manage both the risk and return of your initiatives. If you invest too much in run the business support, you risk missing investing in innovative opportunities that provide growth opportunities, and vice versa, not enough focus on run the business, and your technology platform may not hold up over time.
An investment mindset features a clear set of portfolio objectives, meaning money managers establish an expected return they want to achieve relative to their identified risk profile. They will deliver this outcome via a mix of securities they will invest in. As a Product Portfolio Manager, you also need to establish clear value outcomes for your Products to ensure that you stay on track with your Product Portfolio goals and objectives and you need to establish a way to quantify risk as an input into your investment decisions.
The final piece of the investment mindset is establishing a way of quantifying value. For example, money managers might use a complex mathematical model called the Efficient Frontier, which provides a framework to identify the types of securities that fit into their risk/return profile. As a Product Portfolio Manager, you also need to develop a model that allows you to assess the value outcomes associated with each of your Products.
Unfortunately, the way that we fund our Product Development efforts is mired in the past, with individual projects associated with some poorly defined benefits. The problem with this approach is that we don’t quantify the value we expect to receive from these efforts. And by not defining value that is aligned with our strategic business objectives we are not likely to maximize the long-term value of our product development initiatives.
My QValue Product Portfolio Planning model provides you with a framework to quantify both your risk and return and it’s predicated upon the Efficient Frontier model that money managers utilize successfully. Developing a model that allows you to develop value scores quickly and efficiently for your technology investments while ensuring that you are setting up the organization for long-term growth.
