Portfolio management throught the decision professionals’ eyes
The first European Decision Professionals Network conference
On October 4 and 5, I was part of the first conference of the European Decision Professionals Network. This EDPN network is an informal community that provides a platform for Decision Professionals in both business and government who aim to promote high quality decision-making within their own or their clients’ organisations. It also links European experts in the decision analysis domain to their counterparts in the rest of the world.
The EDPN has been set up by experts across a wide variety of organizations, including Shell, ASML, Unilever, Ford, and also by Bicore. Its first event, last week at Amsterdam Airport, was a big success, with all 50 attendees rating the event as very good or even excellent. The program featured a wide range of topics (from policy decisions to scenario planning and cost-benefit analysis) and sectors (oil&gas, consumer goods, pharma, automotive, government, defense, aerospace), and a lot of valuable insights were given across these domains.
Top five portfolio take-aways
For this post, I compiled my key take aways about portfolio management from the conference:
- Pharma portfolio management is changing from bottom-up optimal selection among projects to top-down strategic decision making. Mark Seidler of SDG pointed out that the traditional selection of projects based on highest (risk-adjusted) value is no longer sufficient for building a succesful pipeline. The process needs to change into a strategic, business-oriented decision process.
- More diversity in portfolio content. In the same presentation, Mark indicated that the portfolio starts to include more licensing and acquisition options and that the portfolio management process can no longer be organized without embedding these. The variety of business models and the change in uncertainty drivers require explicit attention.
- Good visualizations are key to communicate portfolio analysis results. According to Alec Morton (London School of Economics), the presentation of meaningful portfolio options to decision-makers with bubble charts and value-for-money plots is key to the success of the analysis. The technicalities of assessing robustness, sensitivity, dominance etc. should be “under the hood” so that the decision makers can trust that they have been addressed properly.
- Be explicit about the base case. From a presentation about a controversial railway extension, I picked up that the base case is hardly ever to do nothing. Project or portfolio proposals should be presented in the context of a meaningful base case and then be compared for additional cost, value, and risks. This aligns well with the notion of presenting decision makers with context. In portfolio management, the base case may be to let the current pipeline run to completion, or to keep investing in incremental updates to the existing products. It hardly ever is to stop everything that’s being worked on.
- Do not lose the value perspective in the gate decisions of staged project decision. Reidar Bratvold’s presentation was titled “Decision Making in Oil & Gas: the Good, the Bad, and the Ugly”. It offered a lot of valuable insight how decisions in this industry have to deal with major uncertainties. Many of these lessons transfer well to other domains. My favorite one is where Reidar highlights the common pitfall that gate decisions become focused on risk reduction, and lose the value creation focus they should have. Especially in the early stages of a risky project, maximizing the potential value should be the main goal of activities, and not necessarily reducing uncertainty. I blogged about exactly this topic in my experience.
With these and many more valuable examples, insights, and contact, the event was a big success.
Want to know more?
At Bicore, we believe portfolio management is first and foremost a decision making process, in which strategic intent and actual innovation activities are synchronized. This aligns perfectly with the EDPN vision that the success of an organisation is driven by the quality of the decisions it makes. Making high-quality decisions is both a science and an art. It requires the effective blending of analytical capabilities and tools, organisational structures, efficient processes, and a supportive culture.