How portfolios are like forests

I regularly find myself trying to explain what an innovation portfolio really is. Until recently, I’d describe a portfolio as a set of related innovation projects/products – or more precisely a set of related business cases, for both existing and new offerings. So, as a conceptual collection of concepts with something in common…

Maybe it is better to compare a portfolio to a forest. A forest is defined by its trees, and a lot of forest properties derive from properties of the trees. However, sometimes it makes sense to look at the forest as a whole instead of the individual trees. The english language even has the idiomatic expression that you can’t see the forest for the trees if you cannot see the big picture because you keep looking at the details.

So a forest has properties that you cannot see by looking at the individual trees. Think about the density of the forest.  In the same way, portfolios have these emergent properties that only “appear” at the portfolio level, such as the portfolio balance and its completeness. I’d like to stress this metaphor a bit further: besides managing each individual tree (making sure it does well), a separate focus on managing the forest is needed. This portfolio management activity makes sure the forest is doing well, which could require different trees, tree removal, etc. It may even be necessary to remove less healthy trees to free up resources for other trees.

Managing forests (also known as forestry)

When I checked the Wikipedia definition, it resonates with portfolio management really well: forestry is “the science, art, and craft of creating, managing, using, conserving, and repairing forests and associated resources in a sustainable manner to meet desired goals, needs, and values for human benefit”, according to the 1998 Society of American Foresters’ Dictionary of Forestry. It relies on good information about the status of the forest. A whole body of knowledge around Forest Management Information Systems exists, with such key information system capability requirements as periodic monitoring, offering decision support, and analysis of forest properties and impact across a wide range of indicators.

So to get a useful picture of the forest, you need a view of the trees as well as the forest that supports the right decisions:

  • clear status information (where are the trees/projects),
  • comparable description of properties (assessment of health and value against the same criteria),
  • periodic assessment of how well the forest is doing (in relationship to the strategic goals),
  • support interventions at the forest and the tree level.

The capability alignment of our portfolio management solution FLIGHTMAP with these forest management tool criteria is stunning! 

On the usefulness of metaphors

Exploring the analogy of portfolios of projects/products with forest and trees helped clarify my mind on the concepts. Do you agree with this stretching of metaphors?