We are seeing clients with issues around business growth and performance that have a common thread: a lack of an effective portfolio strategy.
From working with clients in this position, we’ve learned what makes a successful strategy, as well as the watchouts and potential pitfalls. We’ve put together seven factors that people often haven’t considered before embarking on a portfolio strategy project, but that can make a big difference, not only to the outcome but also to how easy it is to implement.
1. How we got here
The first step is to understand the decisions that resulted in your portfolio as it exists today.
Why this is important:
You can’t create an effective portfolio strategy without understanding the perceived value of the existing parts, the intentions behind including them and what may have changed.
What to think about:
It’s likely that your portfolio wasn’t purposefully designed but is the product of various innovations, mergers and acquisitions. Digging into that history can help you make sense of why particular brands or products ended up in the portfolio. Some may be conscious choices that fulfil a specific purpose, but others may be there by default or by chance. For example, it’s surprisingly common for a business buy a suite of brands to get access to one ‘jewel in the crown’ and, in the process, get stuck with a bunch of other brands that nobody really cares about.
2. Where we are going
Define the long-term commercial vision and ambition for the brands in your portfolio. But also, be pragmatic – some things may not be changeable.
Why this is important:
Portfolio strategy is one of the most strategic and existential marketing challenges you can tackle. It can include acquiring and creating new brands and delisting and selling others. If you don’t have a strategic commercial vision, everything in your portfolio risks simply having an equal weighting, making these decisions impossible. This can lead to a portfolio makeover where each brand has a role ‘on paper’ without clarity on its strategic role and consequent investment approach.
What to think about:
What problems are you looking for your portfolio strategy to solve? It needs to meet the right business challenges, whether that’s driving innovation, increasing penetration, or defending and attracting specific consumer segments. At the highest level, the problem might be, “what categories do we want to play in in the long term?” But at the more tactical level it can just be about giving your brands clear swim lanes so that retailers can see the value in giving them all shelf space.
You must also consider what you are empowered to change. For example, if you have brands that occupy similar positions and perform the same functions, you may find that the business won’t allow any of them to be discontinued because they are all successful. It’s helpful to consider which brands senior stakeholders are enthusiastic about or where your organisation might have an irrational attachment to a brand, making it hard for you to push through change.
3. The behaviours we are incentivising
It’s important to examine your operating model to uncover the portfolio behaviours you are currently incentivising.
Why this is important:
Too often portfolio strategies look great on paper but don’t create change in the business. We’ve found that brand leaders can resist change if they think that the new strategy will hold their brands back. If this is the case, you may need to change behaviour by adjusting the incentives built into your business.
What to think about:
Are brand owners rewarded solely for growing their brands? The incentive structure must reflect the ambition of the portfolio as a whole and not just individual brands or products. As the category changes and new opportunities arise, you need to think about what incentives are in place to ensure that you can practice portfolio discipline and avoid overlap with other brands in the portfolio.
4. Establish a timeframe
It is important to understand when the portfolio changes need to come into effect.
Why this is important:
Time horizons are frequently overlooked but will make a material difference to the portfolio strategy you create and often come with different stakeholder expectations.
What to think about:
What is the agenda? Are you looking at short-term adjustment or long-term transformation? Talk to all potential stakeholders to get a broad consensus on what horizons the innovation teams are working towards, what are the immediate and longer-term objectives of the brand team, what are the timelines the sales team are working with and what the business is thinking about mergers and acquisitions or corporate developments.
The decision about time horizons will depend not just on immediate priorities for your business versus longer term opportunities, but also the degree of change you are planning. Short term wins might include delisting underperforming SKUs. Longer term goals might include a full restructuring of the portfolio to fit with emerging category trends. You also need to consider whether you will take a phased approach or implement change in one go.
5. Find the Future Consumer Value
Before you create a new portfolio strategy you must have a clear, evidence-based understanding of where the opportunities lie.
Why this is important:
To set any portolio up for success you need to align it with where the current and future value exists in your category. An evidence-based framework will bring clarity to where to focus and which brands to prioritise.
What to think about:
You need to be clear on the opportunities that you are looking to target. This needs to be more than just an estimate of the annual growth rate – it needs to be an objective data-driven view of the landscape based on consumer research such as a demand space, consumer segmentation or usage and attitude study. If you don’t have such a framework in place, it’s fine to start work on the strategy in theoretical terms, but you will need to conduct such research and quantify the opportunities as part of the strategy project.
6. Be honest about the role of your brands
For the portfolio strategy to succeed, it’s important to be brutally honest about the role your brands fulfil with consumers today and how they are perceived.
Why this is important:
There is often a mismatch between what businesses believe about their brands and how consumers see them. The business needs to be willing to challenge internal narratives so that the solution you create will work in the market.
What to think about:
What is the received wisdom about how consumers interact with a brand within your portfolio? Has this been validated with research? And if so, how recently? An important message for marketer is, “you are not your consumer.” If the marketing team isn’t hearing this, they can make decisions on gut instinct which can miss the mark. Think about whether you truly understand how people are using your brands in their lives – and what you offer that they can’t get any other way? We need to remember that no brand has a divine right to exist and that many of us in marketing believe that our brands are more important than they really are.
7. Prioritise the jobs to be done
Portfolio strategy is about making choices about where to direct resources to have the greatest impact. You need clarity on what you are going to fix and in what order.
Why this is important:
Brands in the portfolio aren’t all equally weighted. Some will be successes to be accelerated, others will require effort to get on the right track. When used alongside your evidenced framework of the future consumer opportunities, this will help to focus your attention on the biggest jobs to be done.
What to think about:
Have you understood which elements of the portfolio are performing well, and whether there’s an opportunity to grow them further or accelerate their growth? Similarly, are there elements that are struggling? Maybe you have long tail of brands that don’t really fit anywhere, or one brand that is not meeting its potential and needs to be repositioned.
Do you have enough brands in the spaces where there are the biggest trends and the highest potential growth?
What are the biggest jobs to be done? What will you prioritise to have the greatest immediate impact? What will you deprioritise to free up resources.
A successful portfolio strategy isn’t just about creating a plan on paper – it’s about making intentional, evidence-based decisions that drive real impact. And thinking through these seven success factors before you commit can really help with the project.
