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Portfolio KPIs

The Problem

"In God we trust, all others must bring data", W. Edwards Deming.

 

 

Portfolio KPIs should help us find answers to the following questions:

  • How to demonstrate the value of a product portfolio? For example, senior leadership is not satisfied with storytelling about specific successful products in your portfolio; they want numbers.   

  • How is the portfolio doing year over year? Is it improving or declining?

  • What does a portfolio contribute to enterprise innovation or sustainability?  

  • How to compare portfolios? For example, compare outcomes of a product portfolio that uses lean innovation methodology to the results of a PMO-managed portfolio. 

  • How to find and manage bottlenecks in the portfolio pipeline?

The Solution

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Some measurements can be averaged across products to demonstrate the holistic portfolio value. The choice of metrics will depend on the company size, the industry, product types, and goals.  

 

The table above includes a mixture of outcome and output metrics in multiple categories. Outcome KPIs are the most useful to demonstrate the value to customers and stakeholders; they are holistic and can be aggregated even further, across portfolios at the enterprise level.  

 

A net promoter score (NPS) demonstrates portfolio value to customers. It is the only "oblique" KPI (1) and the hardest to game from the list. 

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Revenue and profit contribution to that of the whole enterprise. Can we afford to grow? How important is this portfolio to the enterprise? How does it compare to other portfolios? These KPIs matter to investors and the company board.

 

Innovation contribution (DEF 1) and conversion (DEF 2) confirm the direction of the portfolio vision and the roadmap by customers.  

 

Output metrics provide details on how the outcomes have been achieved. They also help find and manage constraints inside the portfolio pipeline. For example, do we have an attrition problem (talent retention trend)? Do we de-risk ideas properly (knowledge/assumption ratio trend (DEF 4)) and cheaply (cost/time per learning (DEF 3)) before scaling? Do we have a quality problem (defects escaped to production trend)? Do we have an appropriate budget allocation for each portfolio horizon to achieve a balanced flow (budget allocation per horizon)?

Takeaway

Some KPIs can be aggregated across products in a portfolio.  Outcome KPIs help figure out the impact of the portfolio on customers and company sustainability and innovation.  Output metrics help find and manage bottlenecks in a portfolio pipeline.  

Definitions

  1. Innovation contribution - the contribution of a product portfolio to enterprise finances. For example, portfolio A contributed X% of growth and Y% of profits to the enterprise in year N. 

  2. Innovation conversion - the percent of enterprise customers who use "new" portfolio products. "New" products may be brand new or "nextgen" replacements.  For instance, X% of enterprise customers use products from a portfolio A first released in year N.

  3. Cost (and time) per learning - cost or time of one build-measure-learn cycle to validate an assumption or to implement an idea or feature and learn from customer feedback.  The goal is to reduce the cost and time of each learning.

  4. Knowledge/Assumption ratio - a measure of risk associated with an idea.  A ratio between validated and unvalidated assumptions.  The goal is to reduce risk as a product matures through PDLC.   

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References

  1. John Kay (obliquity)

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