The concept of portfolio is very familiar in the areas of finance and investment. We have all heard the advice to diversify one’s portfolio in order to mitigate the risks of investment decisions. However, in business management, portfolio is also becoming a more and more important concept. Organizations deal with various fields that create tasks every day from services and commodities marketing to growth and development projects. The key idea behind business portfolio management is the aim to manage all these projects and related assets in the most beneficial and least risky way possible.
The roots of the concept
Let us look into the meaning of business management, portfolio, and related concepts. As mentioned above, the term portfolio is usually used in the contexts of investment and finance management. Here it means the entirety of someone’s financial investments, from stocks and bonds to cash and commodities, and everything else.
Similarly in business management, portfolio can be defined as the collection of all products, services, and other units that make up the business. And just like in the field of investment, what makes up the portfolio can also be treated as various kinds of assets. In this sense business portfolio is the entirety of business assets.
In a more narrow but related sense, portfolio in business management refers to the conglomeration of a company’s programs and projects meant to advance the general goals of the business. In both of these senses, when managing the business portfolio, business heads see how various assets and projects relate to each other and to the whole business strategy.
Business management: portfolio and strategy
This brings us to the ways in which business portfolio management has the biggest practical impact. Managing a portfolio means making sure that everything that is done with various projects is the most efficient way to advance the general business goals.
These goals are defined by the management when creating the business strategy. This strategy can either mean the development plan of the entire small business or just a way to implement the broader corporate strategy in one of the branches. In both cases, however, the strategy itself can be implemented through business portfolio management.
The business management portfolio itself entails everything that can be managed within the organization. All the projects, programs, and allocations of the assets are part of the business portfolio and in one way or another relate to the entire business strategy. Making sure that each of them is truly aligned with this strategy and leads to the most effective way of advancing it is the main goal of business portfolio management.
It is achieved through constantly reviewing the objectives of all these projects, making sure that they are clearly defined and could be pursued consistently with each other. Another key objective of managing a business portfolio is to maximize its value by making sure that all assets are used to the fullest. Here once again a similarity with investment portfolio management can be drawn, as the aim is to get the best possible return on investment.
For this purpose, managers aim to conceive the best ways to utilize all the resources of the company, from personnel’s time and skill to the tools and locations they use. These resources have to be divided among various projects in such a way that is best for each project and the general strategy of the business.
How it matters for your business?
Now to the most important part. Let us talk about why business portfolio management matters and how it can help with making your company more successful. This methodological approach has quite a few advantages that make it worth trying. Consider the following benefits.
- It helps you get organized. There are so many things that companies have to do each day on the strategic management side. Multiple projects might get chaotic and aimless without constant oversight. Just like putting your papers in a physical portfolio, managing your business portfolio allows you to keep everything in place and organized and lets you know what is happening at all times.
- Business management portfolio leads to the more effective usage of all the resources. Business portfolio management has the main goal of using all the company’s assets as efficiently as possible. By knowing how each project relates to the others and what it does to advance the business strategy, you can make sure that no resources are wasted.
- You are also better enabled to track your performance with business portfolio management. Constantly checking the results of each program and asset usage in the portfolio you see what works and what does not. Analyzing the data allows you to reorganize the portfolio in accordance with the results the projects show.
- You will not lose sight of the main goal. When managing multiple projects, it is easy to get lost in minor tasks and forget about the big picture. A business management portfolio helps to make sure that everything that is done in the company is constantly measured against the main goals of the business strategy.
In short, one could say that business portfolio management is all about being methodical, organized, and consistent. All the things that a great manager should be.
Such an approach to management also has the benefit of being very data-driven. There are many software tools that you can use to help you with managing your business portfolio. Make sure to check them out when implementing this method in your company.
