Major Challenges for Portfolio Management
Portfolio Management faces many challenges, the most important are:
- The portfolio of projects does not reflect the business's strategy. Studies has shown that there is a gap between product strategies and the strategic arenas, the product types, markets and technologies that would generate these new products. The breakdown of R&D spending by project type often reveals serious disconnects between the goals/strategies of the business and where the money was spent.
- Poor - quality portfolios. This problem is depicted in one's executives's words: "We implemented our portfolio management approach and the first thing that became evident was that half our projects were in the wrong quadrants, including some of our big ones!"
- It is tunnels not funnels. A big problem is that the gates in new product processes (Go/Kill Decisions) are often perceived to be ineffective. In many companies projects tend to take on lives of their own.
- Scarce Resources and a lack of focus. Many firms face the problem of having too many projects comparing the resources they have available. As a result many projects even the best ones lack adequate people, time and money and thus it takes too long to reach the market. Poor resource allocation can also create many other problems along with poor resource allocation.
- Trivialization of product development. It is connected with lack of resources. The time pressure of new products and "quick" revenues leads many companies to pick "low hanging fruit" projects that can be done easily. In that case projects that would help the company to gain competitive advantage are missing from the portfolio.
