Delivering an Improved Portfolio with a Value Based Management Approach

By Babar Khan

A portfolio is a related set of assets that compete for resources and deliver value for an organization. Interactions among the assets increase the complexity of portfolio decision making. For example, we have competition for multiple types of limited resources; we also have contributions towards the same organizational objectives as well as synergy, cannibalization and halo effects among assets. It is the use of limited resources combined with specific assets that we deliver value.

Perhaps you are a multi divisional company and you have a portfolio of business units or physical assets like plants & manufacturing facilities. Decisions about each asset can be made quasi independently. The characterization of portfolios is done in many ways, notably: a. number of assets b. value of stake per asset c. rate of change (annual, quarterly, monthly, daily) d. interaction (independent, many to many, shared) e. uniqueness f. uncertainty (development, deterministic analysis , commercial) g. organizational complexity (several teams, many interrelated teams)