Study Shows Companies Struggle to Find Balance

SALT LAKE CITY—A rapidly evolving and ultra-competitive global economy is pushing corporations to become both more focused—and pliable—in managing their product and service portfolios, researchers associated with the David Eccles School of Business at the University of Utah have concluded.

In a paper to be published in a forthcoming 2011 edition of the Journal of Production Innovation Management, Eccles’ Royal L. Garff Presidential Chair in Marketing Professor Abbie Griffin, along with co-author Linda Kester, note that none of the long-established portfolio management styles now in use can alone successfully navigate the 21st century’s complex marketing landscape.

“The next step that corporate strategy has to take is to figure out how to balance a focus on current tasks while also having the entire set of projects in the development pipeline remain on strategy, as the very environment around them changes,” said Griffin.

“Most firms tend to go to one end or the other of a spectrum: either they go forward rigidly in strategy despite environmental changes and are too focused on completing projects already in the pipeline; or they go to the other end of the spectrum and shift from project priority to project priority, hopping on what looks best at any given point in time, losing focus and confusing employees,” Griffin said.

The hardest thing to do is to strike a balance between maintaining a short-term focus on what really needs to be done now and modifying the strategic trajectory to remain successful in the future by deciding which new projects should be brought into the pipeline, given certain environmental changes,” she added.

The paper, entitled “Modeling Portfolio Decision-Making Processes,” explores how New Product Development strategies were drafted, planned and implemented, and to what degree product lines were pursued in concert with overall corporate marketing and growth goals. In doing this, researchers studied how sample companies carried out their decisions – and how effective or ineffective those approaches proved to be.

In-depth case studies of four companies found some decisions were based on careful fact-finding and cross-departmental collaboration, while others had often negative internal political elements or suffered from corporate executives’ power struggles. Other decisions ultimately were made based on opinions tied to past experiences at the expense of new factual revelations.

“Most frequently, top-down decisions for which products to pursue are more the cause of a firm's portfolio problems – unless the senior managers dictating those decisions are immersed in the market and technology capabilities,” Griffin said. “If senior managers are making these decisions without having deep connections to understanding customer needs and technology possibilities in detail, then portfolio decisions become much more political in nature—not always to the benefit of the firm.”