The portfolio question beyond each business plan

I ask what the businesses contribute to one another and where the organisation has a defensible reason to invest.

That shifts the discussion from preserving existing allocations to evaluating strategic fit and capability. The analysis should reveal where shared ownership creates value, where it adds complexity and which choices deserve a different structure.

Portfolio incoherence persists because planning processes are built around individual businesses. Each unit prepares a plan, defends its targets and requests resources, and each plan is assessed largely on its own merits. Nobody is asked to explain why these businesses belong together, so the question goes unasked year after year. Allocations drift towards whichever units have the most persuasive leaders or the longest history. Over time the enterprise can become a collection of reasonable businesses that share overhead and a name, but little else that creates value.

My practice is to add a portfolio review that sits above individual business plans. For each business, we set out what it draws from the enterprise, such as customers, capabilities, brand, capital or management talent, and what it contributes in return. We then ask whether the business would be stronger or weaker under a different owner or structure. The review also looks at the portfolio as a whole: where risks concentrate, where cash is generated and consumed, and whether the mix supports the enterprise's stated direction.

Consider a group with a large established business and two smaller ones acquired in earlier phases of growth. Each small business meets its plan, but the analysis shows that one benefits considerably from shared customers and distribution, while the other operates almost independently and consumes scarce senior attention. The first case suggests deeper integration and investment. The second raises a harder question about whether the enterprise is the best owner, or whether a partnership or separate structure would allow that business to grow more freely.

The usual objection is that portfolio analysis undervalues synergies that are real but hard to measure, and that it unsettles leaders whose businesses come under scrutiny. Both points deserve respect. I ask sponsors to describe specific synergies and the evidence that they are occurring, rather than dismissing them. Where the evidence is thin, the answer may be to test integration more deliberately before concluding anything. As for unsettled leaders, I find that a transparent process does less damage than the rumour that inevitably surrounds an unexamined portfolio.

This asks the chief executive and the leadership team to hold a view of the enterprise that is larger than the sum of their individual responsibilities. Business-unit leaders must be willing to discuss whether their own unit belongs, which requires a degree of trust that the conversation is fair. The strategy function must bring analysis that is balanced rather than advocacy for a preferred outcome. And the board needs to make room for the portfolio question in its own agenda, rather than meeting it only when a transaction is proposed.

The portfolio conversation is often the one boards find hardest to start, because it questions arrangements that have become familiar. I find it helps to ask what the enterprise would choose to own if it were starting today. The answer rarely matches the current portfolio, and the gap is where strategy begins.