Partners for Advancing Agriculture ®

Optimizing a Portfolio: In Integration, or When Others are Integrating

Fall 2016

Optimizing a portfolio, particularly amidst downsizing distractions, is one of those things that is incredibly easy “not to do”. Inertia would have you leave it alone. Your sales team likes every product they sell, and likes having the ability to offer those products. But there comes a point where overloaded, cumbersome portfolios are actually limiting total revenues and holding companies back. Significant gains, where profits will outpace revenues, can result when a strategic portfolio optimization is carefully executed.

Like any “good to do” strategic move, optimizing a portfolio is not necessarily easy, especially given a sales organization’s passion for doing their job and selling your products. And, it’s often not a popular move across the organization while you’re in the midst of it. Strategy, focus and perseverance are all required to get the job done effectively.

borelWith many large organizations at various stages of mergers or consolidations, portfolio optimization affords opportunities for companies who are reducing product offerings, and simultaneously, for those who are looking to build their portfolios.

A great portfolio is a beautiful thing. It is beautiful because demand is easily created, the competition is outclassed, retailers and farmers are delighted and profits are strong. And while beauty is in the eye of the beholder, there are some consistent characteristics of the products in a “beautiful portfolio”:

  • Strong relative competitive positions that are sustainable
  • Clear, sound value propositions
  • Profitable, or with a clear path to above average profitability
  • Brand equity

borel2Whether you are consolidating/integrating or if others in your competitive space are, this is a particularly appropriate time to make optimizing your portfolio a priority. In addition to the characteristics of products in a “Beautiful Portfolio”, other key factors must be considered in the process:

  • Sales Rep presence, specialization, and capacity
  • Sales Cycle
  • Level of support & loyalty from the distribution channel
  • Realistic capacity of Sales & Key Account reps (it is NOT unlimited)
  • Synergy (or potential synergy) with other products in your portfolio for one or more markets
  • Cost to Market relative to Profit from Product
  • Competitive offerings
  • Market trends (growing, stable, declining; consolidations occurring; etc.)

 Most large agribusiness companies have “too many” products

borel3Most large agribusiness competitors in CP have too many products in their portfolio. Through the work that Context has led in portfolio optimization, we often find products which are more of a “distraction” than they are contributors. Each time we’ve identified and removed these products, our clients have experienced higher overall sales and associated margins in the very next season! But back to the earlier caveat – that optimization is not always “popular” In full disclosure, be aware that there likely will be internal concern and push back, particularly from the Sales organization, about any removal of products. This makes it critical to have A) a strong internal champion for the project, and B) the fortitude to stay the course until the next seasons results can be compared. The outcome will be a lasting positive legacy for your leadership, courage and impact – building a reputation for delivering remarkable results through making tough decisions!

Many medium-size or specialty agribusiness companies have “too few” products

Many specialty ag input companies are at a point where they will benefit from strategic product portfolio additions. We are at a unique point in time where both large and specialty companies are motivated to make strategic moves that can enhance the value of both of their bottom lines.

Managing the Shift Toward Real Advantage

borel4All ag input companies have gaps that would be advantageous to fill, or weak spots that would be advantageous to replace. It is very important to know what products would be valuable to add or replace, and to track the potential sources. When consolidation is occurring, there is an increased need for product or sector divestitures, often driven by regulators. This represents a particular opportunity for product acquisition.

Now, here’s the point where real advantage is realized. Most companies will agree that it makes sense to focus on the product portfolio to win. However, it’s the “how to focus” that differentiates the real winners. Those who increase the emphasis on critical issues including product level, use patterns, time/investment prioritization position themselves to make significant and long-term advantages.

Whether you have more in your portfolio than your sales people can represent well, or your portfolio would benefit from additions, it is important to KNOW your gaps and weaknesses.

Context can help you identify strategic gaps, quantify the synergy and value, and design a proactive process for making it happen. Context helps companies identify products that are more of a distraction and design a proactive process for moving them out.

In the Context Portfolio Optimization Process (CPOP), we start with careful evaluation of what fits, contributes and has synergy in the portfolio – and what does not. Through a series of detailed analyses, we evaluate products, bundles, use patterns, sales and marketing time/investment analysis, and other drivers influencing the porfolio. When product removals are determined to be appropriate, companies have options to sell, license, donate, or drop. Our expert teams then create clear and actionable recommendations for making the needed changes, that add high value in the next season and beyond!

Context has the depth and breadth of experience and capability for this subject. With our global network of experienced industry executives, and our deep expertise across nine distinct practice areas, we are helping companies become more productive, more efficient and more sustainable. For support in evaluating your opportunities in portfolio optimization, contact us. We can provide the strategic management insights you need to make the hard choices that drive your profitability effectively. I would welcome your call, 925-937-4180, or email, to discuss further.