PORTFOLIO MANAGEMENT, NHL STYLE
Posted by Richie Heron on June 24, 2011
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Today is the day when America’s National Hockey League (NHL) conducts its annual entry draft. The 30 North American clubs that make up the league will select junior players to join the premier league in international hockey. The teams make their selections over 7 rounds based on the position they finished in the previous season. This is portfolio management NHL style.
Each team has a different strategy and will draft players depending upon the needs of their team. The process of selection is long and rigorous. Scouts will have viewed the potential prospects many times over the preceding years and will have assessed their key hockey attributes; skating ability, stature, vision, hockey sense. Once these reports have been compiled, the intangible elements are also assessed with a similar rigour; attitude, work ethic etc.
Does the process work? Reviewing the 30 first round picks in each year from 2000 to 2005; on average 8% will not play in the NHL whilst 59% will go on to have a substantial NHL career.
This is a 60% NPD hit rate, way in excess of the poultry 10% ration frequently cited in consumer goods industries. There are obviously lessons for us all in the NHL play book so here are our top 5:
- Product lifecycle management is key: understand your current portfolio and when existing products are likely to decline in performance so that you can develop new products that can take over
- Take the long view; develop for where you want to be, not where you are now, and recognise that development takes time
- A portfolio perspective is essential; not all new products will become an “all-star”, develop products to strengthen the overall portfolio
- Take multiple views of the new product in testing to obtain a complete picture; consumer, brand and your own employees
- And always consider the competitive context