In this article, Joachim Cronquist interviews Robert Svanberg from Arla Foods regarding the company’s implementation of the Stage Gate Model and its approach to Portfolio Management.

How it all started

Joachim: So Robert, how did it all begin?

Robert: Well, the Portfolio Management and Stage Gate Models were designed in collaboration with Professor Robert Cooper. He was invited to Arla Foods to deliver a lecture and advise us on how to design and implement the Portfolio Management approach he prescribes.

Robert laughs.

We had a good start with the best in the field at that time, and as an organization, we were eager to take this on as a new project in the company.

However, I have to admit that we were all too ambitious in the beginning. Arla Foods built an integrated SAP module that coordinated portfolio management, project management and reporting throughout the company. In hindsight, this big system approach is something I would not recommend. Instead, as with any other project, you should start small and make it work, and then escalate the project when you have clarified what you really need. ‘Lean’ and ‘agile’ are the two watchwords I subscribe to now.

A strategic tool

Today Arla Foods actively implements Portfolio Management as a strategic tool to secure its growth targets.

Joachim: Please elaborate a little bit on Portfolio Management in Arla Foods.

Robert: Well, we have an ambitious growth strategy, incorporating new market ventures, M&A and organic growth together to achieve our strategic targets. On the ‘organic growth’ agenda, there are a number of ‘stretch targets’ to reach our strategic ambitions. One of them is a ‘double impact KPI (key performance indicator)’, which states that the annual turnover from products launched within the last three years shall double in three years’ time. ‘You get what you measure’ is a common saying in our company, and therefore it has become very critical to make all targets measurable all the time. This allows us to keep track of and fine-tune our work.

Robert points out that this is where Portfolio Management comes in as a key function at Arla Foods.

Therefore, we decided to introduce the new ‘Portfolio Manager’ position, a full-time role with the responsibility of analyzing and reporting on the progress of project portfolios. At the same time, ‘Category Innovation Directors’ were renamed as ‘Portfolio Directors’ to clarify their main function. The job profile was also slightly tweaked with regard to its content in order to further focus on the strategic impact of the portfolios.

A stretch target challenge

Joachim: What about the organization? How did people react to this new approach?

Robert: The strong connection between target and measurement created a focused attention. In various ways, all involved stakeholders are responsible and measured on the double impact KPI. At first, when introducing the KPI, there was a general skepticism about the feasibility of the target. I recalled hearing comments like, ‘This is out of reach’, ‘This is a management daydream’, and ‘Why put such impossible to reach targets on us?’

At the same time, this buzz around portfolio management came under the spotlight of all departments, which gave all who were involved a sharp focus and call for commitment. As the Portfolio Managers demonstrated the progress of their performance, the organization became more determined to reach this unreachable target. Portfolio content became everybody’s business. Depending on the project you were involved in, you could see your contribution to the KPI. For example, project members started to question projects that only gave a minor contribution.

Putting the Portfolio Management in such a clear strategic context and making it visual had a great positive impact in the performance of the organization.

Next step

Joachim: Robert, what is the next step in Arla’s quest for continual improvement?

Robert: One concern that I have is that we canceled out the long-term perspective as well as the more risky projects in order to reach our short-term KPIs. I believe that we now have to introduce a way to maintain a high level of return on the project portfolio. To this regard, I still lack a good tool to connect strategy with action, and I am in search of a better way to balance our portfolios.

/Joachim Cronquist, Partner Googol