Most companies launching new products operate in a very reactive state. They develop new products to capture an emerging marketplace opportunity or fend off competitors. Without spatial alignment, however, we could be reactive to the wrong competitive or market moves. If we aren’t aware of the broader business context we make reactive decisions. We become vulnerable because we react to specific events or changes, instead of deliberately driving our growth and making competitors respond to us.
Key product and technology decisions support overall business success
At nearly every corporation, product decisions are directly linked to cross-functional efforts. Understanding where product and technology decisions impede the implementation of your strategy is vital. But all those key decisions need to be aligned. To grow in product leadership, we have identified seven key leverage points.
Product portfolio management is not just a tactical exercise. It truly serves to develop a competitive advantage. Doing product portfolio management ensures that all your essential product and technology decisions are made in line with your corporate strategy. And it guarantees that every technical, product management and financial decision moves you toward becoming the company you want to be.
Resource optimization through portfolio management improves capabilities compared to adding resources. Think of it as greasing your slippery funnel, you get 20-30% more down the spout by making everything you do today more effective and more is always more profitable than adding at the top or middle of the funnel. Most products or businesses need a 10-15% increase in sales or productivity immediately and without a doubt tradeoffs will have to be made.
Too often the research shows that internal politics or an overreliance on existing choice criteria, e.g., the HiPPO, prevails and investments are made in the wrong choices. It’s not that the business case for these investments fails, it’s the business case makes assumptions that are just plain wrong. Couldn’t find a big data analysis of where your product choice estimates are particularly erroneous, if you have such data discard some of your worst assumptions and choices and your business will run better.
__Investments and resources are too often squandered in__
__Building the wrong products__
__Building products in a different sequence than what the market needs__
__Building products with wide, low depth feature sets__
__Maintaining products that are purely redundant or have a low return__
As an organization increases in size and complexity one would expect to see an increase in the number of product and market options, either under consideration or already in the marketplace. However, the number of products and services that eventually receive funding usually remains somewhat constant largely due to the constraints of management available time to oversee so many initiatives. Because there are more options competing for the same funding decisions become more difficult, often too difficult to be sure they are made well. This is why we often depend on having to let the political process run its course.
As a company grows and matures the breadth of its product and market options should grow. The number of products in existing markets increases and new products are added in current and new markets. The company’s strategic position – where it commits its resources in order to achieve its objectives – shifts. However, unless there is a rigorous, disciplined, and comprehensive review of the potential value of all product and market options, this reallocation of resources will be made in a considerably more random, less objective manner.
Firms that spend with discipline on truly defending and extending their product franchises become clearer with regards to the trends shaping the future, the technologies they need to access and develop to bring their targeted product portfolio to life, and the geographies and customers that will likely afford the greatest opportunities.
To win long term the question must be asked: Where exactly will my product franchise sit in this future world, and who will most likely be my competitors? What types of competitors will I need to consider, and what will be their fundamental business models?
Understanding a product’s role in attracting and keeping customers and supporting your team’s efforts to establish and maintain that defensibility is an important benefits of product portfolio management.
Focus becomes sharper
Portfolio management helps keep your product management team focused on the best opportunities. In the system software business, your next best SKU may be a product extension or a whole new offering that’s currently not in the portfolio. Better portfolio management will put your R&D money in just the right spots. Customers will get the most benefit from your innovation investments, and you’ll get the best return from those dollars spent.
Product portfolio management is not always all about numbers. Most of what might be considered the art of product management should also be in play here: how and where you innovate, what your process is for choosing and developing new products, how you think about your market and customers, how you position and communicate about your products. All these rely on your product portfolio management, the better to achieve your business and strategic objectives.
Developing a robust product portfolio management process requires [the company] to first clearly define its business strategy, answer basic but challenging questions about how resources such as money, people, and time will be allocated, and what trade-offs such as risk, balancing short-term results with long-term investments, and potentially broader versus narrower product scope the company is willing to make. The product portfolio management process focuses on how a company decides to spread its resources across its products and services.
