Portfolio Management

Product Portfolio management is one of those important but not urgent activities that we never seem to have time to do. It is often thought of as an academic exercise; however, good product managers and product team leaders know it should be done, but struggle to organize the effort. If they take the initiative, the activity can unravel very quickly into an over heated debate about which products should be in what quadrant and why.

Product managers need a practical approach to assess and manage their product portfolios. Recent survey findings that suggest that many product teams and their companies are “flying blind” when it comes to managing and making resource decisions about existing and new products. Or at best “shooting from the hip.”

The method needs to evaluate current products and the impact of potential new product–and we need it now!

What’s the Big Deal?
The stakes are higher now because more companies are asking product teams, and specifically product managers, to make sense of products that get pushed into the portfolio through acquisitions, partnering or mash ups. In this expanded role as product strategy integrator, the product team that hasn’t adequately assessed the current portfolio will be ineffective when asked to assess and complete long term plans for an unfamiliar product or suite of products.

Usually, the impact on the company isn’t fully understood until there is an emergency–the portfolio becomes vulnerable and begins to underperform on critical metrics such as growth and profitability.

What is Practical Product Portfolio Management?
The objective is to determine the optimal allocation of money and resources to deliver products that help meet the strategic goals of the company. This requires mixing quantitative data, such as market share growth, product margin, profitability and competitive position with qualitative evidence like market problems, strategic fit and impact to existing or potential customers.

The principles of portfolio management has two parts:

  • Analyzing and understanding where you are
  • Planning where you want to be and managing how you get there

The discipline has the highest value when adopted by the product management team as part of the regular planning cadence. The analysis and planning steps are combined with high-level business case justifications and integrated into the product roadmap. We call this product management hygiene and it has near term impact on the product team’s effectiveness and company objectives.

What You Will Need?
You will need a few techniques and tools to complete the analysis and planning exercise.

  • A growth-share strategy matrix such as the Boston Consulting Group (BCG) chart. The purpose of this chart is to plot your products based on relative market share compared to the largest competitors versus the growth of the respective market.
  • Time-based visual charts, including roadmaps and capacity charts that illustrate how changes in investments, market conditions, etc., will impact the portfolio in the future.
  • Apply R-W-W analysis to test market data and market assumptions.
    • Is it Real?
    • Is it Winnable?
    • Is it Worth it?

The ultimate goal is to produce an organization-level product portfolio with products stacked in priority for resources and funding. This is of course according to their placement on the growth-share strategy chart and other factors such as strategic fit, probability of technical success and potential value to the company.

No Right Answers
Like other risk based assessment activities, looking for correct answers is counter-productive. In fact we would argue that looking for certainty beyond 80 to 85 percent confidence level at this phase of the analysis is also a waste of time. Your goal is to eliminate flawed assumptions and avoid obvious miscalculation.

Some of the wrong answers to avoid include:

  • Investing heavily in something that is unlikely to have a good payback because it’s not very valuable or will be in a market that does not have good prospects.
  • Allowing a product that is not making the company a lot of money, not growing, and not synergistic with other products to remain alive.

Final Thoughts
Practical portfolio management is a strategic and high-impact activity with short- and long-term potential results. It requires rigorous quantitative and qualitative analysis as well as strategic planning and execution.

There are key factors that product managers and product team must accept in this discipline.

  • Be ready and willing to retire your (or your boss’s) favorite products that don’t meet the needs of the market or the business.
  • Be ready and willing to “kill” or at least defer “darlings” that have great potential and do not fit your company’s business strategy or business model.
  • Re-balance money and resources with objective metrics. It is the only certain path to success!
  • Understand that there are no “right answers.”
  • Accept the fact that high levels of precision are not possible.
  • Above all, start where you are and start now!