Product Portfolio Management: In The Pursuit of Growth

The highly competitive business environment raises the need for companies to be innovative to cater to shifting customer needs. Now more than ever, departments of any business area collaborate tightly to rebalance and diversify their portfolio of products to create and deliver exceptional value. They are no longer focused on releasing just another feature but instead listening to their customers' feedback and addressing their real needs. Ultimately, this is the key to successfully managing product portfolios and thriving in this complex time. 

What Is a Product Portfolio? 

A product portfolio represents a range of product variances that the company produces, markets, and sells to the customers. This diversity of product lines enables a company to address various market segments, accommodate diverse customer preferences, and meet varied needs. The product portfolio is a strategic tool that helps organizations manage and analyze their product offerings.

What Is Product Portfolio Management? 

Product portfolio management is known as the practice of managing the organization's entire product portfolio. Further, product portfolio management is the centralized management of methods, technologies, and processes used by product management organizations and product managers to analyze and manage products and their potential returns based on several key characteristics. 

Product portfolio management plays a crucial role in supporting an organization's financial and operational goals by defining clear objectives and optimizing resource allocation to maximize the value of its products. 
By ensuring that all products align with the organization's strategic vision, product portfolio management enhances the overall quality of deliverables and contributes to sustainable success. 

How Does Product Portfolio Management Differ from Project Portfolio Management? 

Product portfolio management considers every existing and potential product and its current or future importance to meeting the organization's business goals. In contrast to managing product portfolios, project portfolio management is a strategic method for examining, prioritizing, and overseeing a collection of current and upcoming projects. It entails selecting the most suitable project to be executed at the opportune moment, ensuring alignment with the company's vision and strategic goals. 

What Is a Product Portfolio Strategy? 

A product portfolio strategy is a comprehensive plan that outlines how a company intends to manage and develop its range of products or services to drive revenue and increase market share without destroying customer value. A product portfolio strategy aims to maximize the overall performance and competitiveness of the product portfolio in the market. 

A well-defined product portfolio strategy aligns the organization's overall business strategy with its product offerings, ensuring that resources are optimized, risks are managed, and the portfolio remains competitive and relevant. 

There are two distinctive, innovative strategies that a company can pursue to drive growth and success for the business: incremental and disruptive growth.  

Incremental Growth 

This kind of portfolio growth strategy is characterized by applying small improvements to existing products or services and even processes. Companies usually launch this strategy when they see an additional opportunity to expand their presence in the market. This approach is considered low risk because of the low investment cost and the slight chance of disrupting the current business model.  

By continuously improving their products, services, and operations, companies like Nike, Procter & Gamble, and Coca-Cola have maintained their competitive edge and meet the evolving needs of their customers. 

Incremental innovation is centered on continuous improvement, introducing gradual improvements to maintain products at the forefront of the industry. 

Disruptive Growth 

As the name implies, this growth strategy disrupts existing markets and challenges established norms. The focus is creating new markets where emerging technologies and new businesses dominate. Companies adopt this approach when they seek to expand their portfolio of products with an entirely new product line or enhance their current products with technologies. Famous disruptive innovators of our times include Tesla, Uber, and Airbnb. 

Unlike incremental growth, the disruptive approach requires risk-taking and significant investments, but it can gradually change the company and the market. 

What Are the Objectives of Product Portfolio Management? 

The goal of product portfolio management is to strategically oversee a company's entire range of products. While firms use different approaches to implement PPM, there are shared objectives that every company aims to achieve through this process. 

The following are some of the objectives of product portfolio management. 

• Aligning with Business Strategy: Making sure that the product portfolio aligns with the overall business strategy and goals of the company, such as market expansion, customer satisfaction, or innovation. 
• Optimizing the Product Mix: Ensuring that the portfolio contains a balanced mix of products at various stages of their life cycles, from development to maturity, to maintain a steady flow of revenue.  
• Resource Allocation: Allocate resources to create goods that can be successful. 
• Market Adaptability: Responding to market changes and trends by improving, modifying, or re-branding items.  
• Maximizing Product Value: Identifying and focusing on products that offer the highest value to customers and the best return on investment for the company. 
• Portfolio Evaluation and Balancing: Regularly reviewing and rebalancing the portfolio to phase out underperforming products and invest in promising new opportunities. 
• Innovation Management: Encouraging and managing innovation within the product portfolio to foster growth and maintain a competitive edge. 

Product portfolio management achieves these objectives by evaluating resources, analyzing demand and supply, and establishing a prioritized product ranking to bolster the company's long-term growth and sustainability.

What Are the Benefits of Product Portfolio Management? 

Product portfolio management enables a company to select, evaluate and prioritize products in an objective way, based on facts and information. Product portfolio management provides a number of benefits for any organization if it is performed on a regular basis and implemented properly. 

• Maximize long-term value 
• Align products to business goals 
• Optimize risk vs. value 
• Visualize the entire portfolio 
• See and adjust pipeline balance 
• Executive-level product oversight 
• Shape future market focus 
• Optimal allocation of resources 

Empowering Product Portfolio Management through Technology 

The management of a portfolio of products can be complex without digital solutions. Centralized product management software enables companies to easily analyze their portfolio at a glance. These tools offer features that minimize manual work, break down communication barriers, and ensure transparency. They are crucial for understanding product management performance and enabling product managers to make data-driven decisions from a unified source of truth.
  
To showcase how powerful implementing a technology of this kind is, let’s examine it through examples. 

Create Full Product Portfolio Visibility 

With management platforms such as Businessmap, you can bring the portfolio of products into a central hub to oversee their performance and break them down into a portfolio of projects to support product development.  
  
The system allows you to create highly customizable dashboards to meet your products’ unique requirements. The management workspaces feature enables product managers to easily manage multiple projects distributed across teams and track their progress from a single portfolio board.   
  
Going further, every team can plan and execute their projects and improve collaboration through individual kanban boards embedded into a team workspace. 

The platform fully supports the implementation of the product portfolio management approach by allowing teams and management levels to have direct transparency over the interconnected product development process and execution initiatives. 

Connect Outcomes with Outputs 

For successful product development, it's crucial to match actual work progress with the company's objectives. Setting clear and measurable goals (such as market share growth or geographic expansion) and linking them with work delivery processes clarifies the targets and the path to reach them. Applying the OKR goal-setting framework helps companies align strategy with execution and keep track of everyday activities and project progress.  
  
Businessmap offers this capability, allowing teams to set and track OKRs for their product portfolio and tie them to overarching initiatives and daily activities. Furthermore, they can monitor how individual project outputs contribute to achieving the main portfolio priorities.   
  
The image below illustrates how strategic objectives and team-OKRs are linked on a portfolio board.   

Visualizing the connection between company-level and team-level OKRs on a Management Board in Businessmap 

Align Execution to Strategic Plans 

Diversifying the product portfolio entails developing and implementing business strategies to expand the product lines. Releasing a new product or feature starts with in-depth market and consumer behavior research and testing the hypothesis that the target customer base will purchase this product.   

Using the concept of a minimal viable product (MVP), teams can make early assessments with minimum effort to determine whether the planned product or feature corresponds to the initial assumption. Once approved, teams can connect planning with execution using flow or iteration-based workflows.  

In Businessmap, product teams can use timelines to visualize their projects in a calendar view. This functionality helps them create a connected structure between projects and manageable tasks while having a high-level overview of the strategic plan and keeping track of the progress of each initiative in real time. 

Planning projects on a timeline view and connecting them with manageable tasks on a single board in Businessmap

What Are the Product Portfolio Management Examples? 

Here is a look at the product portfolio management examples in different scenarios. 

• A Consumer Company 

A consumer company focuses on selling products that the clients need. Thus, they aim to ensure that they have met the needs of the clients. They do this by using the product portfolio management system to ensure that they learn of consumer trends and behavior to adjust their products accordingly. 

These companies also keep changing their product look to ensure they offer a fresh new look to the clients. Unfortunately, consumer products can be too familiar and tedious to get with the right product. With the help of PPM, the right mix of consumer products is achieved.

• A Mature Company in an Established Market 

Mature companies have been in business for a long time and have products that can be identified as cash-making products. Such companies can use product portfolio management to help them find areas of expansion. That way, they can introduce new products that will meet the demands of the clients. 

These companies have the synergy to create new products either internally or through acquisition. Thus, such companies can achieve impressive growth over time. But for this business to grow, they need to use PPM to tell the products that work and those that don't. That way, it will be easy for the business to focus on selling the products well. 

• A Growth Company 

A growth company is an organization that has run its operation for a long time. The company is now well-established and has a line of products to sell to consumers. Such companies are growing because they use product portfolio management to research the market and know the products that are doing well. 

The growth company uses PPM to find out how its products are performing. The system can also help them determine if they need to upgrade or update their products. The portfolio system is there to ensure that the business continues to thrive. 

• A Startup Company 

A startup company must put the best product portfolio management system in place. These companies are still determining how they will do in the market and how consumers will accept their products. Thus, with a proper product portfolio system, the company might know the best action to put in place to ensure its business grows. 

The purpose of the product portfolio management system in a startup is to help ensure that the company properly allocates the resources, and it will also measure the attractiveness in the market. With proper management, the company will learn how to reduce waste and help identify products that have the most success in the business. 

What Is Product Portfolio Management Software? 

Product Portfolio Management Software allows you to view the products and services that your company offers. With the help of product portfolio management software, you can analyze, manage, and organize individual product data, improve your workflow, track your product's growth, and predict operational risk. 

Essential features like scenario planning allow users to analyze portfolio management choices and make better decisions for product lines. Other than that, modern PPM software can include real-time dashboards to communicate the status of a product or a service. 

A few of the best product management software today are: 

• Businessmap  
• Asana 
• Monday Dev
• Productboard 
• ClickUp 

What Are Product Portfolio Management Frameworks? 

Various product portfolio management approaches exist, but each has a different take on product portfolio analysis. The following four frameworks are most relied on. 

• Nagji and Tuff's Innovation Ambition Matrix 

The matrix has three innovation layers: core, adjacent, and transformational. This helps companies decide on funding growth initiatives by optimizing investments for product development. There are two questions that the matrix asks: 

1. How many initiatives are being pursued for each product? 

2. How much is the investment for innovation? 

• Boston Consulting Group's Growth-Share Matrix 

This matrix plots company offerings using a four-square matrix. The y-axis represents the market growth rate, and the x-axis represents the market share. Products fall into four categories: dogs, cash cows, stars, and question marks. 

The Boston Consulting Group (BCG) Matrix. Image Credits: The University of Minnesota Libraries 

1. Dogs are products with a low market share and growth rate that should be liquidated, repositioned, or sold. This element is found in the grid's lower right quadrant. 

2. Cash cows are found in the lower-left quadrant, representing products in low-growth areas with a significant market share. These products should be milked for cash and used to reinvest in products with high growth and share. 

3. Stars are products that exist in high-growth markets. They are found in the upper left quadrant of the grid, meaning they generate high income and use a sizable portion of the company's cash. 

4. Question marks are dubious opportunities in high-growth rate markets without large market shares. They are in the grid's upper right portion. These products are monitored to see if they are worth keeping. 

• GE/McKinsey's Portfolio Analysis Matrix 

A nine-box matrix explains relative investments a company should make concerning industry attractiveness and competitive strength. This is similar to BCG, with the addition of a market dimension and a firm dimension. 

• Ansoff Matrix 

This matrix has the market and product dimensions, and it recommends conservative penetration of the existing market with new products and market diversification. 

In Summary

Effective product portfolio management is crucial for sustaining a competitive advantage, responding to market dynamics, and ensuring the long-term success of the company's product offerings. It requires a balance between innovation, strategic planning, and a customer-centric approach.