Traditionally, products were developed to serve a large market segment with a similar need. Every aspect of the product and the supporting services were specifically designed and developed to satisfy the needs of this group of potential customers.
The sheer size and potential of the segment justified the large sum of required CAPEX and OPEX investments. In some cases, it even led to the creation of separate business units, each responsible for the success of its product line or segment throughout the complete product life cycle. Most of these business units had their own operations, product management, finance, marketing, sales, and support departments, leading to high operational costs.
In many cases, this siloed way of working leads to rigid environments with specific contractual terms and conditions, service level agreements, and limited options for integration and re-use.
This approach has proven to be successful for many years, and for some organizations, it still does. However, the market is evolving and becoming more segmented; customers have increasing demands and expectations about how they want organizations and products to meet their needs. More or less, the market is becoming highly fragmented, existing out of micro customer segments, and is constantly changing.
Developing and managing a portfolio of products to serve these customer segments profitably requires another productization approach. An approach capable of handling the complexity and tailoring of products and services in a standardized, predictable, and cost-efficient way.
The approach that meets these requirements is called product portfolio modularization. This approach helps to create a structured and straightforward portfolio capable of supporting multiple value propositions based on the foundations of functional and technical re-usable integration-ready building blocks.
Product portfolio modularization can benefit both scaling companies and established companies that need to optimize their portfolio to become more lean and agile.
Defining a portfolio building block model can be challenging as the dimensions need to be just right. Sizing too big or tiny building blocks has consequences for flexibility, management, operations, and costs.
The best way to create a modular portfolio for your business depends on your organization’s portfolio strategy, culture, processes, and systems.
Send me a DM or schedule a call if you want to talk about the best way for your organization.