Product Portfolio Management (PPM) is a high-stakes process businesses master to manage their product lines. It’s not an easy feat, especially with a plethora of products to tend to at any given moment. Managing these products can be daunting, and executing PPM with precision is crucial to the longevity and prosperity of your business.
What are the challenges of managing a portfolio of products?
Managing a portfolio of products can be daunting for any organization. From stocking the right items to pricing and promotion, there are a variety of challenges that organizations must face when trying to create an effective portfolio. Here are some of the most common issues and challenges organizations face when managing a portfolio of products.
- Keeping Up With Trends: As trends come and go, it can be difficult for organizations to stay ahead of the curve and keep their portfolio up-to-date. Organizations must monitor industry trends and respond quickly to capitalize on them.
- Managing Inventory Levels: It can be challenging to ensure that the right products are always in stock. Organizations must be able to gauge demand accurately and clearly understand their inventory levels to stay competitive.
- Managing Different Product Categories: Organizations must be able to handle different product categories to create a compelling portfolio effectively. This includes understanding the characteristics of each product, pricing strategies, and promotional efforts.
- Knowing When to Discontinue Products: Organizations must be able to identify when a product is no longer profitable and decide to discontinue it. This can be a difficult decision to make, but one that is necessary to maximize profits and ensure the organization’s long-term success.
- Partnerships: Establishing partnerships with vendors and other organizations can help expand and diversify their product portfolios. However, organizations must be careful to ensure that the partnerships are beneficial and that the products are of high quality.
What is Product Portfolio Management?
PPM is critical in any organization as it helps ensure the company allocates its scarce resources efficiently to deliver customer value. PPM is the process of overseeing and controlling the development, marketing, and sales of a company’s portfolio of products and services.
The PPM process involves evaluating, managing risk, and making strategic decisions about the mix of products and services offered, prioritizing products or product lines within an organization’s portfolio, deciding which products to invest in, divest, or discontinue, and allocating budgets to maximize growth and profitability.
There are two aspects to PPM, each with different stakeholders:
- Exploration Portfolio; for new initiatives currently in development [New Product Development].
- Exploitation portfolio; for general available products or services currently sold [Product Life Cycle Management].
PPM can mean different things to different people:
- Strategist: supporting the corporate mission and vision
- Financial: most efficient allocation of financial resources to maximize shareholder value
- Engineering: choosing projects to foster the right innovation
- Marketing: faster time to market
- CEO: short-term positive financial impact and growth
What are the goals of Product Portfolio Management?
The main goals of PPM are:
- Maximizing the value of the portfolio: To maximize return, maximize R&D productivity, to achieve financial goals
- Competitive position: In order to maintain a competitive presence in the market and increase its market share, the business has set out a strategic plan.
- Achieving balance in the portfolio: Achieving a balance between exploration and exploitation projects and between high-risk and low-risk projects and the expected return is essential. Other parameters for such a balance may include market attractiveness, technologies, product categories, and project types.
- Optimizing resource utilization: The efficient and effective allocation of resources to maximize the portfolio’s potential. Management should be mindful of the consequences of approving too many initiatives, which can lead to pipeline gridlock.
- Strategic direction: To forge alignment between project selection and the organization’s mission, vision, and business strategy. To better communicate strategic priorities within the reorganization, both vertically and horizontally.
- Risk management: Focuses on minimizing the effect of potential adverse events on a company’s product offerings, thereby protecting their investments while maintaining a balance of risk.
- Driving innovation: Continuously innovating and developing new products and services and staying ahead of the competition.
The Product Portfolio Management Processes
Take a closer look at the following 8 processes involved in PPM to get started:
- Market and Customer Analysis: Understanding the market, competitors, and customer needs and preferences to inform product development and positioning.
- Product Planning and Development: Identifying new product opportunities, conducting market research, developing business plans, and defining product features and benefits.
- Portfolio Analysis and Optimization: Assessing the current product portfolio, identifying gaps, and making decisions on product investment, divestment, or optimization to align with strategic goals.
- Resource Allocation: Determining the resources (e.g., funding, staffing) needed for product development and marketing and making trade-off decisions between products to optimize the portfolio.
- Product Launch and Commercialization: Ensuring successful introduction of new products into the market through effective planning and execution of go-to-market strategies.
- Portfolio Life Cycle Management: Continuously monitoring and managing the portfolio’s performance over its lifecycle, including making product phase-out and end-of-life decisions.
- Competitive Intelligence: Monitoring competitor products and strategies to inform portfolio decisions and ensure the company remains competitive.
- Portfolio Governance: Establishing a governance framework and processes to ensure consistent and effective decision-making across the product portfolio.
It’s important to note that PPM is a continuous and iterative process requiring collaboration and coordination across multiple functions such as product management, marketing, sales, engineering, strategy, and finance.
The practice of PPM is an integral component for any organization harboring a vast array of products. By employing the use of time-tested models such as the BCG Matrix, GE-McKinsey Nine-Box Matrix, Ansoff Matrix, Nagji & Tuff’s Innovation Ambition Matrix, and PESTEL Analysis, organizations are able to make strategic decisions regarding resource allocation and prioritize their product offerings with the ultimate goal of achieving long-term business success.
For the uninitiated, the concept of product portfolio management may seem daunting, but fear not. We invite you to share with us in what ways you manage your product portfolio, and we stand ready to offer assistance in navigating this sophisticated arena.
I’d love to hear from you.