One of the most essential strategic objectives of any organization is to determine the best allocation of resources to new and existing products. As the scope and depth of products within an organization grow, product portfolio management becomes increasingly important.
Product portfolio management is no easy task, however. In organizations with both small and extensive product portfolios, the portfolio management process requires a few best practices. It can be difficult to encourage growth through innovation and product development while supporting existing product lines at the same time.
This article will help you determine the best practices for new and existing product lines in two different growth environments.
Best Practices For Existing Product Lines
The first best practice for managing the product portfolio of any organization is to focus on the business’s strategy and ensure the product lines fit that strategy. When the existing product lines were first created, this best practice was most likely an important part of creating the product. However, it’s important to constantly evaluate existing product lines to ensure that they continue to fit in with the organization’s strategic objectives.
Another best practice for the product portfolio management of existing product lines is to continually evaluate product performance. This data will help you determine when and how to make changes to the product line, especially when considering new product development.
How Do You Determine Your Product Portfolio Strategy For Existing Product Lines?
A great way to help you determine your best strategy for existing product lines is to invest in a product management roadmap software that includes product portfolio support. Product management tools will help any organization manage existing product lines more efficiently and effectively. The best product management roadmap templates and software will have an attractive user interface, user-friendly features, tool integration functionality, and meet your budget.
Determining your product portfolio strategy for an existing product brand starts with analyzing the product line's performance. How is the existing product line performing in the current market? Are there upward or downward trends? Analyzing current performance for your existing product lines will help you guide decisions for your portfolio management strategy going forward.
What Are The Objectives Of Product Portfolio Management For Existing Product Lines?
The main objective of product portfolio management for existing product lines is to help balance risk and growth for an organization. A thorough portfolio management strategy will evaluate existing product successes, risks, and further growth opportunities.
Another important objective of managing product portfolios is to ensure that staff and financial resources are effectively and efficiently allocated to existing product lines.
Related Read: 12 Key Product Success Metrics (+Examples)
What Methods Do Companies Find Most Effective To Achieve Their Portfolio Goals For Their Existing Product Lines?
There are three main methods that companies use to achieve portfolio goals for existing products: financial, scoring and ranking, and project portfolio management. Financial methods are the most commonly used. Financial methods use ratios that compare resources used to the return gained on existing product lines.
A product could be scored by present value, probability of future success, development cost, and expected commercial value. Other criteria might be how well the product fits into organizational goals and strategies. In this way, scoring and ranking involve an element of the human perspective on the part of product portfolio managers.
Project management means leading a team to achieve project goals while working within certain constraints. Achieving portfolio goals is a complicated project and one that generally involves a team of employees from both manager and marketing roles. Effective project management will help ensure product lines reach company goals.
Best Practices For New Products
Idea generation and strategic analysis are two important best practices for portfolio planning. Ideas for new product lines can come from customer feedback, organization team members, or new regulations. Research should be performed to ensure that the organization can meet resource requirements for new ideas.
Strategic analysis of the new product line involves evaluating risk and possible return and ensuring that the product ideas fit into the organization’s business strategy. Financial methods such as the use of ratios and product portfolio road maps are helpful here as well.
Perhaps the most important best practice for the management of new products in a product portfolio is the use of marketing strategy. A solid marketing strategy helps you to understand your target customers and target market and provides information about competitors. It greatly improves lead generation and will help your new product line stand out.
What Product Portfolio Management Can Do To Help Design, Build, And Support New Products
Product portfolio management essentially helps organizations take new products from the idea stage to production. The design and build stages of new product development are often costly with no return on investment until the later stages. Product portfolio management assists organizations by ensuring there is a big picture focus by looking at these aspects:
- Identifying opportunities and risks for new products
- Prioritizing products that are higher value
- Optimizing resource allocation among all products
After the introduction stage, new product lines require continued support, and product portfolio management assists by evaluating performance against expectations. The goal of product portfolio management is to maximize the return on product lines.
How To Apply The Latest Product Portfolio Management Best Practices To Your New Products
The best way to apply the latest best practices is to use product portfolio management software. This provides the organization with a centralized data source and a product roadmap. Product portfolio management software will provide on-demand reporting and valuable analytics and data to help support the success of the new product line.
Related Read: 10 Best Free Product Analytics Tools For 2023
How Product Portfolio Management Can Help You Decide How To Allocate Your Resource Development And Marketing Budgets For New Products
Resource allocation and marketing budgets are essential elements of new product development. Product portfolio management will assist by identifying those products that experience high demand in growth markets, as well as those products that are underperforming.
Portfolio management will also identify products that work well in different types of growth environments to maximize market share. Products with a higher return on investment will merit a higher allocation of resources and marketing budgets.
Best Practices For Incremental Growth
Complexity is an inherent part of most product portfolios. Effective product portfolio management will help decrease this complexity, which makes for better business decisions. Complexity is fueled by two types of growth: incremental growth and disruptive growth.
Incremental growth occurs naturally as an organization develops and adjusts its product lines. Small variations to existing product lines and targeting smaller product markets usually contribute to slower company growth.
One best practice for product portfolio management and incremental market growth is innovation constraints. Creativity and innovation lead to new products and expansion, but they also put a strain on resources (time, people, and finances). Innovation constraints work best for incremental growth because they balance innovation with resource conservation.
How Product Portfolio Management Approaches Have Evolved To Better Fit Within Radical Innovation
Radical innovation is essentially a new product or invention that basically blows up the existing business model. Radical innovation may be the driving force behind product portfolio growth, but it comes with increased risks. The use of product portfolio management software is one way that product portfolio management has evolved to help manage that risk.
Product portfolio management by its nature seeks to balance risk and return. Too much innovation will increase risk unnecessarily and too little will leave the organization stagnant. The risks of radical innovation are tempered through product portfolio management using analytics, which provides a clear picture of risk versus return.
How Product Portfolio Management Usage Has Shifted To Accommodate Faster Growing Markets
Strategic planning within product development is fueled by product portfolio management. Product portfolios help organizations decide when to shift to faster-growing markets by providing analytics of how a product line fits into the overall strategy. Product managers can analyze and assess each product and its level of success more quickly. Product portfolio management also allows risks and opportunities to be identified earlier.
Having a streamlined resource allocation process and more efficient product analysis means that organizations can move into a growth market more quickly. It also allows organizations to make real-time decisions on product support as there is constant feedback on how well the product is performing in a fast-growth market.
How To Achieve Incremental Growth With A Product Portfolio Management Strategy
The best way to achieve incremental growth is to implement incremental innovation. Product portfolio management strategies that focus on balancing risk and return are most beneficial to the organization. An example would be to implement small variations in existing product lines after careful analysis.
After product introduction, analysis and evaluation of goals, and making small changes as needed, will help guide continued revenue growth.
Best Practices For Disruptive Growth
Disruptive growth occurs when an organization adds a completely new product category to a product portfolio or introduces new technology to existing product lines. A growing global economy has greatly contributed to disruptive growth—and portfolio growth by extension.
One best practice for product portfolio management in a disruptive growth environment is to encourage disruptive innovation. While a higher emphasis on innovation increases the risk for the company, it’s required to stay competitive in such a fast-paced market.
Second, agile portfolio management is an indispensable best practice. Agile portfolio management provides more flexibility and continuous experimentation than a traditional portfolio management approach. Companies competing in a disruptive growth market will need to focus more on quickly developing and introducing new products and technology.
Key Requirements For Disruptive Innovation
There are three key requirements for disruptive innovation to occur:
- Simplicity: product lines or technology that is simpler than competing products
- Affordability: the solution should be more affordable than the competitor’s products
- Accessibility: an entity that was previously unable to consume the product now has access
Disruptive innovation is typically reserved for start-up companies, but established organizations can experience disruptive innovation as well. It can sometimes require a complete overhaul of the organization’s business model and corporate strategy, however. Large rewards almost always require large risks.
Examples Of Disruptive Innovation Within Product Portfolio Management
Smartphones are probably one of the most well-known examples of disruptive innovation. The introduction of smartphones forever changed the way consumers access the internet. Suddenly personal computers and laptop markets were disrupted as smartphones gave them a run for their money.
Streaming video services like Netflix are another example of innovation within product portfolio management. On-demand viewing has forever changed the way consumers watch TV and movies, despite legacy technologies such as cable.
How To Achieve Disruptive Growth Through Your Product Portfolio Management Strategy
Disruptive growth is driven by innovation, much more so than incremental growth. However, just as with incremental growth, a good assessment of risk versus reward is necessary.
A good product portfolio management strategy adopts a big-picture analysis of the organization’s products. Most importantly, however, product portfolio management helps ease the complexity by ensuring a continuous assessment and adjustment of products.
List Of Portfolio Management Best Practices
The following list provides a summary of the product portfolio management best practices:
- Focus on your organization’s business processes and strategies and ensure existing product lines fit
- Continually evaluate and analyze existing product line performance
- Collect ideas and research information for new products
- Evaluate and analyze risk and market demand for new products
- Develop a strong marketing strategy
- Constrict innovation in incremental growth markets
- Encourage and support innovation in disruptive growth markets
- Embrace agile product management and development
Product Portfolio Management Advice
Product portfolio management can be a difficult and complicated process. With the right management tools and best practices, you can navigate all stages of the product life cycle to maximize value and profit for your organization. For more insights and guidance on product portfolio management, sign up for The Product Manager newsletter.