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What Is Product Portfolio Management?

Why does Kodak make cameras and sunglasses? Why does Bic make pens, lighters, and razors?

It’s called diversifying your product portfolio.

Product portfolio management is all about developing and implementing a comprehensive and profitable business strategy for your company’s entire product line. Making a product portfolio as strong as it can be is the goal of good product portfolio management. 

Product portfolio management goes way beyond singular product management and day-to-day project management. Understanding the goals and benefits of product portfolio management can not only boost your company’s bottom line but also transform the company from top to bottom.

The Purpose Of Product Portfolio Management

Product portfolio management is the process of looking at every product a company offers to see how well it meets company goals. It’s also about envisioning future product strategies for company growth, cost savings, or other goals.

Strong product portfolio management involves ongoing analysis of the performance of current products as well as market trends for the development of future products. With a solid product portfolio management strategy, companies can more efficiently assess which products are at what life cycle stage, allowing them to adapt marketing strategies accordingly.

As part of product portfolio management, decisions might be made about which product lines to expand, which to shrink, and what future opportunities might be pursued. 

Strategic Objectives Of Product Portfolio Management

Product portfolio management is meant to save a company resources while driving revenues. Product objectives for companies may depend on their overall business goals and their status in the marketplace.

For example, well-established companies with diverse portfolios typically build their product portfolio strategy around expansion. This can look like a company venturing into a new market (such as the video game company Riot Games partnering with musicians to release an album that promotes its League of Legends game). 

Alternatively, a company might expand by marketing existing products to a new audience (for example, Kellogg’s marketing cereal not solely as a breakfast food, but as a snack). 

Companies may also acquire other businesses, such as Disney’s vast collection of media companies. 

Smaller companies with fewer resources might focus inward to cut costs and increase efficiency. With a smaller portfolio of products, the quality of each product holds more weight, but costs might be less, thus improving profit margins. 

Benefits Of Product Portfolio Management

Through product portfolio management, businesses can do the following:

  • Evaluate product performance.
  • Increase efficiency. By looking at which products meet company goals, businesses can prioritize stronger products and launch new products more quickly.
  • Improve competitive ranking. By tracking market trends, businesses are better able to pinpoint customer needs and adapt to changing market trends.
  • Centralize data. This enables teams and departments to better communicate with each other.
  • Determine and prepare for risks.

Research from Manufacturers Alliance shows that 61 percent of product managers rate product life cycle and portfolio management as “very or extremely important” to their role. Why? Because product portfolio management helps businesses make decisions in line with the reality of their products’ successes.

Related Read: Importance Of Product Portfolio Management

Who Is Responsible For Product Portfolio Management

Product portfolio management falls under the purview of a product portfolio manager. This person is a senior team member responsible for ensuring that all products in a company’s product portfolio ultimately meet ever-changing customer expectations.

To achieve this goal, the product portfolio manager ensures that a company optimally allocates its resources in product development and management and keeps a sharp eye on product improvement areas as well.

Portfolio management is a challenging task. It’s especially difficult to track the market and know how to call the right shots. Successful product portfolio managers should be the following:

  • Clear headed. Emotional responses to market fluctuations will lead to erratic decisions.
  • Forward thinking. A portfolio manager’s job requires research and careful thought. They must consider possible risks, the needs of customers and stakeholders, and long-term projections of market value. 
  • Analytical. They must consider how a product is performing now and how factors could affect its future performance.
  • Innovative. Portfolio managers look for new advantages, investment options, and ways to get an edge over competitors. 

The Difference Between Product Management Vs. Product Portfolio Management

A product manager oversees one product but a product portfolio manager looks at every product a business offers. For example, a product portfolio manager might suggest that a company launch a new product to fill a need in the market. 

A product manager would oversee the development, production, and launch of that product. And a product owner would work with the development team to make sure the product appeals to customers.

The Components Of Product Portfolio Management

Product portfolio management begins with product portfolio analysis. A company looks at its existing products and assesses how well they meet business goals. 

Management that focuses too narrowly on a single goal may overlook factors that affect product success. A company focused too singularly on a product is like an ecosystem with low biodiversity. If a species dies off, the entire ecosystem collapses. Similarly, a company that leans on one product will have nowhere to turn if that product eventually declines.

The most common analysis frameworks are the Boston Consulting Group (BCG) and GE/McKinsey matrices.

The BCG Matrix

The BCG matrix looks at market share and market growth. Using that data, it places products into four categories: cash cows, stars, question marks, and dogs. 

Cash cows are a company’s legacy products. Though growth has slowed or plateaued, these products hold the most market share. Apple’s iPhone, for example, is its cash cow.

Stars are products to invest in, with a high growth rate and high market share.

Question marks, as the title implies, are (typically new) products that require further study. In other words, they could either fizzle out or catch on, depending on how customers like them.

Finally, dogs are products that drain resources without adding value to the company. These products should be discontinued.

The GE/McKinsey Matrix

The GE/McKinsey matrix expands on the BCG matrix. The BCG matrix is a four-cell matrix that ranks market growth and market share as either high or low. The GE/McKinsey is a nine-cell matrix. The GE/McKinsey matrix looks at industry attractiveness and the strength of a business unit. It ranks products as high, medium, or low. This expansion allows for more nuanced when looking at different products.

Product Life Cycle

After performing a product portfolio analysis, a company conducts a product life cycle analysis. Life cycle stages are identified as one of the following:

  • Introduction. A product first hits the market. Companies focus on advertising and getting the word out.
  • Growth. Demand increases. More people want to buy the product.
  • Maturity. The longest stage of a successful product’s life cycle. Here, the product is most valuable. Sales plateau or slow considerably, but the product has the largest market share. A company may add features to the existing product or put out an upgrade to keep a hold on the market. (For example, consider new releases of the iPhone.)
  • Decline. The product loses sales. Changes in customer habits, technology, or competition make the product unappealing or obsolete. Companies typically confront this by discontinuing the product or changing the product to reach a new market.

Resources are allocated to products depending on their life cycle stage and alignment with business goals. Team members create a portfolio road map, which details a product’s features, how it fits company goals, and how resources should be allocated to it.

A company may then begin new product development, update a current product, or acquire a new product.

Related Read: An Updated Approach To The Product Life Cycle

Tools For Product Portfolio Management

Product portfolio management requires a lot of elements coming together. How do companies keep track of it all? Through the right tools, of course.

Product portfolio management software manages, organizes, and analyzes company products.

Benefits Of Using Tools

Product portfolio management software makes it easier to access data, allocate tasks, and keep teams connected. Team members can provide real-time feedback and communicate quickly and directly. Every step of product production is accessible, preventing miscommunication. This allows for faster turnaround, increased productivity, and reduced costs. 

Artificial intelligence is now part of many product portfolio management tools. Artificial intelligence can be used to automate tasks and forecast market value more accurately. This helps businesses make more accurate decisions, saving them resources and improving product development as a process.

Choosing The Right Software For Your Business

To determine which product portfolio management software is right for your business, you must know what you need. Take stock of what resources your company has available and what software you already use.

Try several tools before committing to one product portfolio management software. Many programs offer free trials for this purpose. When trying product portfolio management software, evaluate things like ease of use, price, and integrability.

Common features of project portfolio management software include:

  • data analytics, including market demand analytics;
  • product roadmap tools;
  • risk management features;
  • budget tracking and resource allocation;
  • scheduling and calendars;
  • time tracking; and
  • portfolio ranking tools.

Related Read: A Guide To Product Analytics: Benefits, Metrics & Why It Matters

Stay Informed About Product Portfolio Management

No matter your goals, needs, or team size, product portfolio management is a valuable function for any business. A well-kept product portfolio is a key to measuring your success and figuring out what really matters to your company.

For an in-depth look at more product portfolio management tools, insights, and industry tips, subscribe to The Product Manager newsletter.

Suggested Read: 8 Product Portfolio Management Best Practices