Product portfolios is the talk of the town. While the concept isn’t new, increasing attention is paid to how we manage product portfolios. But before we take a closer look, let's consider why product portfolios management is important to the entire company.
We start with a definition of the product portfolio. At the simplest level it is nothing more than an inventory of all the products and services offered by an organization. However, to be useful, it must be a little more involved than that.
First, we need to ensure we have truly identified every offering, not just the main ones. Any organization will have those almost forgotten niche products that only one or two people know about and that only have a handful of customers using them, they must be included just as much as the main offering.
Then, we need to ensure all markets are considered – market segment, geography, etc. And we need to include subsidiary or related companies in those numbers, along with any add on modules offered through in house or partner professional services.
We also need to understand our internal products and services – those things we have developed for use by our employees – they are still part of our product portfolio.
It's a complex picture of the various elements or versions of the product portfolios that exist in the organization, and before we can manage that environment effectively we need to be able to develop a consolidated, integrated view – a single product portfolio for the entire organization. Without that we are "managing blind" adjusting one set of products without understanding the impact on other areas, and that hurts both effectiveness and efficiency. It also exposes the organization to unnecessary risk.
Organizations must therefore develop a single, integrated portfolio of all the products and services they have developed and maintain. It’s not sufficient for that portfolio to be a mere inventory of those products, it must represent a comprehensive understanding of characteristics, purpose, etc. to provide a foundation that can then be effectively managed. The following aspects of every product must be included in this portfolio view:
- Market positioning – not just the industry verticals and geographic regions served, but also whether the product is a market leader, a niche player, the value offering, etc.
- Financial performance – key information on the product’s value to the organization – the revenue generated (or costs saved for internal products), the cost of that revenue, historic and projected financial performance, etc.
- Product lifecycle – whether the product is in a growth phase, mature or declining as well as information on other current products that are either designed to replace it or that it will ultimately replace.
There are numerous other elements you can consider, and each organization will have its own characteristics it wants to add. What’s important is that you have a single integrated product portfolio that tells you everything you need to know about individual solutions and how those solutions work together to create the complete set of products and services used by your organization and its clients.
Once you have that understanding you can look at how to manage that ecosystem of connected products, and that’s what we are going to look at in the next blog entry.