What is portfolio product management?
Few meaningful companies sell just one thing. Diversification is a powerful way to sustain a business through shifting markets, changes in customer preferences, and even seasonality. Some organizations focus on product line extension — starting with a flagship product and spinning off supporting offerings that can be purchased together or alone. Others focus on an assortment of products targeted at different markets. This type of portfolio expansion strategy relies on new product development or mergers and acquisitions (M&A).
For those of us working in the fiercely competitive tech space, we frequently see the latter. It can be difficult for startups and small- to mid-sized businesses to compete on a global scale against industry behemoths. Big players often find it more cost effective to absorb smaller companies than to invest in the research and development required to launch new products. (And for some fledgling businesses, acquisition is the desired exit strategy.)
Both product line extension and M&A growth present challenges for a product portfolio. Even in an organization with a comfortable investment cushion, careful attention should be paid to the level of complexity and value creation within the portfolio.
How do the core and non-core product lines perform? Do all of the products in the portfolio deliver value to customers and to the company? Do low-performers benefit the business in other ways? Is the portfolio more valuable than the sum of its parts? Portfolio product management is essential to answering these questions.
What is a product portfolio?
A product portfolio is the totality of products and services that a company offers. It might be helpful to think of a product portfolio like a menu. Some chefs prefer a slim selection of recipes. Others prioritize variety and include many dishes and cuisines. One approach is not necessarily better than the other. But for the restaurant to be successful all of the items on the menu should be delicious, cost-effective to prepare, and ordered by diners consistently.
What is portfolio product management?
Portfolio product management is the process of managing a company’s product portfolio. This includes analyzing, measuring, and optimizing how existing products contribute to broader business goals. It also involves identifying opportunities to expand the portfolio and creating a product portfolio roadmap.
The discipline is multi-faceted and requires a broad mixture of business and technical skills. Depending on the size of the organization and scope of its portfolio, portfolio product managers might be responsible for a specific vertical, a group of products in the same product line, or everything that the company offers. Portfolio product managers oversee new product development, lifecycle management of existing products, and integration of any products brought on through M&A. Each area comes with its own set of requirements — getting the dance just right takes balance.
New product development
Introducing new products can consume significant organizational resources. Portfolio product managers provide value by monitoring market trends and generating a business case for new offerings that could fill a gap in the portfolio.
Product lifecycle management
Products that have already launched and are currently being sold must be evaluated in motion for optimal results. The portfolio product manager creates a portfolio product roadmap to evaluate collective performance and ensure activities support upstream business initiatives. Evaluating product KPIs can help with choosing where to invest across the portfolio and where to improve. Part of the process is also to identify when to divest from a product in decline.
Mergers and acquisitions
Looking outward for M&A opportunities is another way to grow the portfolio. Portfolio product managers assess the market and make recommendations to senior executives who ultimately decide where to invest.
What is a product portfolio strategy?
A product portfolio strategy is a company’s theory for how it will increase market share and revenue. There are two basic trajectories: incremental and disruptive growth.
Incremental growth is typically internally-focused. Companies look for relatively low-cost ways to expand market share or reach small adjacent markets. Existing products may be enhanced or repackaged. The investment in developing this type of “new” product is relatively low.
Disruptive growth is typically externally-focused. Companies look for expansive ways to disrupt existing markets or create new ones. Teams seek to create or acquire new technology. The investment in developing these products is typically high.
A comprehensive analysis is usually the first step in developing a product portfolio strategy. Many teams get started with market research and a basic SWOT analysis:
Customer research is the process of gathering feedback and insights from current or prospective customers. The data can be qualitative, quantitative, and a mix of both. This is useful for understanding customer motivations, struggles, and needs.
Competitor analysis captures all types of products available in a specific market — including direct and indirect competitors. Score both the company and the product functionality. This is useful for understanding the overall market landscape.
SWOT stands for “strengths, weaknesses, opportunities, and threats.” The goal is to map out internal factors (strengths and weaknesses) and external factors (opportunities and threats). This is useful for evaluating the current product portfolio and pinpointing differentiation.
More mature organizations will want to delve deeper. Over the years, several matrices have emerged to help organizations do this.
Growth share matrix
Originally developed by Boston Consulting Group (BCG) founder Bruce Henderson in 1970, this basic tool plots out existing or potential products based on profitability. The category labels are somewhat crude (cash cows and dogs?) but quickly convey potential opportunity.
Established winning strategies
Deserving of the most investment
Requires close attention for true innovation
Established successful strategies
Operational efficiency is critical
Established lagging strategies
Product in decline
Requires transformation or exit
Could grow into stars
Investment should be vetted
GE McKinsey matrix
This matrix emerged shortly after BCG came out with the growth share matrix. General Electric hired consulting firm McKinsey & Company to help manage its massive portfolio of (often unrelated) products. The resulting nine-box matrix evaluates offerings based on the overall attractiveness of the market and the product's competitive strength within it. The goal is to evaluate and prioritize investments in one view while capturing the nuance and context specific to that product.
What are some examples of company product portfolios?
Serve one market or many? The examples below show some of the ways that companies approach building out a product portfolio.
The global coffee chain has a multifaceted product line with a variety of distribution channels. Starbucks sells their own coffee and tea products and licenses their trademarks. As the company grew, they expanded their portfolio to meet existing demand and to reach new customers.
Not all launches or acquisitions were successful. For example, in 2007 the company acquired a record label — Hear Music lasted for eight years, its CDs sold in Starbucks stores. As consumer preferences shifted to streaming services, Starbucks shuttered the label and announced a partnership with Spotify. The Starbucks Verismo® single-cup coffee maker was launched in 2016 but discontinued in 2020. The company could not compete with the wide variety of single-cup makers and chose instead to focus on producing Starbucks pods that could work with any machine.
There are four basic product lines, under which Starbucks offers products they created and make — as well as products from brands they have acquired. The table below is by no means exhaustive (it does not include companies acquired then shuttered), but gives you a glimpse of how the company structures its portfolio of products.
How could we resist the chance to include ourselves in this guide? Today Aha! offers a complete suite of tools for product development, along with professional services. But when the company was founded in 2013, it launched with one product — a product roadmap tool which shared the same name as the company.
Over time Aha! expanded upon the core roadmap offering to include functionality to address all aspects of product development. Purpose-built workspace types for different use cases were introduced in 2019 and 2020. Now the suite includes everything you need to imagine, plan, build, and deliver lovable software including strategic planning, innovation and creative collaboration, idea management and user feedback, release management, agile development, and analytics.
From ideation to launch, better product development happens with Aha! — try it free for 30 days.
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