How to align your product portfolios with business strategy to maximize value
Companies that fill the product pipeline end-to-end, from new ideas to best sellers, can become overconfident about their ability to increase revenue. Even a company with the most innovative products and technology can lose its competitive edge if time-to-market is too slow or development costs are too high. The harsh reality is, 49 percent of organizations surveyed have seen a project fail in the past 12 months, in part because their projects and resources are not well aligned with business goals.
You can beat these odds by adopting a Product Portfolio Management approach that allocates the right resources to the right projects and balances the portfolio at every stage of the product development lifecycle. By making the process both efficient and repeatable, Product Portfolio Management yields a more profitable, high-value portfolio that generates a higher ROI throughout the product lifecycle.
Product Management Challenges
Add to that the opportunity cost of quashed product ideas and squandered resources. It is the insurmountable challenges and irrevocable mistakes that ultimately take down a promising new product or put forward a doubtful one. For some companies, the misstep is simply managing products the same way they always have. That can cause problems today. Get to market too late, and your competitor already dominates sales. Invest too much in a low-value product, or too little in a market leader, and you never recoup your costs.
A failed product launch can be devastating. In the United States alone, new product failures cost some $260 billion annually.
In the absence of strategic criteria for evaluating products, leadership teams too often make unwise choices. What these companies miss most is the business intelligence that forces them to pivot away from a failed strategy and toward a winning one. The lack of insight into the product lifecycle and the uncertainty caused by multiple sources of conflicting information can lead to paralyzing indecision.
Benefits of Product Portfolio Management
Product Portfolio Management solves these problems by centralizing all the data and processes you use to identify, prioritize and manage products and projects. This data-driven approach empowers the bottom-up and top-down decision-making that makes companies more agile and responsive to market conditions. When you automate Product Portfolio Management functions with enterprise-level software, you can gain access to current, accurate data and real-time analytics to establish the criteria for success.
The Product Portfolio Management process groups connected products into portfolios, where they can be valued based on their cost and revenue potential. The portfolio can then be balanced based on alignment with strategic goals, acceptable risk and available resources.
Product Portfolio Management solutions eliminate issues related to lack of transparency. This approach gives you the visibility you need to make smart decisions about product mix, fit to strategy, risk vs. opportunity, resource allocation, investments, capacity and scaling. When you implement Product Portfolio Management, you buy-in to the fact that not every product will progress through the pipeline to development. You will pull and push products based on facts (not company politics, project team opinions or someone's gut feeling).
It comes down to this: Product Portfolio Management fills the pipeline with the right products, supports these products with the right resources at the right time, and gets products to market on-time and on-budget.
What the C-Suite Needs to Know
Your C-level executives not only manage their individual functional areas such as finance, operations, technology and marketing but also help lead the company toward strategic goals and objectives. To achieve the company's vision for the future, the senior leadership team needs access to the right information at the right time. A Product Portfolio Management solution provides visibility into product portfolio strategies, customer insights, new product development (NPD) pipeline performance, product lifecycle management, governance and other areas. Powerful analysis and reporting tools guarantee transparency throughout the Product Portfolio Management process.
To achieve the company's vision for the future, the senior leadership team needs access to the right information at the right time. A product portfolio management solution provides visibility into product portfolio strategies, customer insights, new product development (NPD) pipeline performance, product lifecycle management, governance and other areas.
When you have a roadmap to guide your company toward strategic goals and objectives, you can see how well products and brands line up on that map. Portfolio owners can define criteria and metrics for prioritizing products based on their fit to strategy. Product roadmaps reveal how to allocate resources according to these priorities. Connecting the right projects and products to your strategic plan reduces risk, allowing you to leverage the same resources within an integrated product portfolio. When performance against strategy is measured using real-time analytics, making in-flight course corrections is fast and accurate.
All told, a strategic portfolio that balances duration, cost, market and risk performs better and adds more value to the bottom line.
A winning strategy surely starts with delivering customer value. Not knowing what customers want, need or buy is the first step toward failure, as indicated by some notable flops. And yet, there are still companies who fail to gather all the facts about customer preferences, requirements, satisfaction, loyalty and complaints. You want to confirm that marketing has done its customer due diligence and validated product demand. A Product Portfolio Management solution can help analyze the market data that factors into green-lighting some products and deep-sixing others.
Marketing can gather vital intelligence to help vet ideas, prioritize projects and choose the products to put forward. This can involve taking product inventories, identifying gaps and overlaps, and scoring strengths and weaknesses. As part of the Product Portfolio Management database, information about the customer mindset can indicate how well product portfolios are positioned to deliver value.
With greater visibility into NPD pipeline performance, proactive pipeline management improves the odds of product success. Real-time numbers can inform decisions about resource allocation, capacity planning and other functions. In-flight work of all types – agile, collaborative, iterative and project – can be monitored and managed across teams, departments, geographies and the enterprise using the Product Portfolio Management approach. You also have better insight into what is not working – pipeline bottlenecks, project constraints and other problems that can undermine an otherwise successful project. By spotting and removing roadblocks, you can get new products to market faster and open new revenue streams sooner.
When C-suite executives have a clear line-of-sight into the product pipeline, they can more effectively shape strategy, set priorities, marshal resources and deploy assets from cross-functional areas. This helps to increase the total return on your product innovation investment.
Product lifecycle optimization
From early ideas to retired flagships, products can run their course in a matter of days, months or years. Picking a winning idea and shepherding it through the product innovation lifecycle takes team members from multiple areas, including engineering, production, sourcing, supply chain, quality management, sales, marketing and legal. Your team needs to validate projects and make critical decisions at each checkpoint in the gated process, informed by the best-available data. Product Portfolio Management improves time-to-market by streamlining communications and removing barriers to collaboration to make the gated process more efficient.
This management approach optimizes the product innovation lifecycle from end-to-end, beginning with new initiatives and extending through in-flight projects to products on the verge of retirement. Product Portfolio Management looks beyond individual projects and products, supplying the real-time data you need to assign relative values and priorities within the context of the entire portfolio. You can use analytics to see gaps and overlaps in your offerings, rebalance portfolios, troubleshoot problems, forecast performance against strategic goals, and determine timing for end of life.
This process helps you decide whether to kill a product earlier in the development cycle, so you can weed out low-value products before they drain your resources. If you create a product innovation lifecycle with more checkpoints, you have more chances to review product data and decide whether to stop work, go ahead, or pause to make changes. The result: A higher success rate for the higher-value products.
Oversight of the product development process is typically performed by leaders who understand the cross-functional intricacies of taking an idea from concept to launch. This process often varies by region, product line, regulatory requirements and customer segment. Managing this variation and measuring status manually results in wasted effort and decisions made too late. A Product Portfolio Management solution can provide the accurate, timely information that is paramount to delivering products on time and on budget. Proper governance ensures that product decisions balance the interests of many stakeholders, so the company invests in the right products and portfolios at the right time.
From the high-level perspective of the C-suite, you need an all-encompassing view into portfolio performance. The analytics and reporting available in Product Portfolio Management solutions deliver that view directly to your CEO’s inbox. The senior leadership team can make objective product decisions based on the most current information about strategy, financials, capacity and risk. Product portfolio managers can answer tough questions from the C-suite by leveraging an automated solution to drill down to up-to-the-minute portfolio statistics and metrics in a single click.
Product Portfolio Management dashboards are specifically designed to provide the key performance indicators (KPIs) your team needs to achieve better product portfolio outcomes. You can monitor factors that drive innovation and impact total cost of development for each product, product line and brand, and adjust your course toward target margins and revenues. A gated-project dashboard reports cost estimates and revenue projections, so you can make the call to kill likely-to-fail products earlier in the commercialization process.
There is no substitute for fast, accurate and insightful reporting when it comes to making better decisions about your company's product portfolios.
The Bottom Line
Companies that adopt Product Portfolio Management consistently report increases in revenue tied to successful product selection and improved time to market. Wasting less time and fewer resources on low-value projects contributes directly to stronger margins and higher ROI. In the end, products that align with strategic business goals and receive the right resources at the right time are more likely to be profitable and sustainable.