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What Is Product Portfolio Management?


There is a popular refrain among successful product portfolio managers: Pick the right ideas, products and projects, and do them the right way with the right resources at the right time. When executives are given the right amount of visibility to make the right decisions, companies can achieve their strategic objectives. These are the fundamentals of Product Portfolio Management.

Using Product Portfolio Management to Deliver Against Strategy

Product Portfolio Management is a practice designed to manage all aspects of the products your company sells. This involves evaluating their performance, identifying risks and opportunities, prioritizing high-value products, optimizing resource allocation across the portfolio and balancing the product mix among strategic buckets. Done right, this practice aligns the product portfolio with business strategies to achieve target revenue and profitability.

Product Portfolio Management can also bring winning products to market faster, when the process is used to shepherd new products from ideation through the commercialization funnel. This approach goes hand-in-hand with a gated process, like Stage-Gate® or a homegrown Phase-Gate process, that has built-in check points from idea to launch. It provides the repeatable and auditable processes required to reduce project duration and deliver on time, whether you're developing a new product, line extension, product fix, or performing sustaining engineering activities. Speed often equals success in terms of first-to-market advantage.

Product Portfolio Management strategies allow you to constantly revise your product portfolio investments according to changing market conditions, competitive threats, regulatory requirements, resource capacity, pipeline priorities and other conditions. This helps maximize your return on investment.

Leveraging Technology for Product Portfolio Management

Product Portfolio Management can be implemented across the enterprise. An automated solution breaks down silos, providing an unprecedented line of sight across geographies, brands and teams to understand product performance, the NPD pipeline, team productivity, potential roadblocks, ongoing realization of the corporate strategy and other areas. Powerful analysis, reporting and dashboard capabilities within these solutions provide full transparency, with real-time analytics to inform decisions about product priorities and resource allocation in various scenarios. In-flight work of all types can be monitored and managed across teams, departments, business units and regions. With better insight into pipeline bottlenecks and other problem areas, you can quickly and proactively pivot and see immediate results.

A Product Portfolio Management solution can enable and automate industry best practices, templates and visual workflows for project execution and can provide a structure for analyzing product portfolios, including scoring methods, X-Y graphs, the growth-share matrix and bubble diagrams. Product roadmaps can be created and maintained to communicate goals, timelines, priorities, dependencies and other critical information. These powerful tools can eliminate cumbersome spreadsheets and manual processes. More importantly, they centralize the product data and provide a single source of truth. As a result, decisions are based on accurate, real-time analytics instead of gut reactions.

A centralized solution streamlines communication and removes barriers to collaboration, so teams can be more productive. The ability to trust the numbers and each other becomes crucial when under-performing products are on the chopping block. A product planning framework is in place to assign relative values and priorities within the context of the entire portfolio. Your team can work together to weigh KPIs against strategic objectives, and cull low-value products before they drain your resources. Combining these capabilities into one purpose-built system is what helps achieve a higher success rate for higher-value products.

Measurable, Real-World Benefits of Product Portfolio Management

A data-driven product portfolio empowers companies to be more agile and responsive to market conditions. Product Portfolio Management centralizes all of the information and processes you need to identify, prioritize and manage products. Gartner, the research and advisory company that helps clients achieve mission-critical priorities, endorses this data-driven product portfolio management approach, concluding that Product Portfolio Management "provide[s] decision makers with a structured, objective process for defining and adhering to corporate strategies ... PPM can increase product and corporate strategy alignment for greater success."

By grouping related products into strategic buckets, product portfolio managers can compare product development projects based on their relative costs and potential revenues. The portfolio can be balanced based on alignment with strategic objectives, acceptable risk and resource capacity. Automating these processes provides the transparency and visibility you need to make smart decisions about product mix, fit to strategy, risk vs. opportunity, resource allocation, investments and scaling. Product portfolio prioritization and roadmap decisions are based on trustworthy data to improve time to market and drive differentiation.

Successful Product Portfolio Management can be defined as applying your people and your money to the most profitable products. That means that not every idea makes it through the pipeline, and not every product lives out its lifecycle in the marketplace. Then you can back the winners and widen your margins. Companies that adopt Product Portfolio Management consistently report increases in revenue tied to successful selection of products aligned with strategic objectives. As independent research firm Tech-Clarity concluded, the bottom-line benefit is "a combination of increased revenue from higher sales volume and margin lift, alongside reduced costs and from better resource utilization, avoiding spending on low-value project, and improved efficiency."