Product management can be hard enough, but when you scale beyond more than one product, product portfolio management is a critical tool to prioritise between multiple products, ensure resources are assigned to the right products, and that you have a pipeline of new product ideas ready to grow.
Success is a Terrible Teacher
Whether you’re in a small but growing company or a large established enterprise, you will tend towards the status quo. It’s way too easy to get stuck following the same patterns that got you to this point, so focusing on your established cash cow product to the detriment of the others is a natural bias. But this can spell doom for your company if that product is declining, you’re flogging a dead horse, and letting it suck up all the resources in your company. And the bigger you are the more likely this is to be true.
So it’s imperative that you always consider every product in your portfolio in an objective manner, and this starts with an honest assessment of where every product sits today.
Map your Product Portfolio
Product portfolio management starts with gaining clarity by mapping out all your products, so you know what stage each one is at. Whether you call it the Product Lifecycle, Stage Gates, or “Explore, Exploit, Sustain, Retire”, it’s about classifying all your products into groups so that you can compare like with like and ensure they get the appropriate level of investment in resources.
The Product Portfolio Management Lifecycle
Most products follow a natural lifecycle from introduction, through growth, to a (hopefully long) period of sustained maturity, followed by an inevitable declining sunset period.
In the beginning there was an idea. This is where all your new products live, where you’re exploring new ideas and focused on customer development to understand which ideas might be valuable enough to actually build on.
It can be valuable to further split this into two groups. First, new product ideas – where you focus only on customer research. Then, once you have a validated customer problem, product testing – where you start building MVPs (or RATs) in order test solutions to those problems and find product/market fit.
Once you’ve achieved product/market fit it’s time to accelerate the growth of that product, and only now do you invest heavily, assign marketing resources, and start building your scaling and business plans.
In maturity it’s all about sustaining an established business, so the focus shifts again to optimisation and finding efficiencies of scale and operations.
Eventually all products start to decline. Some take days to hit this point, some take years – there is no hard and fast rule and if you’re doing your job right you can extend this period, but it will come eventually. The key is to have enough of a pipeline of new product ideas coming up behind it that you disrupt yourself (rather than letting a competitor or new entrant do so), and to recognise this early enough so that you can start reassigning resources away from the declining product to one of your growing products instead. There’s no point rearranging the deck chairs on a sinking ship…
It’s Not a Linear Process
It’s important to remember that product portfolio management is not a linear process. Not every product will make the full journey through the lifecycle, they can fail and drop out at any point in the journey.
It’s Not the Steps, it’s the Mindset
It doesn’t matter how many steps you have in your lifecycle, just that you think about your products in product portfolio management terms. Having more steps in your process can allow for more granular stage gates and, most importantly, more granular resource allocation.
At Telenor (the Norwegian state telco with 30,000+ employees across 12 countries) they have 5 steps, covering new product ideas through to established businesses. They also have really fun names that help excite people about the process:
Courtesy of Lisa Long / Telenor
And at the Financial Times, they separate their product lifecycle process into 6 steps:
Courtesy of Bede McCarthy & Cait O’Riordan / FT
Why Product Portfolio Management is So Valuable
It encourages new ideas. In the first stage there will be a lot of ideas that fail – but that’s OK. By staging your resource allocation you can ensure that only validated ideas progress from research to product development, and that only validated products progress to the growth and marketing stages.
It focuses on learning. The early stages should only be measured on knowledge gained. It’s only once you have launched a product to the market and gained traction that you even think about measuring on revenue and users.
And throughout every stage, everything you learn – every assumption, every failed idea, every test, should be stored in a central database. This allows other product managers to access your hard-won knowledge – springboarding them for the next piece of learning they need to make their own product better.
It frees up resources. Because product ideas don’t need developers – but growing products do. And, at some point, the resources being used by a declining product can be reassigned to ensure the growth of the next big idea. Resources are simply assigned when and where appropriate – you don’t need Marketing if you’re still validating the problem.
It reduces risk at every stage. Just like a VC you’re never investing everything up front, you’re only investing as much as the idea or product needs to get to the next stage, answer the next question, or validate the next assumption.
It is a great sanity check on your strategy. Once you map all your products and ideas against this product portfolio management lifecycle you’ll quickly see if you’re spending enough time and resources on the front end of the process – generating new ideas and new products. Is your execution matching your strategy?
There’s a built-in tension between the mindsets of explore and exploit. Most organisations and product teams are excellent at exploiting a known product, market, and business model, but it’s a very different approach to exploring new opportunities which is why making room for the latter in your organisation is so important.
Product Portfolio Governance
Of course to oversee this process, and make sure successful ideas get the funding and resources they need, you need some form of governance.
Now I know we all get the fear when we hear the word governance. We’re all picturing a bunch of suits sitting around a boardroom table checking their spreadsheets and opining on our ideas, because traditionally these decisions would be made purely on business plans. But we all know that these business plans were being made up just to get the desired investment, and then forgotten about when the new idea inevitably didn’t deliver on its promise. In many organisations this is why product boards and the traditional oversight of product portfolios have failed.
So whether you call it an investment board, an innovation board, or a product council, there are a few key things you need in order to make product portfolio management oversight successful.
Team – In order to generate the necessary cross-functional buy-in to this process, the council has to have representation not just from product, UX, and engineering, but from Sales, Marketing, and Support too. And so it can make effective decisions, it needs senior representation too – ideally the CEO.
And in order to focus on validated knowledge and remove opinion and bias from the oversight process, the product council’s decisions have to be grounded in knowledge and tied to the stage-gate process. Their decisions are not about whether or not they like the idea – but whether or not the idea has amassed enough customer validation to progress to the next stage.
Asking questions, not providing answers. The product council is not there to decide what to build, tell teams how to build it, or to prove they’re the smartest by providing the answers. They’re not there to remove the autonomy from individual product teams. The product council’s job is to ensure that those teams are moving in the right direction, asking the right questions, and sticking to the customer development approach as they develop their product ideas.
But the product council is not just there to make resource allocations.
The council is also a great way to ensure alignment between teams. Xing in Germany have this fantastic concept of Auftragsklärung, which is a template for how they pitch, discuss, and monitor their product ideas. Each team prepares this giant poster as their pitch for resources, maintains it as they learn new things and challenge their assumptions, regularly present them to each other, and then post them in their office so passers-by can understand what everyone is working on at a glance.
Courtesty of XING
As part of that alignment role, the council is also the keeper of the institutional knowledge – that database of ideas and research – and is responsible for making sure not just that the organisation learns from what works and what doesn’t, but that it then records and disseminates that knowledge back out to the organisation too. No new product idea, assumption, or test is complete until it has also been documented for others to learn from.
Product Portfolio Management: Success at Scale
Success at scale requires effective resource allocation across products at wildly varying stages of product development, from research-only to high-growth marketing and scaling, so it’s important to set up your product organisation to embrace this variability and ensure you spend time on exploring new opportunities while exploiting your existing products.
Adopting a product portfolio management approach based on the product lifecycle and grounded in customer development lets you consider all the products in your portfolio in a holistic manner. This means you can focus on learning about your customer, balance explore and exploit mindsets, and deploy your resources where they’re most needed.
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