With markets in turmoil and development budgets coming under increasing pressure, the need for prudent investment oversight at the product and portfolio level has never been more important. This article outlines a straightforward framework for evaluating where to slow down investment and where to speed it up to ensure continued long-term success.
Product portfolio management is the process of managing a collection of products. This could relate to all products at the company level, within a business unit, and even the different features of an individual product or service could be thought of as a “portfolio.” Portfolio management should be an ongoing activity where products and features that no longer make sense are retired and other investments are slowed down to allow increased investment in more promising areas. However, when market conditions deteriorate and investment budgets come under increasing pressure and scrutiny, the need for active management of the portfolio can become an existential necessity.
The 4 S’s of portfolio management: Stop, Slow, Start, Speed
Even in the best of times, there are finite resources to invest in new product development and maintenance. In essence, successful portfolio management is an optimization of contractionary and expansionary activity. Given a fixed amount of resources to invest (including money, time, and people), it’s a zero sum game between activities that must be stopped or slowed down to allow for other projects to start or speed up. The art of portfolio management is finding the right balance between these competing forces.
Managing a product portfolio
1. Determine the investment budget
Decide the total amount of resources to invest. This can include monetary and other resources such as employees with different types of skills, manufacturing capability, and channel capacity.
The overall budget for investment in existing and new products can shift based on the macroeconomy and what’s going on in the specific markets for the products. It could be the case that the investment budget needs to be reduced to manage costs during an economic downturn or perhaps there’s an opportunity to accelerate investment to take advantage of market conditions. Either way, having a definitive understanding of the available investment budget is necessary to balance the portfolio.
2. Quantify new investment areas
Measure the necessary investments in new areas. This is the “expansionary” perspective – the view of areas to increase investment in. What new projects need to be started and in which existing areas does the business need to accelerate investment? New products are the lifeblood of any business, and in tough times the business needs to ensure there is adequate investment in new areas to ensure the continued health of the business.
3. Make room for your new investment areas
Trade off new areas of investment with existing projects. With a fixed investment budget, you’ll need to reduce investment in existing projects (Slow) or stop projects altogether (Stop) in order to invest in new projects (Start) and increase investment in existing, promising areas (Speed).
The decision to slow or stop an active new product project is often among the most difficult for product leaders. Not only can it impact existing customer commitments, it’s hard to end a project you’re passionate about and invested in. Nonetheless, these tradeoffs are crucial to ensure the business remains strong.
Read more about product portfolio management and other key product management topics in my book, Mastering Product Management: A Step-By-Step Guide, available now in paperback and eBook.