One of the most common product portfolio management challenges is aligning company’s product portfolio with a new business strategy. Far too often companies fail to take their strategy process all the way to the product portfolio level when creating new or just updating their existing strategy.
For example companies may come up with a bold new strategy definition stating e.g. “we plan to grow our revenues by 20% during next two years by winning business in new customer segments A and B”. In many cases this type of definition is done without a clue how this should be reflected in the product portfolio. What is the strategy here? Should we introduce completely new products of certain type, change the existing ones or remove some products in order to implement the strategy?
Many companies lack totally the crucial link between business strategy and product portfolio or the connection between strategy creation, R&D budgeting and the portfolio management process is very rigid and slow. These core decision making processes must be tightly coupled in order to have the most optimal and strategy compliant portfolio of products all the time. This is also a must in order to create the necessary agility in the business.
In order to achieve the required agility it is simply not tolerable to have several years lead time from the changes in the business strategy to respective changes in the product portfolio, the market assumptions, stated strategies and competitive factors get outdated far sooner. It is common that strategy updates are not at all reflected in the product portfolio or the changes get though very very slowly though annual portfolio planning and R&D budgeting. Products are not ramped down and if the new R&D projects run for 18 months on average, this means in practical terms, that it may take 3 years or more to have new products in the market that are based on the “new” strategy.
Many companies also use product road maps to define the wanted and planned product evolution. Product road mapping is a very good way to plan how to the product in question should evolve in the future. However road maps should not be isolated, they should also be directly connected to the company’s strategy process. All changes in the business strategy must fall through the portfolio also all the way to the product roadmaps reflecting the changes in the strategy.
Poor portfolio performance metrics, missing data and the missing strategy alignment also easily shifts the decision focus on just few new product development projects rather than making it possible to push the strategy all the way on existing products to renew them incrementally and utilize their full potential during their lifecycle and especially phase something out based on the strategy in order to give room for new products to grow.
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