For the growing companies, it’s crucially important to keep track of all their products and make sure they are in demand and meet customers’ needs. A good way to increase profitability is to work on the products that will definitely bring revenue and make the right improvements that people are expecting. Product portfolio management can make this happen. At the same time, it has some more functions and usually faces a lot of challenges. Read further to learn what we mean.
The Essence of Product Portfolio Management and Its Main Functions
A product portfolio is a set of all products and services that a company creates and offers to customers. Product portfolio management helps find the most appropriate strategy to gain the desired business objectives as well as evaluate the success of each product or service and make corresponding improvements if necessary. Its main focus is customers’ satisfaction and market changes, by tracking which it is possible to create the products with the biggest value, and therefore, earn more. Let’s consider the functions of effective product portfolio management below.
Effective Product Portfolio Management Impacts Customer Experience and Satisfaction
Effective company’s product portfolio management helps produce only goods and services that are in high demand with its current and potential customers. To let it happen, clients’ feedback is constantly gathered and analyzed. Together with that, the market is under strict and continuous examination to reveal current trends in the domain the company works in. The analysis can show that some products should be improved, some of them should be changed, and some of them eliminated from the market. By monitoring the market and examining competitors’ products and listening to your customers, you can timely react to even slight market changes and people’s needs as soon as they arise. As a result, you can timely update your products to be one of the best in your industry.
Good Product Portfolio Management Contributes to Better Resource Utilization
The analysis of current trends in the market, customers’ requirements, and the products the company suggests makes it possible to allocate key resources to the work on the products that are more valuable to the company. This allows getting the desired outcomes faster and eliminates the issue of insufficient capacity because your people will work on those projects that are the most important for your business at the moment and they won’t be overloaded because of other insignificant tasks.
Product Portfolio Management Implies Customer Engagement to Increase Brand Awareness and Trust
Product portfolio management implies involving customers in one or several stages of the product life cycle, often even before the work on a product has been initiated to increase awareness of the product and make people want it even before its launch.
Properly Managed Product Portfolio Increases Profitability
Profitability is usually associated with an increased outcome as a result of intaking more orders. In other words, it’s indicative of the company’s growth. The revenue must be reasonably invested to be doubled. Efficient product portfolio management allows a company to be agile and respond to arising market demands. It results in the acquisition of all necessary information about the company’s products in terms of their performance and success, namely
- What products are the most popular and bring the best outcomes,
- What products need improvements and which exactly,
- What kind of products are expected to bring profit in the future (based on the given results).
Every product in the portfolio should be evaluated with the help of one of the product success metrics. This allows a company to build a line of products that are in demand, and therefore, increase profitability.
Now, as we know what the main functions of product portfolio management are, we’d like to compare it to project portfolio management as these concepts often get confused.
Project Portfolio Management VS Product Portfolio Management: Main Difference and Common Points
First off, we have to understand the difference between a project and a product to distinguish between the two concepts.
According to PMI, a project is a temporary arrangement with a defined beginning and end in time and therefore defined scope and resources. The goal of any project is to create a product or service.
A product is a kind of service or goods a company creates and improves in response to customers’ needs with the aim for the company to reach its business objectives and get revenue. As distinct from a project, a product doesn’t have a defined end date and is constantly under development to meet changing market demands.
Project portfolio management implies choosing and delivering the right projects for the organization. The “right” projects are the ones that comply with the company’s business strategy to help reach the goals.
Product portfolio management is about choosing and delivering the right products based on the analysis of their performance, market state and customers’ needs as well as the company’s business objectives.
What Project Portfolio and Product Portfolio Management Have in Common
Despite a great number of differences, there are some things in common:
- the need to create a strategy,
- the need for proper resource management,
- prioritization of tasks across all items in the portfolio,
- risk and uncertainty management,
- progress analysis and reporting.
At the same time, it should be kept in mind that product development is project-based and if a company leverages product portfolio management it implies that project portfolio management also takes place. Moreover, they have much in common, which makes it possible to use the same solutions to manage them.
Product Portfolio Management Challenges
The challenges a product portfolio manager often faces are very similar to those faced by any project manager:
- The absence of transparency in the company results in a failure. All team members must have access to historical and real-time data to be able to timely react to transformations.
- Too many projects within the product portfolio. The companies that have a big product portfolio have an enormous number of projects face the challenge of their prioritization and resource allocation, which is difficult because of the huge amount of data and unexpected changes.
- Insufficient resource capacity, i.e. overloaded employees not capable of completing all necessary tasks. This is a common problem for the organizations that work in a multi-project environment as a result of having a rich product portfolio. Resolving a resource capacity challenge with a resource management solution can help achieve the desired outcomes and quickly grow revenue.
- Proper collaboration within a team and between teams is crucial and sometimes complicated for a number of reasons: globally distributed teams, different time zones, lack of consistency, absence of a single source of communication, etc.
- The complexity of making informed decisions because of the absence of necessary information, uncertainty, and risks.
- Uncertainty poses another threat to efficient product portfolio management.
- Sometimes product portfolio management results in a decision to stop working on a product because it is no longer required in the market. This in turn may lead to team members’ frustration and burnout because of reallocation to another product. Here you need to create the right environment to increase your people’s motivation and implement necessary changes smoothly and efficiently.
The list of challenges is not exhaustive, but the ones mentioned above can be successfully addressed with the help of a software solution. Let’s discuss this in the section below.
Product Portfolio Management Software: Addressing the Challenges
Gartner experts state that product PM applications ensure the product strategy’s alignment to both short-term and long-term business objectives. A single product PM application can govern multiple product-centric applications with project management capabilities, but it must be harmonized with other applications.
A modern Product PM tool should have the following capabilities:
- What-if simulation using predictive analytics;
- Demand capacity planning;
- Resource allocation across multiple projects as product development initiatives;
- Task management;
- Performance control;
- Team collaboration;
- Budget management.
Product portfolio management solutions provide transparency across all the products or services in the company and therefore assist in better management.
When searching for a reliable product portfolio management solution, we suggest focusing on the following criteria, that are similar to the criteria for choosing a resource management solution:
- Functionality: key features;
- Usability: interface, technical support, and availability of a mobile app;
- Architecture: security and integration opportunities;
- Vendor reputation and feedback;
Therefore, if you want to grow your company or already have a big enterprise with many products being developed, product portfolio management is a great instrument for it. Stay tuned, as soon we’ll compile a full guide on product portfolio management solutions to help you make the right choice for your business.