Product Portfolio Management Definition

Product portfolio management is known as the practice of managing the organization’s entire product portfolio. Further, product portfolio management is the centralized management of methods, technologies, and processes used by product management organizations and product managers to analyze and manage products and their potential returns based on several key characteristics. 

Product portfolio management’s role in any organization is to support its financial and operational goals by defining objectives, optimizing resources and their optimal allocation, and improving the quality of deliverables while all products are strategically aligned with its organization’s goals.

How Does Product Portfolio Management Differ from Product Management?

The fundamental difference between product portfolio management and Product Management is the number of products each process manages. While product portfolio management considers every existing and potential product and its current or future importance to meeting the organization’s business goals, product management focuses on a single product and how the individual product contributes to the organization’s goals.

Who Is the Product Manager?

A product manager is a management professional responsible for product development activities within an organization. They are actively engaged in product management practice to ensure that the organization meets its product development goals. The Product Manager is in charge of the product’s business strategy, its functional requirements, and the launching of new features. They also oversee various departments like data scientists, software developers, product designers, and engineers. A product manager oversees a business product’s success. It is their responsibility to build the roadmap for a single product and define its strategy.

Product managers must consider the many factors in product production that ensure an organization’s success. Such factors include the products offered by the competitors and the targeted users or consumers of the product. The product manager also considers if and how well the product corresponds with an organization’s business model. There are significant variations to the scope of a product manager. Some product managers are in charge of one or more product lines while others especially, those in large corporations, manage minor aspects or components of a product.

What Are the Objectives of Product Portfolio Management?

The objectives of product portfolio management are to take a strategic view of the product company’s entire products catalog. Firms adopt various methods for implementing product portfolio management; however, there are some common objectives that each company tries to accomplish by product portfolio management.

The following are some of the objectives of product portfolio management.

  • Determine which items are in great demand in a rising market.
  • Remove underperforming items from unappealing markets.
  • Allocate resources to create goods that have the potential to be successful.
  • Identify products that have a stronghold in a slow-growing industry.
  • In promising markets, improve, modify, or re-brand items.
  • Concentrate product pipeline processes on appropriate items.
  • Balance long-term and short-term objectives.
  • Create communication channels and connections to the entire business plan.

The Portfolio Product Management approaches this objective by assessing the resources, the demand and supply, and creating a rank-ordered priority list for the products.

What Are the Benefits of Product Portfolio Management?

Product portfolio management enables a company to select, evaluate and prioritize products in an objective way, based on facts and information. Product portfolio management provides a number of benefits for any organization if it is performed on a regular basis and implemented properly.

  • Maximize long term value
  • Align products to business goals
  • Optimize risk vs. value
  • Visualize the entire portfolio
  • See and adjust pipeline balance
  • Executive-level product oversight
  • Shape future market focus
  • Optimal allocation of resources

What Are the Product Portfolio Management Examples?

Here is a look at the product portfolio management examples in different scenarios.

  • A Consumer Company

A consumer company focuses on selling products that the clients need. Thus, they aim to ensure that they have solved the needs of the clients. They do this by using the product portfolio management system to ensure that they learn of the consumer trends and behavior so that they can adjust their products accordingly. 

These companies also keep changing their product look to ensure that they offer a fresh new look to the clients. Unfortunately, consumer products can be too familiar and boring to get with the right product. With the help of product portfolio management, the right mix of consumer products is achieved. 

  • A Mature Company in an Established Market

Mature companies have been in business for a long time, and they have products that can be identified as cash-making products. Such businesses can use product portfolio management to help them find areas of expansion. That way, they can introduce new products that will meet the demands of the clients. 

These companies have the synergy to create new products either internally or through acquisition. Thus, such companies can achieve impressive growth over time. But for this business to grow, they need to use the product portfolio management to tell the products that work and the ones that don’t. That way, it will be easy for the business to focus on selling the products well.

  • A Growth Company

A growth company is a company that has run its operation for a long time. The company is now well-established and has a line of products to sell to consumers. Such companies are doing well because they made use of the product portfolio management to research the market and know the products that are doing well.

The growth company can use product portfolio management to find out how their products are doing. The system can also help them determine if they need to upgrade or update their products. The portfolio system is there to ensure that the business continues to thrive.

  • A Startup Company

A startup company has to put the best product portfolio management system in place. These companies are unsure how they will do in the market and how consumers will accept their products. Thus, without a proper product portfolio system, the company might not know the best action to put in place to ensure that their business grows and that they make the most money in the process.

The purpose of the product portfolio management system in a startup is to help ensure that the company properly allocates the resources, and it will also measure the attractiveness in the market. With proper management, the company will learn how to reduce waste and help identify products that have the most success in the business.

What Is Product Portfolio Management Software?

Product Portfolio Management Software allows you to view the products and services that your company offers. Through the help of product portfolio management software, you can analyze, manage, and organize individual product data, improve your workflow, track your product’s growth, and predict operational risk. Tools included in product portfolio management software offer scenario planning, allowing users to analyze portfolio management choices and make better decisions for product lines. Product portfolio management software also has real-time dashboards which communicate the status of a product or a service.

What Is the Product Portfolio Management Framework?

There are various tools for product portfolio management, but each has a different take on product portfolio analysis. The following four frameworks are most relied on.

  • Nagji and Tuff’s Innovation Ambition Matrix 

The matrix has three innovation layers: core, adjacent, and transformational. This helps companies with decisions on funding growth initiatives by optimizing investments for product development. There are two questions that the matrix asks:

1. How many initiatives are being pursued for each product?

2. How much is the investment for innovation?

  • Boston Consulting Group’s Growth-Share Matrix

This matrix plots company offerings using a four-square matrix. The y-axis represents the market growth rate, and the x-axis represents market share. Products are broken down into four categories: dogs, cash cows, stars, and question marks.

1. Dogs are products with a low market share and low growth rate, which should be liquidated, repositioned, or sold. This element is found in the grid’s lower right quadrant.

2. Cash cows are found in the lower-left quadrant, representing products that exist in low-growth areas but have a large market share. These products should be milked for cash, which is used to reinvest in products with high growth and high share.

3. Stars are products that exist in high-growth markets. They are found in the upper left quadrant of the grid, meaning they generate high income and use a sizable portion of the company’s cash.

4. Question marks are dubious opportunities in high growth rate markets without large market shares. They are in the grid’s upper right portion. These products are monitored to see if they are worth keeping.

  • GE/McKinsey’s Portfolio Analysis Matrix

A nine-box matrix explains relative investments a company should make concerning Industry Attractiveness and Competitive Strength. This is similar to BCG, with the addition of a market dimension and a firm dimension.

  • Ansoff Matrix

This matrix has the market and product dimensions, and it recommends conservative penetration of the existing market with new products and market diversification.

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