Renewing Product Portfolio to match Business Strategy in an agile way
One of the most common product portfolio management challenges, when creating or updating business strategy, is aligning a company’s product portfolio with this business strategy.
For example, companies may come up with a bold new strategy target statement e.g. “We plan to grow our revenues organically by 20% during next two years by winning business in new customer segments A and B”. In many cases, this type of definitions are done without any link to the product portfolio i.e. the actual strategy decisions are not done. What is the actual strategy? Should we introduce certain type of completely new products, change the existing ones – how?, or remove some products to implement the strategy? i.e. to win the business in the segments A and B?
Many companies miss the link between business strategy and product portfolio or the connection between strategy creation and R&D budgeting and prioritization process, and portfolio management is very rigid and slow. These core decision-making processes must be tightly coupled to have the most optimal and strategy-compliant portfolio of products all the time. This is also a must to create the necessary agility in the business.
It is simply not tolerable to have several years of lead time from the changes in the business strategy reflecting in changes in the product portfolio. The market conditions, stated strategies, and competitive factors get outdated far sooner.
It is very common that business strategy updates are not at all reflected in the product portfolio or the changes get through very slowly through 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 products 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 product portfolio and product roadmaps reflecting the changes in the strategy.
Poor portfolio performance metrics follow-up, missing data, and the missing strategy alignment also easily shift the decision focus to just a few new product development projects rather than making it possible to push the strategy all the way to existing products to renew them incrementally and utilize their full potential during their lifecycle. It is especially important to phase out products based on the strategy to give room for new products to grow.