Principles of Product Portfolio Planning
Over the last several months I have been working with some clients to revisit how they do product portfolio planning. Essentially the process they use to determine where to invest and how much. I’ve discussed the purpose and the common frustrations with how product planning is done in most software product companies, as well as explored the root causes of these frustrations. We’ve looked at several specific techniques, and we’ve considered the lessons we can learn from the VC industry, incubators, and some companies that have demonstrated the ability to perform this well.
Many of you have let me know that you are frustrated with how your company handles planning, and are anxious to just hear the case for a recommended process.
But it’s difficult to have definitive recommendations because there are some additional factors, especially the culture of the company and the personality of the leaders, that can significantly impact the product portfolio planning model that is the best fit for a given company. However, I do believe that there are some over-arching principles that can guide you in defining an effective process, and in this article I’d like to share these.
1. Clearly Articulate Business Strategy. In countless organizations, the product organization simply does not have a clear and accurate understanding of the business strategy. First, be clear on the distinction between business strategy and product strategy. Second, ensure there is in fact a business strategy. Third, create product scorecards to ensure that the team understands not only what the business strategy is, but how they can directly help to deliver on that strategy. Note that the product organization might have to “help” the business to articulate the business strategy. Do what you can to make it their idea but in any case be sure that this business strategy is clearly articulated and understood and agreed upon by your executive team.
2. Surround Yourselves with Talent. If you want a strong product strategy, make sure that you are leveraging the resources of your company and, if possible, the industry. Find people that will push you and challenge you. Consider creating a Board of Advisors comprised of industry experts that would be too expensive for you to actually hire but would be willing to meet with you a few times a year.
3. Know What You Can’t Know. One of the most critical points is to understand and accept what you simply can’t know at each stage of the planning process. To be specific, if all you have is an objective and a product idea, then at that stage you can’t possibly know what it will cost to build out that idea, and even more importantly, if customers will actually like your idea as much as you do. Your initial business plan is almost certainly wrong. Recognize this, and manage this risk by recognizing and embracing two investment decision points rather than one. The first is whether the opportunity is promising, and the second is whether the product team has convinced you that they have a solution worth building – in other words, you have both evidence from real customers that they want this solution, and the team has a high-confidence estimate of the cost to build and deliver this solution.
4. Require Executive Sponsors. First, make sure every key investment has an executive sponsor. Second, make sure the executive team has a chance to scrutinize and honestly debate each project. Third, make sure that every member of the executive team embraces whatever decisions the team makes and does everything they can to help out any project.
5. Stay Out of the Weeds. Senior management will be tempted to get in the weeds and worry about details and features. Keep them focused on the big picture and the major investments, and if you don’t have teams that are capable of making the right detail decisions, then find new people rather than try to micro-manage from above. The job of the executive team is to ensure the product strategies are good and that the organization is set up to succeed, not to decide the details of features or design.
6. Groom the Portfolio. For each project, make sure you are constantly evaluating whether it should be an area for active investment, reduced to sustaining mode in order to have more to spend on your active investments, or potentially phased out because it’s no longer contributing to the portfolio.
7. Think Long Term. The reality is that most significant product efforts that can truly impact a business are multi-year strategies. They might start contributing much sooner than that, but to reach their potential they will often take several years. The product portfolio planning process needs to ensure that the company is not just thinking a quarter or two ahead. The executives must insist on multi-year product strategies and thinking, then monitor progress along the way.
8. Make It Personal. Many companies, especially larger companies, tend to view staff as interchangeable. But the determining factor is very often the actual individuals that lead the team. Stop avoiding this and start embracing this as an opportunity to recognize and develop strong leaders. The executives should evaluate the proposed team when they evaluate the project opportunity, and the actual team should present the opportunity. Additionally, the executives should insist that the same group that does product discovery continues on to lead the product implementation.
9. Kill or Be Killed. The purpose of product discovery is to identify a product solution that is valuable, usable and feasible. But if you or the team determines they can’t do this either because the customers don’t consider this valuable, or it’s too complex to be usable, or it will take too long or cost too much to deliver, then you must get good at killing these projects. It is far worse to spend the time and money to build and deploy and then find that the product doesn’t sell or isn’t used.
10. Embrace Pivots. When you actually get your ideas on front of real customers, the bad news is that sometimes you discover that they’re not as excited about your ideas as you are. The good news is that you often discover through this process something that your customers really are excited about. We call this a “pivot” and you can either reject these because they’re not your original idea, or you can embrace these because you’ve actually found something customers do care about. Encourage your team to always be on the lookout for pivots.
11. Use a PMO. The executive team doing portfolio management needs ready access to someone that has direct and ready access to the resources available, the capacity of the organization, the current schedules and commitments, and the critical dependencies between projects. This enables the executives to discuss “what-if” scenarios and make informed decisions.
12. Be Brave. Finally, the secret sauce for many successful product companies is that they demonstrate what I call corporate courage. They’re not afraid to compete, even with themselves. They know that eventually all products run their course, and they’d rather obsolete themselves than have a competitor do so. If they believe that something is the right thing for their users and customers, they are not afraid to endure the press or others that may not agree.
Hopefully with these principles you can envision a product portfolio planning process that is effective without being onerous or bureaucratic.