The Purpose of Product Portfolio Planning
I am in the midst of a series of articles on product planning, but I’ve received several e-mails asking where this fits into the overall product organization, and the product discovery and product development processes, so I thought I’d make sure before proceeding further on the techniques that we’re all clear on the purpose and objectives of good product portfolio planning.
You can view each of your product efforts as an investment by your company towards future earnings. Just like a financial portfolio, your returns are a function of your investments. Your company is investing in the products you are designing, developing, selling and supporting.
We do product portfolio planning for much the same reasons we do financial portfolio planning.
Just as many people don’t actually do financial portfolio planning – they just see a stock they like so they buy it, or they get scared by something so they sell it – some companies don’t explicitly do product portfolio planning. They get an idea for a product so they pursue it, and they lose interest in an idea so they stop funding it. Or they decide they like a business so they buy it, and then they can’t figure out what to do with that business or how it fits with the rest of their portfolio so they let it languish or they sell it.
On the other hand, other companies take portfolio planning very seriously and they have a very formal series of big meetings each quarter or year where they debate how the portfolio should change in the coming period, review the proposed projects, and decide what will get funding and what won’t. The specific techniques used at many of these companies can make the product team want to run and hide whenever portfolio planning is mentioned, but this is a function of the techniques that are commonly used, and not the act of planning itself.
So all this begs the question of the purpose of product portfolio planning. There are actually several key objectives:
1. The executive team establishes the top level business goals and the business strategies, but the product organization needs to deliver the products that make these business objectives a reality. Specifically, the product strategies must align with the business strategies, and this product planning process is meant to both enable and verify that this is the case. In the financial portfolio example, if you decide to invest in developing markets around the world, or in green technologies, then we need to adjust our portfolio to reflect these new priorities.
2. Just as with your financial investments, some investments are meant to be low-risk, quick hits, but with relatively low return, and other investments are higher-risk and longer-term, but with big potential returns. We review our product portfolio both to make sure we’re maximizing the portfolio value over time, but also to make sure the portfolio is balanced and diversified – across risk, duration, timing and technologies.
3. With a financial portfolio, you only have so much money to invest. The same is true with product portfolios, but in addition to financial constraints, we have the additional constraint of people and expertise. Very often specific people on your team are the most constrained resource, so you may look to product portfolio strategies that make the best use of the resources you have. And yes, it’s a very common situation where companies try to do too much and the people are spread too thin. Good product portfolio planning should ensure that the resources are actually sufficient to succeed.
4. Finally, we review the product plans at the portfolio level to make sure we have that holistic view across products and across business units to ensure that our efforts make sense together. There are often conflicts that must be resolved.
The leaders of the product organization are responsible for this product portfolio planning and review. Depending on your company culture, this may also involve the executive leadership team (in truth, in some company cultures, this entire portfolio product planning process goes on only inside the head of the CEO).
In any case, the various techniques that we have discussed, and will discuss in the coming weeks and months, are all designed to help with this product planning process of deciding where to invest, and ensuring that the products you deliver not only succeed, but deliver on your business objectives.