For those who’ve grown up practicing traditional product management environment, you may be asking yourself, what is the definition of product portfolio management and how is it different? The notion of product portfolio management often brings perceptions that may not be entirely accurate. Here are the seven most common misconceptions we hear and why they really aren’t issues after all.
Portfolio Management requires more people than traditional product management.
It might seem that way because most people interpret a vertical market (industry) alignment to mean an additional layer of people above and beyond your current structure. Few, if any, of our clients need to hire additional people. Portfolio management eliminates many of the redundant practices that occur at a product level, so in reality you’re reallocating current budgeted headcount to support new business practices that have no dedicated resources in the current structure.
Portfolio Management forces our entire company to be restructured around vertical markets.
Major company restructuring is rarely required. There’s a tradeoff with portfolio management because you’re establishing more focus on the company’s performance in key vertical markets and less on the P&L of each product. The biggest impact of that tradeoff is in the business practices that connect corporate financial goals to product, marketing and sales initiatives. Bottom line: portfolio management is a process change that more closely connects corporate goals to the management, marketing and sales of your entire portfolio versus a restructuring of the company.
Portfolio Management limits our sales efforts to specific vertical markets and reduces our revenue potential.
Replace the term “limit” with “focus” and your revenue potential grows significantly, especially if you’re in a market that’s crowded with competition and your products are in the “commodity zone.” For most B2B organizations, 80% of revenue and profitability comes from a handful of vertical markets. If product teams, marketing and sales focus on solving bigger problems for those markets and communicate differentiating value in plain simple English, the revenue opportunities would far exceed those in the other 20% they’re not focused on.
Portfolio Management ignores small improvements to individual products that impact customer retention.
If customer retention is a strategic initiative, small product improvements will be a top priority. Otherwise, small product improvements are part of every development cycle but they become a second priority to higher value solutions that address broader market issues and advance your company’s market position. In a portfolio model, smaller product enhancements are focused on products that require significant development to deliver the higher value solutions because the cost and impact to the projects are marginal at that point.
I can’t track the performance of my product in a Portfolio Management model.
Nothing changes from how product performance is tracked today. What changes is the fact that individual product performance isn’t all that important in a portfolio management model. The most critical metric in a portfolio management model is the performance of your organization (revenue, profitability, market share, customer retention, etc.) in its chosen market segments. To that end, certain products play a leading role while others play a supporting role.
Portfolio Management diminishes my strategic value as the business owner of my product.
As a B2B product manager, your strategic value is far greater to the organization when you’re a major shareholder of a product portfolio that’s constantly growing in market value versus the owner of a single product business that can only offer tactical value due to its limited scope. It boils down to the value of a well-integrated portfolio aimed at solving bigger problems for specific markets versus the value of many individual products all aiming for slightly different targets and solving smaller problems.
Product Marketing’s value is weakened if the focus is no longer on individual products.
It’s the exact opposite. Product Marketing’s stock goes way up in a portfolio management model because they possess market knowledge that’s complementary to product management instead of attempting to match their product knowledge. Industry knowledge becomes a much greater focus in product marketing and complements product knowledge in the form of value propositions and sales tools that communicate your organization’s strategic value to each market segment with products and features offering more compelling proof points. And anything product marketing does to improve the credibility of the sales force is highly valuable to every organization.