Aligned, reconciled and customer-focused product portfolios help drive overall growth and focus in the organization.
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Evolve Product Portfolios for Changing Customer and Market Needs
Growth organizations choose customer-driven prioritization across their product portfolio
According to a recent survey, companies with growing revenue use different portfolio management methods than those with flat or declining revenue. Growth organizations follow three critical priorities in managing their product portfolio. Download this research to learn:
The key differences in how growth and no-growth companies manage product portfolios
How to center the core values for your portfolio strategy and achieve success
Near-term and long-term actions to drive growth
How to manage a successful product portfolio
Product portfolios must evolve to changing customer and market needs.
Align and Reconcile
Find Hidden Revenue
Customer-Centric Portfolios
Fund potential growth by eliminating redundancies.
Properly aligned portfolios ensure all products support the current business strategy and benefit from a strong and consistent marketing and sales focus. Conversely, misaligned portfolios will underperform relative to their potential revenue growth.
Aligning portfolios fosters a more targeted approach to feature development among individual product managers. Plus, reconciliation and rationalization create opportunities for greater investment in new and promising growth products while preserving better margins for those in the mature or declining life cycle stage.
Step 1: Comprehensive portfolio analysis
At least once per year, perform a comprehensive portfolio analysis to assess the performance of each product and determine what actions (if any) are required to:
Align it with the business strategy
Reconcile overlap or inconsistencies
Achieve the desire mix of revenue growth and profitability
Start by reaffirming that your product vision and strategy align with the current corporate strategy. Then assess each product’s financial performance and market characteristics to determine if investment or other adjustments are needed to meet the objectives for the portfolio. Classify each into categories such as “mature,” “top performer” and “future star” based on financial performance, market growth/share and revenue growth potential. Finally, identify market gaps and potential areas of product or feature overlap for further investigation.
Step 2: Align products and reconcile feature overlap
Once potential problem areas have been identified, the next step is to further examine each one. Every product in the portfolio should address a unique market problem or opportunity. Two products from the same organization in the same market can create confusion for customers, marketing and sales. Consider merging similar products or select the one that offers the best value and growth, and retire the remaining product. Look for feature overlap, which can be more difficult to identify. Aside from adding cost to the portfolio and confusing customers, overlapping features create redundant product management responsibilities.
Step 3: Reallocate investments
An effective portfolio analysis should provide insight into any product gaps in the portfolio. These gaps can take the form of underserved areas of existing markets or unserved adjacent markets. It should also identify introductory and growth products, which may require additional investment to reach their full potential. Product leaders can shift funds from mature or declining products or those that overlap and need to be retired. It is important to conduct these analyses regularly as there is often lag time between the decision to ramp down on a product and those funds becoming available for other products. A regular review of the portfolio means funds from previous analyses will be available for newly identified growth products.
Design a connected portfolio to increase revenue.
Product managers lack insight into how their users and products interact with other users and other portfolio products in the customer environment. However, analyzing historical purchasing behavior of customers can help unlock new revenue opportunities. This data can be used to identify patterns or product, user and buyer relationships to create testable hypotheses that will eventually form the basis for a connected product portfolio. To benefit fully from a connected product portfolio, product managers should focus on three areas:
Map key relationships between portfolio products.
Product managers must thoroughly understand the relationships between products in the portfolio before determining which strategies will exploit those relationships and deliver synergistic results. Start by recording the number of instances when a combination of products is licensed to one customer — regardless of sale date. Then interview customers to test hypotheses about why these combinations were purchased. How are the buyers and users of these product groups related? Product managers must use these interactions to better understand the motivations of buyers and map any business processes or workflows that span the users or buyers in these groupings.
Product managers go to great lengths to understand the workflows directly related to their users and products, but they may not fully understand how work or processes move between users. Mapping these interuser workflows informs product managers of the opportunity to create significant differentiation through new or increased product integration.
Design for greater upsell, cross-sell and retention.
This step involves three connected portfolio approaches: Integrate workflows between products, add premium product tiers and bundle products. Cross-product integration increases customer value of individual products when used in combination at a customer location and leads to increased revenue from cross-selling, greater product differentiation and increased customer retention. Adding a premium tier to a product can generate more revenue from upsells to a segment of customers willing to pay more for a superior experience. Product bundles focus customers on the merits of a broader solution, simplify the purchase of a multiproduct solution and provide an effective financial incentive to purchase more products now.
Define and track portfolio performance metrics.
Product managers should identify the specific metrics that most closely measure progress toward their objectives for the portfolio, but some of the most common examples include:
Percentage of revenue from cross-selling
Percentage of revenue from upselling
Percentage of customers by number of products purchased
Customer retention rate by number of products purchased
Initial sales of combined products (by named product combination)
Total customers by named product combination, including bundles
Learn why growth organizations focus on the customer.
When it comes to driving growth, portfolio management methodology matters. In fact, Gartner found statistically significant differences in management methodology between companies with growing revenue and those with flat or declining revenue.
Additionally, 53% of respondents in growth organizations chose customer-driven prioritization across the portfolio, compared to only 33% of no-growth organizations. On the flip side, 31% of no-growth organizations cited portfolio adaptability as a top 3 priority, while only 13% of growth organizations did so.
The Gartner Product Management Branded Survey highlighted three key insights for product leaders when it comes to growth versus non-growth companies:
Growth companies center their portfolio strategy process around the customer. They work to discover and construct the combination of products that best serves their various target personas within customer organizations, and then orient all other priorities to flow from that center. When they do struggle, it is with finding ways to serve that customer in as many ways as possible — in allocating their limited resources to the right number of products, instead of spreading them too thinly and compromising the experience.
No-growth companies, by contrast, focus far more than growth companies on the adaptability of the portfolio, i.e., on how they can structure the portfolio to achieve cost-efficiencies. This is unsurprising as mature organizations are generally dealing with many products in various stages of the life cycle, as well as redundancies arising from mergers and acquisitions (M&A). No-growth organizations struggle with portfolio simplification, again with cost-efficiency in mind.
The temptation is always to focus the portfolio process inward, onto existing resources and how to deploy them most efficiently in their present form. This logic proceeds from an assumption, often justified, that resources are mostly fixed, and that therefore optimizing their use to produce the maximum number of products and features is the best path. But this ignores the market truth that not all products and features equally serve the actual needs of the customer. In fact, some do not serve their needs at all, and should be retired rather than allowed to limp along.
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FAQ on product portfolios
What is a product portfolio strategy and why does it matter?
A product portfolio strategy is a plan that organizations use to manage their collection of products or services. It’s essential for maintaining a competitive edge, optimizing resources and driving long-term business success. Plus, it helps navigate complex markets, manage risks and capitalize on opportunities.
What are the factors to consider when optimizing a product portfolio?
Product portfolio optimization allows firms to rebalance portfolios, streamline operations and financially reposition themselves against volatility. Some factors to consider are: market demand, product performance, product life cycle stage, resource allocation, risk, alignment to strategy and cost.
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