Regardless of company size the profitability of the product range should be one key area for the product management organization to focus on.If the company is a smaller fairly new technology company growth is however usually more important than immediate profitability. Thus the whole company is focused on growth and it may be difficult to see the right moment when shift shall be given towards more long term product profitability. Hence the focus in product management (processes as well as the right support systems) may initially not be geared to monitor the business essentials necessary to manage a wider product portfolio over time.
Surprisingly though the same can often be said in long established companies sustaining a stable customer base and fairly stable product portfolio. Numerous re-organizations, acquisitions, mergers, process changes and also system consolidations have probably made prudent business management of the product portfolio, maybe not a lost, but at least a fairly cumbersome faith to accomplish for the aspiring product manager. Company tradition coupled with the seasoned “key experts” who always knows exactly how we have “always done” product management can be a real hindrance to proper business management of the product portfolio. I believe that some key signs of this are:
- A very large and still growing product portfolio with constant new, and often very detailed technical, requirements from sales, but still financial growth and margin is not improving.
- Product substitution is difficult to handle as phasing out older products is not popular, or even vetoed, by the sales organization.
- Complaints from sales that they need yet another product variant with lower cost.
- Managing the product portfolio for value based pricing is difficult or not done at all.
- Unclear corporate measurements on who is really accountable for the business management of the product portfolio.
- Very difficult to get key business data for a single product, e.g. product margin, cost in different parts of supply chain, price per customer etc. But very easy to get all accounting data for an organizational unit in the company.
So what to do?
Well it cannot be fixed overnight as it really means taking better control business wise of the product portfolio. Which is obviously easier said than done when you are swamped day to day work dealing both with sales requests, updating product databases and participating in project reviews.
So step one is to actually set time for real business analysis of at least one product line in the portfolio. And that means for starters:
- Assess the product-portfolio business wise. What is selling, what is not selling, how many parts do we have in the supply chain for a given product etc. This can be a cumbersome process tools wise but pick at least one product line and start.
- Get real customer insights yourself. Understanding the real values your product brings to the customer.
- Take full control of mapping customer values to product requirements and evaluate product structure against the customer values.
- Understand the competitive landscape
Once an assessment has been made on one product line it is time to see what needs to change in the current product management way of working to solve these problems. And that will call for a much longer blog.
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