Kill it! Or The Art of Managing Small Product Portoflios

Kill it!

In a product portfolio business, the product manager (or more appropriately product portfolio manager) usually oversees part of an often complex catalog of products.

Here are some examples:

  • catalog-based B2B businesses (electronics components/parts; scientific research: specialty chemicals, biology/biotechnology; mechanical; finance and insurance)
  • catalog B2C businesses (think about amazon, with a huge catalog of diverse products; online shops; bricks and mortar retail chains; personal finance)
  • technical/scientific field, either B2B or B2C. These are usually highly specialised companies servicing specific market niches, with a certain numbers of products in different categories (engineering companies; pharmaceuticals; FMCG)

A typical portfolio is made of the star products (or cash cows), the potentials (new or growing products looking to become star) and the laggards. Realistically 20% or less of the portfolio will generate most of the revenues, while the majority of the rest is there for historical reasons, for “completeness”, “because you never know”, or by pure mistake.

 

Examples from physical goods industries

Let’s use, as I often do, the specialty chemical industry as an example. Many chemical compounds suppliers offer comprehensive sets of molecules belonging to a specific chemical class. Usually these are molecules with the same basic structure and only minor variations differentiating them. You can see a few examples here:

The electronics and mechanical industries also offer many excellent similar cases:

 

The argument for the large size portfolio

Most often the argument for keeping a large portfolio is value of choice and completeness of the offer. Companies go the extra mile to add yet another small variant of a given product or technology to ensure anything thinkable is on offer, not to lose any occasional potential customer.

The truth is that more often than not, among the hundreds or thousands of products, there are just a few bestsellers and most things don’t sell at all.

There is a huge opportunity cost in maintaining such a big catalog. Efforts are diluted on the majority of products that do not have any real market traction.

I believe the same argument can be raised for apps that keep adding functionalities in the attempt to attract all kinds of user. They end up losing their identity down the product roadmap, failing to retain customers attracted by the original core idea of the product.

There are several unanswered questions behind strategic business choices:

  • Why do some products sell while other similar ones don’t? Is it because there is a real need for a specific variant? Is it because sales or marketing naturally tend to favour one thing rather than others?
  • Are some product variants intrinsically superior to others?
  • How true is it that the bestsellers sell thanks to the availability of all the alternatives?
  • So are customers really attracted by the completeness of the offer?
  • If I dropped the non-sellers and focus on the bestsellers, could I grow the business?
  • Should companies follow the existing market or should they try to create new markets?

Investing in launching some products (or variants) to sell others seem counterintuitive. Yet this is what many companies do. The unanswered question is: does this really help sales?

 

How laggards inherently compete vs best sellers

In the most typical organisation, Product Managers sit between R&D, Manufacturing/Supply Chain, Sales and Marketing.

To lead the portfolio development and manage the technology lifecycle they need to keep the focus on what makes business sense, resisting the technology-driven mindset of completing the offer by adding variants or pursuing product introductions as a natural evolution of all R&D results/projects.

At the same time, to drive growth Product Managers must in fact compete for Marketing and Sales resources. Sales people will always focus on the most promising leads, the shortest sale cycle, the biggest potentials. It is also human to go for the path of least resistance: if a product needs half the effort to generate the same deal size as another product, what do you expect to be the commercial team’s favourite?

Diluting the resources at your disposal on too many fronts (read: too many products) is inefficient and risky.

 

The most reasonable solution

The right solution is one and one alone. Look at the big picture and focus on your biggest assets. The rest? Kill it.

I know, you are afraid of losing opportunities. We all are. But you will naturally give preference to your best bets anyway. You’d be afraid of neglecting a commercial push for the highest potentials to try and improve a laggard. Then what? Your laggard will remain laggard. You have spent time and effort developing it and maintaining it. So you will spend more time and effort to keep it alive, to justify its presence in the portfolio. The reality is, that’s time you could better invest in more productive activities.

Do yourself a favour. Look at the data, test it meaningfully, identify your stars and your promises. Give them your heart. And your laggards? Kill them.

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