I talked to a product VP last spring. Her whiteboard was entirely color-coded with sticky notes – one for every product in the company’s portfolio. Red for “struggling”, green for “thriving”, yellow for “not clear”. Most were yellow. She said they weren’t really making decisions about their products. They were just managing the chaos of their portfolio.
This is how most companies manage a portfolio of products. Exhustive.
What “strategic” actually means here
Note that here I’m distinguishing strategic portfolio decisions from picking ‘winners’ in the hope that they will yield maximum returns in the short term. Rather, making strategic portfolio decisions on a regular basis involves utilizing a framework which leads to well-supported strategic decisions regarding products and services in a portfolio. But the data used to make such decisions regarding the products and services in a strategic product portfolio is inconsistent. Therefore, such data cannot be used to consistently make excellent strategic decisions. Also, there are the usual political interests, both inside and outside of a company, that have to be taken into account when making strategic decisions regarding a company’s product portfolio.
Looking at your product portfolio as a strategic whole is harder than it sounds.
- Where is each product in its lifecycle, and are you investing accordingly or just historically?
- Which products are genuinely complementary to your core offering versus ones that just… exist?
- Where is competitive pressure eroding margins faster than you’re growing revenue?
- Which gaps in your portfolio are customers actually asking you to fill?
Revenue is a bad metric for tracking how healthy a product is. Rather, revenue should be viewed as a trailing indicator for a product and should be used to get a rear view perspective of what a product has done in the past. Often a product can be generating a lot of revenue but still be a product that is dwindling in relevance. As long as a product is losing relevance it will also start to deteriorate from the inside. Eventually the deteriorating product will affect the way customers and users experience a product. Customers and users will start to feel the drag of a declining product. Support for a product will start to crawl. Updates to a product will stop. As a company a sunset of a product can be bad for customers but years of under-investment in a product that is slowly deteriorating is worse for customers.
The false comfort of “keeping everything”
What I am seeing more and more is that companies don’t kill off products or reorganize their product portfolios because in the short term it is easier to continue to invest in a cash generating product then it is to spend money and resources in the short term to kill a product off. Like holding a stock that’s going down in value – it’s only painful when it finally hits rock bottom. The invisible and gradual cost of maintaining a marginal product for long periods of time is far greater then the short term pain of announcing the end of life of a product to customers.
While there are certainly some costs associated with dropping a product, they are generally less than the slow rot of marginal products sucking up resources that could be better spent on other, more-growing products. So, keeping marginal products around is not neutral, it is poor.
A third of the resistance to closing a product comes from its past. People were involved in creating and running the product and therefore have a vested interest in keeping it going. The VP of Product at Box.net once told me that a major reason for keeping a failing product alive was because of the “emotional baggage” that it brought with it. In the end, a well-handled end of life for a product is often better for customers than a slow decline of a product while it is still supported. Customers notice when a product is being slowly driven into the ground by under investment of resources. It drags, support is slow to respond, there are few updates. This is far worse for your brand than a transparent announcement of the end of life of a product.
(And I’ll admit that in many cases I can understand why they kept a losing product – the founder of the product was still on staff, for example).
Investment planning that doesn’t age badly
In general, portfolio investment decisions can go wrong in two extreme ways. On the one hand, the “peanut butter approach” where resources are spread too thinly across too many products or initiatives within the portfolio in order to drive progress, does not lead to meaningful results for any of the initiatives. On the other hand, a small set of internal product or function champions and their respective initiatives typically receive the bulk of investments to meet strategic objectives. Both extreme cases are rooted in lack of explicitly shared criteria to qualify and measure what good investments actually are.
Without clear criteria for good investment decisions, most organizations end up spreading resources too thinly across too many products and services in a “peanut butter” fashion. Alternatively, the majority of resources can end up being invested in a handful of high visibility products and services that are strategic fits for only a minority of internal supporters.
Companies that have healthy product portfolios use defined criteria to make good investment decisions, and hold periodic reviews of the investment tiers of their products. When making plans for future investment dollars, a company should determine what is required to keep a product that it already has in its portfolio alive (sustain it) and what would be required to grow a product that it currently has in its portfolio (invest in it). Two very different numbers.
A strategic product portfolio management tool, such as strategic product portfolio management software, can be used at scale to perform the aforementioned strategic product portfolio management. However, the tool must be used as a support for decision making – i.e. the basis for a set of investment decisions to be detailed in a slide deck – and not in and of itself as the basis for all of the decisions made with respect to the products in the portfolio under management. The tool can bring a high degree of transparency to the manner in which investment decisions are made and create a single point of truth for up to date information with respect to the portfolio of products under management.
When to kill a product (and why it’s so hard)
When a company ceases to develop a product, this typically has a personal history. As well as the fact that products that are discontinued can have a negative impact on customers, the experience can also have a lasting impact on a company’s brand. In many cases, the negative impact that under-invested, declining products have on customers can far outweigh the negative experience that customers have when a company announces the end of life of a product that was once successful.
The pain of a poorly managed sunset of a declining product far outweighs the negative brand impact of a transparent announcement of end of life. Customers can typically tell when a product is ‘drifting’ and that support is struggling to keep up. It’s far better for customers in the long run for a company to invest in products that have growth potential, rather than underinvesting in products that are declining and ultimately become unsustainable.
| Situation | Common (wrong) response | Strategic response |
| Declining revenue on an older product | Maintain investment hoping for a turnaround | Assess lifecycle stage and set a clear path forward |
| Two products overlapping in function | Keep both to avoid internal conflict | Consolidate with a deliberate migration plan |
| New market opportunity emerging | Build something new without adjusting existing portfolio | Evaluate what to deprioritize to fund it properly |
| Customer complaints about a specific product | Reactive patches with no strategic review | Determine whether investment is worth it given positioning |
The hardest products to kill are often the first to be considered for the axe: Under-performing products that have die-hard fans on staff. As a leader, you are left to try and make the best decision for the company, and try to be as fair and compassionate as possible with the product team and the users of the product.
Start with fewer decisions, not more
Running a portfolio of products is best when you make a few decisions with more care and deliberation, rather than continually re-allocating resources among many products. Your processes should be stable and your decision making cycles predictable.
Set a review cycle, have clear investment criteria before you start discussing individual products within that portfolio, make sure you’ve designed in disagreement, but once you’ve made a decision, be clear on what that decision is so that your team can go stop rehashing it in the halls and actually start doing something with it.
When every product is in some state of review it becomes a jumble of inaction. The review process steps are written on yellow sticky notes on the whiteboard. They are “under review” meaning somewhere along the line they will get marked green for go or red for no go. But for now they are just sort of mired. And so at the end of the quarter, as everyone departs for their summer vacations, there is a mountain of work that did not get done.
The chaos doesn’t clear itself.
