Maximizing Product Potential: A Guide To Building a Strong Product Portfolio
When you work in a single-product organization, you look to that one product to solve your customers’ problems and help you reach organizational goals.
Your decisions come down to which features to add, improve, or remove so that you can make the best use of your product team's time and investment dollars.
As you look to grow your organization, you may reach the point where you’ve tapped out the potential of that one product. It may be time to add another product. Yet when you do that, it can have all kinds of implications on your existing product.
You can’t make decisions about each product in isolation, you should consider them all together. That’s where a product portfolio comes into play.
What is a product portfolio?
A product portfolio is the collection of all the products and services you offer to your customers. A product portfolio becomes meaningful when your organization adds additional products to sustain and grow market share and revenue.
When you add new products, you’ll need to decide how you allocate your staff and resources to support those multiple products.
A product portfolio helps you do that by providing a view of all your products together. This view helps you analyze how all of your products fit together regarding their market position, how they serve specific target customers and how they contribute to your company goals.
How to build your product portfolio
In order to add products in a way that helps you sustain and grow market share and revenue, you need to build your product portfolio intentionally.
Here are steps you can take to build an effective product portfolio, whether you’re looking to add your second product or if you’re trying to put some intention to your approach to adding products.
Define, or confirm, your target market
For starters, you need to make sure you’re clear on who you want to help solve problems. If you developed your first product with specific customers in mind, this is more an exercise in validating your choice of market.
If you didn’t have a clear idea of who you were targeting when you built your first product, there’s no time like the present to zoom in on who you intend to help with your product(s).
Conduct market research
To avoid building a solution looking for a problem, your best first step is to conduct some research to understand the market you currently operate in and markets that you’d like to enter. You should already have a lot of information about your current customers, so this is an opportunity to build on that.
Talk to your customers to find out what problems they still have even after using your product. Finding these additional jobs to be done can help you identify opportunities in your existing market or a new market you can move into.
You can also get some signals from observing what others in your market are up to. The products they introduce to, or remove from, the market can provide some insight into opportunities.
Develop a product portfolio strategy
A product portfolio strategy is your organization’s theory on how to leverage your products to achieve your business goals. You can think of it as a product strategy that governs how you align your people and resources to build and maintain those products.
Get clarity on your organization’s business goals and the metrics you use to know you’re meeting them. Then, think about how your collection of products will help you meet those goals.
To do that, figure out where each product is in the product life cycle, its market share and growth prospects. That tells you how each product currently contributes to your business goals and can help you form some decision filters for the mix of investment in your products, which forms the basis of your strategy.
Managing the product portfolio
You can then apply those decision filters to help you determine whether to keep, phase out, or expand your current products and build or acquire new products.
Those decisions help you determine how to allocate teams and resources to your various products to put yourself in the best position to meet your business goals.
A common framework that helps you make those types of decisions is the Growth Share Matrix from the Boston Consulting Group. This framework compares the growth and market share of the products in your portfolio. The four quadrants that result provide some guidance on how to distribute your product development investments.
The four quadrants are:
Low Growth, High Market Share (Cash Cows). These products require little investment and produce a large cash flow you can invest in other products.
High Growth, High Market Share (Stars). These products represent large future potential and are ideal places to invest the funds coming from your cash cows.
High Growth, Low Market Share (Question Marks). These products may become stars, but usually require additional analysis to determine if you should invest in them or discard them.
Low Growth, Low Market Share (Dogs). These products do not have excellent prospects for future growth and may not be worth the investment to continue maintaining. They are suitable candidates for divesting.
There are a variety of other frameworks that help you do similar product portfolio analysis with slightly different factors. The key to all these analysis frameworks is that you make investment decisions across all of your products based on how the mix of products help you reach your business goals.
Example: Atlassian - Intentional Product Portfolio Management
Atlassian, maker of software products such as Jira, Confluence, and Bitbucket is an example of a company that has taken an intentional approach to building and managing their product portfolio.
Less than two years after they released their first product, Jira, they released their second product Confluence, which was fairly quick since they were still trying to fully establish their place in the market with Jira. Their introduction of Confluence was successful because they realized it could help their current customers solve additional problems that Jira did not.
It’s easy to consider Jira and Confluence are successful products. Atlassian noted in their 2021 annual report they derive a majority of their revenue from those two products. Those two “cash cows” no doubt help fund the development of new products such as those coming out of Point A, their “innovation hub”.
The revenue produced by Jira and Confluence also made the decision to divest HipChat to Slack easier. HipChat was losing the market share battle with Slack and had few prospects for growth, so Atlassian divested it to avoid any further investment.
How airfocus helps you manage your product portfolio
Once you decide what products in your portfolio, you plan to keep and expand, you need some way to track how those investments are going.
That’s where airfocus’ Product Portfolio Roadmap Template comes in handy.
This template provides a high-level summary across all of your products. You’ll be able to see gaps in your overall product portfolio strategy so you can identify new ideas to close those gaps and meet your business goals.
If you need to visualize the initiatives in your product portfolio in one place, give the Product Portfolio Roadmap Template a try today.
Kent McDonald
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