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What is Product Portfolio Management? The Secret Propelling Product Leaders Forward

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In the last two decades, we’ve observed a puzzling paradox – great product managers exist at both market-leading and market-losing companies. So what else does it take to build a high-performing product organization that propels companies up and away? What’s the secret sauce beyond having the best talent and great product craft?

The answer is – Portfolio Product Management Craft (PPM Craft).

What is Portfolio Management?

In the financial world,

“Portfolio management is the art and science of selecting and overseeing a group of investments that meet the long-term financial objectives and risk tolerance of a client, a company, or an institution.”

Investopedia

Besides focusing on picking the right individual investments, winning portfolios

  • focus on smart allocation to various categories of investments, and
  • adjust allocation periodically based on the goals, performance, and markets.

A winning product organization operates similarly and uses a portfolio approach – to evaluate product categories across its products and allocate resources to best achieve the overall outcomes of the organization. This process is also adjusted periodically in response to the market and company needs. 

Does this mean only large organizations with multiple products need product portfolio management (PPM)? Not necessarily, just like everyone may have a financial portfolio regardless of size, the same applies to a product organization. Let’s take a quick look at the history of PPM.

The Evolution of Product Portfolio Management

Traditionally, product organizations run Product Portfolio Management, which considers each product line an investment option. For example, the Proctor and Gamble baby care portfolio has shampoos, powders, diapers, etc. 

When IT came along, there was no tangible product line but the need existed to allocate resources, e.g. engineers, to best support its customers. This consequently created Project Portfolio Management, defined as:

“The centralized management of one or more portfolios, and involves identifying, prioritizing, authorizing, managing, and controlling projects, programs, and other related work, to achieve specific strategic business objectives” – Project Management Institute (PMI)

As you can see, Project Portfolio Management fits well in a waterfall-type environment.

When digital products came along, the traditional product portfolio management approach began to struggle. 

A digital product often appears as a single product from the customer’s perspective, e.g. Google Search. But the product organization for Google Search has many product teams with their own underlying “product areas”. It is a “one-product” portfolio. How do you define the categories for product investments when there are no easily separable product lines? How do you evaluate and decide which part(s) of Google Search to focus or reduce investment? 

With the adoption of agile development, the Project Portfolio Management with pre-defined, fixed scoped projects no longer worked. 

Instead, the engineering teams work collaboratively with product managers early on to design much better solutions to customer problems. However, if product managers start working with engineers on all ideas, all the time, across teams, it can become very chaotic and confusing. 

These were the “new” challenges we faced 15 years ago at PayPal as it underwent Agile transformation. We had to tweak the two PPM methods as well as, build a new portfolio product management practice to support digital products in an agile world. It is now called responsive product portfolio management (Responsive PPM).  

Here is a summary of the key differences in the 3 iterations of PPM:

Regarding investment inputs, Responsive PPM uses skilled resources which are primary resources, e.g. iOS developers, or Data Engineers, needed to build products. When multiple agile product pods require the same team / skills, aka Resource Contention, a portfolio allocation approach is applied, followed by a more quantitative prioritization within the same portfolio dimension. 

Regarding investment options,  Responsive PPM takes a multidimensional approach. One dimension could be business goals, e.g. grow new accounts or retain existing customers. Another dimension could be market segments e.g. enterprise, SMB or international. Yet another dimension could be types of product investments such as growing core capabilities, expanding to adjacent markets, or new product innovation. This allows both a big picture level of allocation by portfolio dimension, and carries the spirit of portfolio intent into each agile pod (product manager + her teams) for aligned innovation and  

How Do You Apply the Latest PPM Best Practices?

As you can see by now, a winning product organization does not spread its resources thin like peanut butter. It defines portfolio goals responsively to the changing state of the market and product performance in many dimensions. Additionally, they allocate resources according to the strategies and focuses. 

Is Responsive PPM relevant to individual product managers who may not have control of the entire company’s product portfolio? The answer is a resounding yes. 

Portfolio management is the craft of managing complexity and delivering the best product outcomes given constraints. 

Every product manager leads a portfolio since their product or product area needs to support a number of goals, multiple segments, and various themes. The Responsive PPM approach can also help product managers to effectively prioritize competing needs from all dimensions and balance the near-term goals and longer-term vision. 

It is important to put your thoughts “on paper” because it not only helps you think better, it also helps you communicate and achieve buy-in from your various stakeholders on why you are building what you are building and where you are now. 

Dragonboat is the fastest growing product portfolio platform for outcome-focused teams to strategize, prioritize, plan and deliver products that drive business results. With Dragonboat, product teams can connect OKRs, customer insights, and product initiatives in one source of truth PPM platform. Sign up for a free trial or book a demo.

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