We’ve observed a puzzling paradox in the last two decades—great product managers exist at both market-leading and market-losing companies. So what does it take to build a high-performing product organization that propels companies to wild success? What’s the secret sauce beyond having the best product talent?
The answer is Portfolio Product Management (PPM).
In this post, we’ll look at the definition of product portfolio management, its evolution over the last few decades, its relationship with product management, and key elements of the framework.
What is Product Portfolio Management?
Product portfolio management is rooted in the principles of portfolio management from the finance 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.”
Besides making the best investment decisions, winning portfolio management includes:
- Allocation to various categories of investments to maximize portfolio yield
- Periodic allocation adjustment based on the goals, performance, and markets
A successful product organization operates the same. They use a portfolio approach to evaluate product categories and allocate resources to best achieve business outcomes. They are responsive to fast-changing market and business needs, adapting in order to maximize the outcome.
Therefore, Product Portfolio Management is the practice of evaluating performance, identifying risks and opportunities, prioritizing high-value products, optimizing resource allocation across the portfolio, making informed tradeoff decisions, and balancing the product mix among strategic buckets. When done right, this practice aligns the product portfolio with business strategies to achieve profitability.
Next, let’s look at the history of portfolio management to understand how we arrived at the newest evolution—Responsive Product Portfolio Management (PPM).
The Journey to Product Portfolio Management
Traditionally, product organizations run Portfolio Management, which considers each product line an investment option. For example, the Proctor and Gamble baby care portfolio comprises shampoos, powders, and diapers.
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)
Project Portfolio Management fits well in a waterfall-type environment. However, when digital products became more complex, the traditional approach began to struggle. A digital product often appears as a single product from the customer’s perspective, such as 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.”
In this structure, product portfolio managers face many questions. How do you define categories for product investments when there are no easily separable product lines? How do you evaluate and decide which part of Google Search to focus on? Where should you reduce investment?
With the adoption of agile development, the Project Portfolio Management with pre-defined, fixed scoped projects no longer worked.
In agile, engineering teams work collaboratively with product managers early on to design better ways to solve 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 during its Agile transformation. We had to tweak the two PPM methods and build a new product portfolio management practice to support multidimensional digital products in an agile world.
This new practice is now called Responsive Product Portfolio Management (Responsive PPM).
Traditional Portfolio Management vs Project Portfolio Management vs Responsive Product Portfolio Management
Responsive Product Portfolio Management allows winning product organizations to avoid spreading their resources thin like peanut butter. It defines portfolio goals responsively to the changing state of the market and product performance in many dimensions. Additionally, it allocates resources according to the strategies and areas of focus.
Regarding investment input: Responsive PPM uses skilled resources, which are the primary resources (e.g., iOS developers or Data Engineers) needed to build products. When multiple agile product pods require the same team/skills (known as resource contention), leaders apply a portfolio allocation approach, 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., growing new accounts or retaining 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 a big picture level of allocation by portfolio dimension and carries the spirit of portfolio intent into each agile pod (product managers and their teams) for aligned innovation and collaboration.
Regarding measures of portfolio outcomes: Responsive PPM also includes monetary metrics like revenue, and other metrics such as new market penetration velocity, platform uptime, or NPS scores. These metrics reflect the various goals the product organization needs to achieve.
How is Product Portfolio Management Different Than Product Management?
Now, you may be wondering, “How does portfolio management interact with product management, and how do the two differ?”
Product management sparks innovation and problem-solving at the level of the customer need. In compliment, portfolio management makes sure strategic alignment and resource allocation needs are met to maximize portfolio outcomes.
Core product management skills include analyzing customer needs, product discovery, product design, planning, iterating, and releasing new product features.
Portfolio management skills include strategic planning, forecasting, allocation, trade-off analysis, scenario planning, and adjustment.
Can Small Orgs and Individual Product Managers Do Product Portfolio Management?
You may be wondering if a Product Manager, who may not have control of the entire company’s product portfolio, can apply a Responsive PPM approach.
The answer is a resounding yes!
Product portfolio management is the craft of managing complexity and delivering the best product outcomes given constraints. Product Managers find themselves doing this already, every day.
Every product manager leads a portfolio since their product or product area needs to support several goals, multiple segments, and various themes. The emphasis is not on managing the size of your portfolio but on managing your choices.
Watch the Webinar Recording: Replace Your Roadmap with a Responsive Portfolio to Drive Outcomes
Key Elements of Product Portfolio Management
Now that we’ve covered the different iterations of product portfolio management and how it relates to product management, let’s break it down to see just what is involved.
A roadmap is a visualization of the vision, priorities, timelines, and work that needs to be done in order for you to meet your goals. Roadmapping is a useful tool for communicating your plans to stakeholders and tracking progress towards your initiatives.
Before you can build a roadmap, you first need to collect and organize customer insights. These could be from your own list of internal ideas, or direct feedback from customers. If you’re doing a feature-based roadmap, you would work from this backlog of requests and choose which feature to prioritize for a single outcome. However, with outcome-focused roadmapping, product teams can take a more holistic approach to prioritizing features that will drive the best outcomes while considering all the dimensions of the business, customer, and portfolio.
Keep in mind, customizing your roadmap based on your audience and showcasing varying levels of details to your stakeholders is crucial. In fact, that’s the last step of any great roadmap—sharing it!
You need to present data in a way that quickly aligns everyone involved and communicates the plan. For example, C-level executives likely want to know if your roadmap is on track and meeting OKRs. On the other hand, a weekly sync with the product team needs to highlight the details of each Epic, visualize dependencies, show progress percentages, and display statuses. These are two very different roadmaps, but both equally important.
In addition to the PMs’ focus on their individual roadmaps, product leaders and product ops need to align and manage the entire portfolio—multiple products and their dependencies. To do this successfully, connect your long-term vision with team execution. The most successful product-centric companies do this by starting with the corporate-wide business goals and identifying where to invest resources to achieve meaningful results.
Next, set objectives that span multiple areas of the business and link them to the corporate strategy. You can even connect objectives and key results (OKRs) to your initiatives and roadmaps. By linking these together, you’re prioritizing initiatives for the relevant OKRs based on how much they contribute to each objective. During this step, you’ll want to anticipate trade-offs to understand the opportunity cost of prioritization decisions. Roadmaps cover the what and when, but it’s vital to also include the “how” and “what-if” scenarios during resource allocation so you can respond to the inevitable changes driven by the market.
This framework is how outcome-driven organizations operate. It becomes an internal pulse and guides teams to prioritize what to build next while keeping everyone aligned through planning, resourcing, and progress tracking.
The key to delivering outcomes is to ensure your strategy is in alignment with the overarching goals of the company. Outcome-driven teams constantly decide where to focus, choosing the right features to work on that will create the most significant impact and lead to the greatest outcome. They prioritize and re-prioritize with diligence to keep their work connected to the near-term focus and long-term vision.
To support these prioritization efforts, today’s industry-leading organizations make sure to balance their resource allocation between multiple dimensions, outcomes and timeframes. They apply the rock, pebble, and sand technique to best manage their product portfolio. In doing so, they can also move forward with their big, strategic bets that will allow them to continue to innovate and transform.
The last element to deliver outcomes is to continuously evaluate progress towards your goals in real-time and to responsively adjust. If the team is over-achieving in one goal and underperforming in another, you should make an adjustment. No need to wait for the next “planning cycle” to make a change. This is the beauty of outcome-drven product management—the ability to respond, make adjustments, and keep every effort focused on your goals.
Benefits of Following a Responsive Product Portfolio Management Approach
Product portfolio management is the product-centric company’s key to combatting chaos, misalignment, dependencies, resource bottlenecks, and other growing pains.
While there are a few “flavors” of PPM, we recommend following the Responsive PPM approach:
- Produce outcome-driven initiatives that are iteratively built, tested, and learned from/ validated before the next iteration.
- Encourage a bottom-up workflow that empowers teams and leaders to make iterative and holistic decisions toward achieving their OKRs.
- Allow executives to adjust and reprioritize in response to changes in execution, available resources, and external factors.
- Tie the strategic and execution cycles to the rhythm of “Align, Allocate, and Adjust,” ensuring everyone moves in the right direction and speed.
Rather than planning only once a year, Responsive PPM is the rallying drumbeat for an entire organization to move quickly and efficiently. Responsive PPM lets Agile, product-centric organizations maintain their agility regardless of their size and scale.
Interested in learning more? Join the fastest-growing community for product portfolio management and connect with industry colleagues at ResponsivePPM.org.