People often ask me about the innovation, new product development, and portfolio management trends I’m seeing in the field. For many years, I saw that companies’ first priority was to automate the gated development process. That is, companies needed to automate the process of moving new products along from initial idea through to development, screening, and finally to commercialization.
But in recent years, I’ve seen a shift. Although, companies still need automated gated processes, now companies are also needing something more: they need to manage their new product portfolios for a dynamic environment. Markets are not as stable as they once were – they are constantly shifting and changing. In response, companies need to actively manage their product portfolios. Companies need portfolio management for speed – but the speed I’m referring to isn’t just about getting to market with a product faster. Rather, companies now need to be able to change direction faster.
Tough economic times and competitor activity drive the need to ensure that the product development pipeline is not just adequate, but closer to optimal. This need is true of big companies as well as small ones. Companies of all sizes are seeking to change their strategic direction faster.
What precipitates the need for a company to change direction? It may be an external event, such as a change in consumer preferences, the opening of new markets, a change in government regulations, or an aggressive move by a competitor. But it can also be driven by looking ahead and seeing where the company wishes to be, what segments of the market it wishes to serve. A change of direction can therefore be either reactive or proactive.
What’s more, I’m hearing the language around portfolio management change. The core goal has always been to align products with strategy, but I see that goal expanding now to also encompass alignment of products to resources. For today’s companies, balancing the portfolio means balancing it not just on the right products but on the right mix of resources.
These resources can be employees, factories, even down to specific ingredients or parts that go into a new product. For example, a company may want to maximize using a certain resource. Portfolio management lets them see down to that level. If several projects, for instance, would require using certain subject-matter experts, then time constraints on those experts could jeopardize one or both projects. Or, perhaps a company wants to use resources in a particular geographic area for cost or market proximity reasons. The product manager can look across the portfolio of projects and assess which ones will use resources from which regions. The manager can then tilt the balance to favor projects relying on the desired geographic regions.
In short, companies need to react to internal and external developments and change the direction of the ship quickly. Effective portfolio management helps keep the company’s pipeline of products aligned with a company’s strategy and allow it to maneuver in a dynamic environment while ensuring optimal asset utilization of the firm’s resources.