The Biggest Difference Between Product Management and Portfolio Management
The biggest difference between product management and portfolio management is product management focuses specifically on the success of each product whereas portfolio management focuses on the success of the company (the portfolio) in chosen market segments.
In a product management model, product managers assess markets where their products can best succeed and they create plans accordingly to support the company’s strategic and financial goals.
Imagine the complexity if you have 10 products and 10 product managers evaluating markets that are best for each product and creating plans in silos. The bottom line is your portfolio (your company) has no focus or direction as far as the market is concerned and you’re on a path of trying to be everything to everyone.
Traditional Product Management
Here’s the other problem. Every one of those product plans is a good plan if it supports the company’s strategic goals, but then it becomes highly subjective (and political) as to which plans contribute the most to the company’s goals.
It’s the root cause of constantly changing priorities, a lot of stops, starts and shifts in direction to meet your company’s annual numbers. It doesn’t need to be that difficult if you have solid reasons to say “no” to a lot of impulse opportunities!
Portfolio management gets rid of the competing product plans because the first order of priority is determining the market segments, in pecking order, that will contribute the most to your organization’s strategic and financial goals considering the value of the entire portfolio.
The market segment priorities dictate the investment levels in each product collectively based on the needs of each segment and the gaps in your portfolio.
B2B Portfolio Management
Portfolio management simplifies the strategic planning and prioritization process because product managers are collaborating more than ever to grow the market value of the portfolio in the market segments most conducive to the company’s success.
Portfolio management also forces product managers to adopt a longer-term view of the market and strategize accordingly. Product releases are still the execution phase but everything works better when priorities across all products are synchronized to target customer needs in the company’s highest priority markets.
In a portfolio management model, your company is building strength and gaining momentum in key market segments with a portfolio of solutions that’s best suited to propel its growth and profitability. It’s a much better use of resources compared to the scattershot scenario that depends on every product succeeding in its own silo to meet the company’s goals.
Perhaps the best thing about portfolio management for product managers is that saying “no” is much easier, and you’ve got more than enough data to back that decision! If the ask doesn’t have a significant impact on revenue, retention or adoption in your chosen market segments, it goes to the parking lot.
FAQs: Difference Between Product Management and Portfolio Management
1. If product priorities are shaped by market segment priorities instead of individual product needs, aren’t the priority debates just shifting from products to markets?
It’s a logical question but the answer is a definitive no. Market segment priorities are far more data driven and objective than product priorities, which can be highly subjective due to the lack of quality data. When you combine a simple portfolio SWOT analysis with market growth forecasts, the data paints a very clear and factual picture of your most lucrative market segments in pecking order.
Here’s a bonus. Those market segment priorities are just as valuable for product marketing and sales as they are product management.
The other key thing to remember here is that market data and research is far more available and reliable for specific market segments and product categories (the portfolio) versus individual products (modules of your platform) because, at that level of granularity, research can be difficult to find.
2. Does portfolio management mean that I’ll be adding more industry-specific features to my products?
In some cases, yes but not always. Here’s the thing to keep in mind. Let’s apply the 80/20 rule. Your customers across all market segments do the same things the same way 80% of the time and 20% different. It’s the 20% that’s critical in a portfoliomodel.
You’ll build base capabilities that are an 80% fit for all customers, but if push comes to shove on resources, time and scope, the (20%) market specific features get priority so that you have something that’s more valuable, unique and differentiating in your key markets. This approach is critical to growing the value of your portfolio in each market segment.
3. If we’re doing portfolio management, do we need to gather requirements from each market segment?
Definitely yes but it’s not as complicated as you might think. This is where strategic customer requirements and THE BIG WHY come into play! It’s a fact that customers across industries and market segments do a lot of the same things the exact same way operationally, but the reasons they do them are different when you look at the dynamics in their market and the impact on their strategic priorities.
That context of WHY customers need to do something strategically is not only important for product teams, but it’s equally important for marketing, sales and customer success teams.
4. Does portfolio management impact our agile process?
If you stick to the fact that agile is a development methodology and not a product management framework, it will have no impact whatsoever on your agile process. Nothing changes about how you work with your development teams. The only thing that changes is the prioritization process that feeds your product roadmaps and backlogs.
5. How does portfolio management impact product marketing and sales?
It’s all upside for marketing and sales. Here are the benefits in a portfolio model.
The relevance factor goes way up on your marketing messages and sales narratives because they’re specific to each segment versus generic in a product model.
You’re marketing and selling greater strategic value because you’ve built your value propositions around the strategic customer value of the portfolio. You’ll use the problems solved by each product as proof points.
Customers may still buy individual modules but your odds of increasing the number of products on the sales contract goes up because each product is positioned relative to the strategic value of the portfolio (which mirrors the customer’s strategic priorities). The whole portfolio is more valuable to the customer than the sum of the products.
6. How does portfolio management impact the structure of product management?
The best way to think about the portfolio manager role is to think of them as a market segment owner, meaning they’re the company’s designated expert on the market segments they’re responsible for. To be corny, their first love has to be market segments, not products.
The mission of the portfolio manager is to deliver pure, unbiased business requirements to product managers and product owners. Portfolio managers are the chief business requirements gatherers, responsible of answering all the WHO, WHAT & WHY questions about your target customers. They provide the richest possible voice of the customer in a direct pipeline to product management.
The Bottom Line on Product Management vs. Portfolio Management
If you’re a B2B company with two or more products, portfolio management is the most efficient way to meet your company’s strategic and financial goals because you’re not spreading the organization as thin as you would be when each product is marching to its own drummer in terms of plans, priorities and market focus.
Here’s a key thing to remember. When your company is hitting its numbers, how much do executives, investors and the board really care about the product mix? The answer is, they don’t unless you’ve bet the ranch on the success of a new product or two. So why not take the easier road to hitting your numbers?
Here’s the other thing to keep in mind. The best thing for each product is usually not the best or most valuable thing for customers, or your company for that matter.