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What is Product Portfolio Management? PPM Explained for B2B

What is Product Portfolio Management

Products are the lifeblood of your organization–without products, there would be no company. Staffing your organization with highly capable product managers is of utmost importance to ensuring the success of each product, but what happens when your portfolio starts to expand? 

Adopting a product portfolio management (PPM) approach is the logical next step in the maturation process for most product management teams. Adding a product portfolio manager role (PPM) can unite disparate teams by rallying them around a single vision and establishing high-level milestones for the product portfolio as a whole. 

In this post, we’ll put the product portfolio management discipline (not to be confused with project portfolio management) under a microscope, identifying the differences with traditional product management, the common objectives of PPM, and what it takes to be a great product portfolio management organization in today’s environment.

What is Product Portfolio Management?

Think of product portfolio management as the age-old philosophy, “the whole is greater than the sum of the parts.” The value of your portfolio is far more valuable to the market than the sum of your products.

Product portfolio management is the oversight and management of multiple products that target common markets, albeit with more strategic goals in mind. In its simplest form, product portfolio management focuses product, marketing and sales teams on market segments that are most conducive to meeting the organization’s strategic goals. 

The discipline of product portfolio management, essentially, focuses on two primary factors:

  • The goals of the organization
  • The needs of target customers in specific vertical markets.

Because product portfolio management is focused on specific market segments, organizations are able to meet their customers’ needs quicker and deliver more value than an organization focused on the success of each product.

An Example of Product Portfolio Management

Let’s say your company has a human capital management platform (HCM) that consists of payroll, HR, benefits, talent management, employee engagement, and recruiting. Each of these modules are considered products in terms of what customers buy. This is your portfolio.

Your HCM portfolio is sold across a variety of industry verticals like healthcare, retail, manufacturing, hospitality, banking, government, etc. 

When it’s time to start your strategic planning for next year, here’s the sequence of events in a product portfolio management model.

  1. Start with your company’s business goals. Let’s say the growth target is 15% with a 30% profit margin.
  2. The first thing you’re going to prioritize is your vertical market segments. Which vertical markets (considering your entire portfolio) are most conducive to 15% growth and 30% margin? If you love data-driven decisions, this one’s a chip shot. A little bit of market research will give you some definitive answers.
  3. Let’s say your market research tells you that industries with the highest percentage of hourly employees (retail, hospitality, manufacturing) are the fastest-growing segments for the portfolio as a whole. Resist the temptation to do this for each product. 
  4. Your next move is to prioritize, in pecking order, these three verticals in terms of your customer success rate. You’re looking to pair vertical segments with the highest growth potential and match them to vertical segments where you’re most successful. This allows you to play from a position of strength. Let’s say the pecking order turns out to be 1) retail, 2) manufacturing, and 3) hospitality.
  5. Don’t think about your products yet. Your next order of business is to gather and analyze what’s driving these organizations from the top down in terms of their strategic and operational priorities and the obstacles preventing them from executing on those priorities. Let’s say all three of these verticals have a top priority of staffing up to full capacity to remove the artificial ceiling on their revenue, plus retention initiatives to keep their best people.
  6. After you fully flesh out the customer business requirements in detail, you’re in a position to use each of your product modules as levers to eliminate the obstacles preventing those target customers from executing on those priorities.

Instead of each product team establishing its priorities in a silo, the PPM model has all product managers working as a team and establishing a coordinated set of priorities across all products collectively that have the biggest impact on the top priorities of your target customers in those prioritized vertical segments.

The mentality here is, what’s best for each product may not be the most valuable thing for the customer or your business (the portfolio). That doesn’t mean you won’t be making routine enhancements to each product. It just means those incremental enhancements have a lower priority than the capabilities required to grow the value of your portfolio in your chosen market segments. 

Benefits of a Portfolio Management Structure

Implementing a portfolio management structure has far-reaching benefits. 

  • Direction – Provides a single top-down strategy for product management, product marketing, and sales teams. Everyone understands their specific roles and how they influence the organization’s market segment strategy.
  • Unity – Creates a company-wide set of priorities that align all disciplines to one agenda that supports the top priority market segments. Teams are not left to their own devices to form their own view of the market segment.
  • Value – Targets solutions that are more valuable to customers. Product management teams then focus on creating solutions that go beyond products to meet the needs of the most pressing customer issues.
  • Credibility – Establishes more effective marketing and sales strategies that speak to the strategic motivation of buyers. As portfolios grow, it becomes more evident that the organization aims to create higher-value solutions for specific markets.
  • Momentum – Accelerates growth momentum by giving the green light (or red light) on initiatives that support the company’s goals. The perspective provided by high-level goals allows organizations to say no to initiatives that would impede strategic plans already in play.

Product Portfolio Management Roles vs. Product Management Roles

Traditional Product Management Organizations

Traditional product management focuses on the performance and growth of each product individually with the understanding–or hope–that the success of each product will influence the success of the organization as a whole. 

In a traditional product management organization, product managers are responsible for one or more products and oversee everything from product features to customer behavior, product roadmap, and more. Because they’re so mired in the details of their products, as they should be, product managers cannot think strategically about portfolio performance. 

Product Portfolio Management Organizations

In a product portfolio management organization, product portfolio managers oversee a group of product managers and are responsible for the performance of the portfolio in named market segments. Their goal is not to help one product succeed but rather to build a portfolio of products that satisfy target market segments and, in turn, help the organization grow. 

Product portfolio managers are more focused on the big picture of the company’s performance in each target market segment versus how well each product is performing individually. They identify gaps in product offerings or capabilities and make sure each product is contributing to the organization’s strategic goals, but they’re doing it from a big-picture market segment perspective as opposed to looking at the performance of each product in a silo.

Types of Product Portfolio Managers

Product portfolio managers come in three main varieties. PPMs can either be vertically focused, horizontally focused, or a hybrid of the two.

  • Vertically focused PPMs concentrate on specific industries and strategize their product offerings accordingly. 
  • Horizontally focused PPMs, on the other hand, aim to position products that serve the same discipline (e.g., HR) across multiple industries. 
  • Hybrid PPMs are more common in smaller organizations. They adopt vertical strategies in organizations that target multiple disciplines (HR, IT).

Regardless of orientation, product portfolio managers are operating at a level that transcends products and don’t have day-to-day ownership of product issues. The portfolio manager’s comfort zone must be deliberately centered on industry and market dynamics as well as the operational business practices of target customers.

Does Your Organization Need a Product Portfolio Manager?

Companies that offer a handful of products don’t always need a product portfolio manager. Smaller teams are usually able to work together to manage the product portfolio as a unit. Of course, it all depends on the products and the team. If it seems like each product has become a disparate and conflicting piece of the larger organization, a product portfolio manager can bring everything together under a cohesive vision and strategy. 

Common Objectives of Product Portfolio Managers

Product portfolio managers take a high-level approach to product management. Common objectives include:

  • Resource management – PPMs are responsible for allocating resources to each product within the portfolio based on the highest business priorities of their target customers. 
  • Identify gaps – Product portfolio managers also need to identify gaps or opportunity areas in the portfolio and fill those gaps accordingly with new capabilities or even new products. 
  • Discover opportunities – PPMs monitor market trends to see what products might be competitive or popular among their target customers.
  • Make data-informed decisions – Analyzing data is also incredibly important for a PPM. Product portfolio managers keep an eye on industry trends and their impact on each target market segment. 
  • Market research – They’ll also have more frequent customer interactions and at a higher level to fully understand customer strategies and business goals. 
  • Drive sustainable growth – PPMs are responsible for closing the gap between company goals and the strategies used to achieve them from one inflection point to the next. PPMs should help organizations avoid flatlines in growth by creating products that solve more complex problems.

The ultimate goal of a PPM is not to make a singular successful product, but rather to help the organization succeed in key market segments through the success of the portfolio as a whole.

What Makes a Great Product Portfolio Manager

Succeeding in the role of product portfolio manager requires a specific set of skills, but not the same skills as a product manager. If you’re looking to advance your career into product portfolio management or are considering hiring one for your organization, check out these must-have skills of a great product portfolio manager.

Strong Communication Skills & Stakeholder Influence

Since most product portfolio managers are responsible for leading a team of product managers, exceptional communication and persuasion skills are essential. Good product portfolio managers are capable of communicating strategy to their team as well as key stakeholders that have to buy into the strategy. 

Big-Picture Market Knowledge

A great PPM must be able to set specific goals for a product portfolio and then create a roadmap of objectives to achieve those goals. To be a great product portfolio manager, you have to be able to see the market dynamics in key industries as well as in your own product category to formulate a strategy that energizes your team and stakeholders. 

Holistic Thinking

A product portfolio manager must keep the high-level business strategy and needs of their customers top-of-mind when making product decisions. Ultimately, the PPM must treat each product as a lever and consider how it affects the entire organization and the overall value to its customers. While it’s easy for product managers to fall into the tunnel vision trap for a specific product, product portfolio managers have to operate with the big picture in mind consistently.

Prioritize, Allocate, and Delegate with Confidence

Much of product portfolio management requires skillful prioritization of certain products over others, allocation of resources from one product to another, and delegation of tasks and responsibilities to the right individuals. Great managers don’t seek to do it all themselves. They know that each member of their team has specific strengths and skills, and they know how to leverage the strengths of each member to generate the best possible outcome.

Learn more: The Leadership Side Of Product Management – What Does It Really Mean?

Product Portfolio Management is a Driving Force

Great product portfolio management provides unity and a competitive advantage in an already competitive market. The vertical market focus keeps organizations from spreading themselves too thin by trying to be everything to everyone. It also sets them up to be the best at what they do in each of their chosen market segments.

If you’re in a fast-growing organization with multiple products in the works, adopting more of a product portfolio management discipline can deliver the results you’ve been looking for. If you’re a product manager wondering how to advance your career, product portfolio management could be your next step.

To learn more about product portfolio management, check out our course offerings on product and portfolio management. Our courses are designed to help increase your skills as a product manager and leader within your organization.

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by John Mansour on November 21, 2022.