Category Archives: Portfolio Management

Evolutionary crisis in smartphones?

For ten years now the mobile phone business has been dominated by similar looking device offerings with large touch screens and similar user experiences centred on a responsive touch interface; is this going to continue, how is the market going to evolve?

Competition as a supplier in the mobile phone business is not straightforward -the rules of the game change from time to time. The mobile phone industry has seen a number of such change cycles since the establishment of the first digital mobile phones around 1990, with different players exiting and entering the market according to their ability to compete profitably within the cycle. During each cycle, different business factors become critical within the different phases:

The impact on a supplier’s product portfolio through the change cycle is a gradual increase in the in the lifecycle of individual products, which leads in turn to a widening of the number of products offered and ultimately to a much more consumer segmented product offer.

The voice era

The first change period in the digital era was purely the ability to produce a digital mobile phone at all – leading to the development of proprietary chipsets and software. The first digital products were too large and battery life was terrible, so the following consolidation phase was one of miniaturisation and power optimisation over a period in excess of five years. As the technology reached a point where acceptable size and power consumption was available there followed a plateau period for roughly 3 years when branding, segmentation and physical cosmetics was to the fore.

The multimedia era

The next change period came in 2002 with the advent of camera phones and programmable operating systems in GSM world markets. This heralded a period of multimedia convergence in the mobile devices as music players, video players appeared alongside the ever-present camera. A further complexity was incorporated over the following 2 years as 3G WCDMA became established as a fundamental requirement of a multimedia device. It can be argued that this change cycle was still in its consolidation period when it was disrupted by the next change period in 2007 when the Apple iPhone brought fundamental innovation in the user interface and later in the software application model. For a short period of less than two years products from both cycles were active and successful in the market – it should be noted that always after a change event there is a similar period, but the Apple iPhone product paradigm became the clear winner.

The Smartphone era

Since 2008 there has been a consolidation period in what became the smartphone space with ever better cameras, better quality displays and improved computing performance to deliver a high quality experience. Today the consolidation is reaching a point where the experience difference between high end smartphones and low cost smartphones has never been smaller. The smartphone based on the iPhone of 2007 has made it through its period of consolidation without being fundamentally disrupted.

So today, the smartphone business is in a plateau period- with supplier profitability tied closely to branding and logistical excellence fighting against the gravitational pull of commoditisation.

By retaining its own proprietary platform Apple has maintained differentiation while the rest of the market shares the Android platform and has therefore experienced greater pressures. Since the chipset business in the Android space has also been horizontalised- there is pressure from Qualcomm, Samsung and the like to adopt the very latest generations of their chipsets, however these are not delivering the big improvements in user experience seen in earlier years. Product differentiation is increasingly hard and the mode of the business is moving much more to a fast moving consumer goods model – as it did in the 1998-2002 period. The greater challenge now is that the smartphone form factor does not lend itself to easy cosmetic differentiation since the front face is over 90% glass.

So unless some breakthrough innovation is made, the winners in the smartphone market will be those who possess a good brand and marketing with the operational excellence necessary to deliver really good value to the end user.

Nokia – a good time to make a come back?

After largely disappearing from the mobile phone market following its acquisition by Microsoft, 2017 will see the re-emergence of the Nokia brand with products managed by HMD Global in partnership with FIH Mobile (part of Hon Hai Precision) and brand licensed from Nokia. As someone deeply involved with portfolio management at Nokia during the growth and glory days, I would like to take the opportunity to explore whether this is a good time for them to make a comeback?
In a previous blog I analysed the dynamics of the mobile phone market in terms of what facets of the overall business need to be optimised at a given point in time. In brief, my view is that the smart phone market has moved into a plateauing phase where the key strengths needed are brand, distribution and cost efficiency. So the question is whether this new Nokia set-up is well placed for this challenge?
First of all where is the Nokia brand today? Ten years ago Nokia was the leading mobile phone brand across the world except in North America, South Korea and Japan. This position had been built on fifteen years of growth – how much can this legacy be drawn on now? At its zenith Nokia stood for a perhaps contradictory combination of high technology and reliability – you could expect to get the very latest from Nokia and the products would be really tough in real life. The challenges of the 2008-2013 period largely stripped Nokia of the high technology association but today you still hear stories of how good and tough my Nokia was. The UK press has been full of stories about the resurrection for the 3310 over the last week, all very positive. So if I was to describe the Nokia brand today from a European perspective I would use words like: honest, tough and sentimental.
Distribution is the next major part of competing in today’s market scenario as with any fast moving goods business. Here HMD take responsibility for sales and FIH Mobile for manufacturing and logistics. This has the promise of being a good combination with a lot of personnel coming over from Microsoft devices business while FIH are of course a well-established world class manufacturer. Access to market in countries where operator distribution is critical will depend on the right deals being made but there is no obvious reason why this may not be the case. While a split company setup may struggle in a period where the market is changing fast with product innovation at the fore, since this is not the case at the moment there is no reason to believe this cannot succeed well.
Cost efficiency is the key to offering the value for money proposition essential in a plateauing market and in this case to compete against mainly Chinese companies which offer very keen price points. Clearly the advantage of the resonance of the Nokia brand will give the new venture an edge but as a challenger there can be no expectation of premium pricing at the beginning of sales. With the mobile phone chipset business dominated by only a few suppliers, the size of FIH/Hon Hai as a manufacturer will be important to get good pricing as well as the potential of Nokia branded goods making even a fraction of historical volumes.
So in a nutshell it would appear that the timing for a comeback looks good. Leaving re-entry any later would see the continuing in the decline of Nokia as a consumer brand – furthermore the operational mode of separate sales and manufacturing companies in partnership can work when product innovation is not the main route to success.

Business transformation, meet product portfolio management..

Business transformation is a much bandied term these days and in practice is often used to cover business change activities. This article is to make some comparisons between the goals & activities of transformation against those of a product portfolio planning and management process.

First, a reasonable definition of product portfolio management (PPM):

The process by which business strategy is converted into a product roadmap which delivers corporate goals and optimally utilises the business’ product making and marketing abilities in relation to the market opportunity.

Next, a couple of definitions for business transformation (BT):

Business transformation is about making fundamental changes in how business is conducted in order to help cope with a shift in market environment.
Business Transformation is a change management strategy which has the aim to align People, Process and Technology initiatives of a company more closely with its business strategy and vision.

In summary then, business transformation is an external market and business strategy driven process with the goal of creating change in the organisation to enable it to execute the business strategy and align it to compete in the new market reality. This is now sounding rather like the definition for product portfolio management…

So, are there any real differences between business transformation & PPM?

Transformation scope covers situations where major cultural change is required
PPM builds upon reasonably well working functional processes. Functional competence needs to be in good enough order for PPM e.g. functional capacity planning
PPM has built-in “closed loop” feedback to adapt and sustain in the face of continued change as opposed to transformation which is about initiating & driving a big change
PPM generates risk/return options for business decision e.g. between long and short term gain and taking technology risk or market risk or a balance of both.

PPM vs. business transformation

If we were to try and make an analogy of personal health to these two approaches then business transformation “treatment” might be required in the most extreme situations to shock the patient to help them survive and then guide them toward a more healthy way of living. By contrast, PPM might be seen as a combined exercise and dietary approach which avoids the risk of extreme intervention and helps the person achieve their best health and fitness.

Personal reflection

In my own experience of working for a large corporate (Nokia) over many years, I have seen both transformations in action and then also contributed toward the formalisation of product portfolio management. My perception would be:

The transformations galvanised the organisation into “change mode” and caused for example the creation of new business units with unique missions
Whilst the initial phases of the transformation mostly bore fruit in line with their mission, often the nature of the transformation challenge could make the timing of the first fruit quite unpredictable
Real value was only generated further through the transformation. This might be partly attributed to the benefits of the learning curve but the main value transition was co-incident with product portfolio management practices becoming bedded in
The big value add of PPM was in its ability to hedge both technology risk through different delivery paths to market and market risk through an offering of mainstream and niche/discovery products.

I am interested to hear other views from others on PPM vs. business transformation, but for today, I am an advocate for benefits of PPM and indeed our company offers the Portgenie PPM framework to those interested in learning more.

References

[1] https://en.wikipedia.org/wiki/Business_transformation

[2] https://rapidbi.com/what-is-business-transformation-3/

[3]”Leading Change, Why Transformations Efforts Fail”, John P. Kotter, Harvard business Review.

When two worlds collide: Integrated Business Planning & Product Portfolio management.

As a long term practitioner of Product Portfolio Management (PPM), I was really interested to analyse the principles of Integrated Business Planning and compare it to the practises which I was familiar with. In the first place I must declare that in my career rather than labelling practices and processes, the modus operandi was to extend existing ways of working to become more holistic and drive higher overall business value. When looking at Integrated Business Planning, or IBP, I quickly recognised business processes which I had been operating for in excess of a decade.

The same problem from two different ends

The origins of Product Portfolio Planning lie in the desire to transform company strategy into an executable roadmap to deliver the corporate goals. In simple terms, it is about understanding the market opportunity and making decisions which maximally utilise the company’s ability to develop and market products. On the other hand, IBP was born from the world of Sales and Operations Planning (S&OP) which originated with the goal of balancing product sales and product manufacturing delivering the mantra of ‘one set of numbers’ – in other words, delivering operational excellence.

The collision between these two process philosophies is therefore natural once each has developed excellence in its original field of application: product sales performance is key intelligence for Portfolio Management whilst driving change in the selection of products is a key extension for S&OP.

The term, “Integrated Business Planning”, was originally coined by the consultants Oliver Wright who have a foundation in advising on S&OP. The aim of IBP is the integration of more company functions than S&OP, of particular relevance finance and product development, into a single regular planning cycle. The result being very similar to the regular cycles advocated in the portfolio management context.

A personal reflection

At Nokia in 2007 we implemented an organisational change which was characterised as an ‘integrated company’, the aim of which was to bring sales and operations into the same planning and decision making processes as product development. In reality this change had already started to happen ten years previously as operational excellence had developed as well as more structured product line management. Working in an integrated way had already become a way of life with functional decision taking a supporting role to the over-arching process driven, cross functional structures.

So overall it does not matter if the change to integrate a company into a common decision-making, shared-goal oriented organisation comes from S&OP or the Product Portfolio management end. Fundamentally, it makes sense for a company to operate as a single team which was our goal at All about the Product when we created our “Portgenie” Product Portfolio Management process framework.

In the end, so what?

You might accuse me of some bias, but my strongly held opinion is that there is no greater opportunity for medium and large scale businesses, than to look at how to jointly maximise product making and marketing capabilities in relation to market opportunities. Thus, I am really interested to hear the experiences of others in utilising IBP or PPM based approaches to deliver this benefit.

When does Product Portfolio Management become relevant for a growing company?

In the start-up phase a new business typically searches for the one product which can initiate some business momentum. Allied to this, following lean start-up methodologies, the product is often limited to a ‘minimum viable product’ and little attention is paid to further products or the evolution of that product into something more complete.
As the business moves into a phase of growth, the initial product becomes more complete and further products may be added to the firm’s line-up – typically products are managed in the same way as in the start-up phase. It is in this period that some Product Portfolio Management discipline can become crucial to maximising the prospects of the business.
However the traditional form of Product Portfolio Management is seen as a process for big companies with lots of activities to keep relatively remote senior management in control. So the question is how can a business benefit from Product Portfolio Management without incurring the overhead of doing so?
In a sense the question returns to one which is very familiar to a start-up: what is the minimum viable method of Product Portfolio Management?

Critical Aspects

Essentially Portfolio Management is about optimising the overall solution rather than focussing totally on the atomic constituents. What this means that any minimum portfolio management method must:
• Consider the business opportunity as a whole and so develop holistic objectives/prioritisation.
• Identify conflicts on resources between products/projects and arbitrate on them.
If these two aspects are addressed then portfolio management is already up and running!
As the business develops and grows further aspects of Portfolio Management can be added such as linkage to formal strategy, defined communications policies, standardised reporting and planned reviews.

A roadmap for Product Portfolio Management

It is recommended that any growing company should implement the minimum viable Product Portfolio Management Solution, anything less does not represent a step forward compared to managing products individually. An example template of this is Portgenie-MVP from All about the Product Ltd.
The first step of Portfolio Management(MVP) is enough to manage the portfolio operationally with consolidated plans and roadmaps without a dedicated Portfolio office, without a significant documentation, reporting burden or process load.
Elements of Product Portfolio Management can be added to the MVP state as needed by the particular business; if the company is operating over several sites then communications may be next key element to add or if strategy is changing then a formal strategic link could be added.
In essence this way of considering Product Portfolio Management makes it modular built onto a minimum core.

Minimum Core

Statement of business priorities
Roadmap of product plan
Resourcing plan of the roadmap
Decision making and conflict resolution

Modular add-ons

Internal/external communications policies
Regularised reporting rules and formats
Portfolio planning projects on a annual/six month cycle
Formal steering and followup processes
Linkage to strategic planning processes
Defined linkage to go to market projects.

Why Implement Product Portfolio Management?

The reality is that any business which has more than a single product implements some form of Product Portfolio management, but that implementation may not be formalised or even recognised as such. Product Portfolio Management is after all fundamentally about choosing which products to make, how to market/price them and when to stop selling them. So if a business can survive without formal Product Portfolio Management, why should anyone bother implementing it? To search for any answer to this question, it is first important to understand some of the factors which can make a product business successful such as:

It brings superior products to market.
It maximises business potential with a well-structured product range.
It can react to changes in the market faster than competition.
It can nurture and most importantly bring to market new innovations.

At the root of success of course are managers in the business who understand the market they are in, can anticipate its requirements and carry the organisation in the same direction with full force. In a business without a formalised portfolio management process, these key managers may struggle to get heard; struggle to create focus for the organisation and ultimately become very frustrated. Senior management may also become frustrated for slightly different reasons; their struggle is to get clear visibility of what the current state is in product development and then to have decisive levers to direct the business in the correct direction. Therefore in essence Product Portfolio Management is a framework which enables a business to get the best out of the management resources it has. So what are the key features of a Product Portfolio Management framework which can deliver these benefits?:

Provision of clear decision and review points which consider the totality of the product undertaking.
Direct linkage to company strategy which has been endorsed by the most senior management.
Bonding between the various stakeholder functions which means they all operate together in lock step.
Visibility into the current state in development and sales in a structured way.
By creating balance in the portfolio enabling innovation to bubble to the top as well as making incremental products.

These benefits seem pretty compelling but it remains that Product Portfolio Management is really a means to get the best out of the people who run the organisation. At the end of the day good decisions are needed and while the framework can potentially maximise the probability of making a good decision it does not substitute good market instincts or leadership qualities. So are there great costs implementing a Product Portfolio Management Framework? The fundamental answer is that the biggest part of the cost is the change needed to bring the organisation to a common way of working. A well designed Product Portfolio Management Framework will be customisable to a given organisational scenario to focus change only on those areas which need addressing. Once implemented the clarity and clear target setting it delivers will mean that the overall organisation can operate at a greater level of effectiveness. If the benefits are so clear then why doesn’t every business implement Product Portfolio Management in a formalised way? Well this is another story and the subject of my next blog post.

Missing the opportunity

Missing the opportunity: The under discovered benefits of Product Portfolio Management.

Product Portfolio Management is a discipline which can deliver great value for a business and ensure the firm gets the best return from its resources and opportunities. However, despite this clear benefit, many businesses either do not even have Product Portfolio Management as a recognisable process or have adopted an ad-hoc methodology.

At the root of this status quo are two factors:

Businesses can ‘survive’ without Product Portfolio Management.
Product Portfolio Management is very difficult to do well.

This paper explores these two factors.

Why it’s often not even implemented

It’s often overlooked

Product Portfolio Management is a task which is so deeply integrated into the overall operations of a business that it often is overlooked as a separate competence which needs to be developed and improved in order to make the overall business perform better. In many cases the decisions and choices which should be curated by a Product Portfolio Management function are instead driven by a dominant function (such as Development or Marketing) or alternatively handled without any joined-up ownership on a decision by decision basis.

Its benefits are seen more in the long and medium terms

The choices and decisions driven by portfolio management tend to derive value over some substantial period of time driven by the product development time to market. Therefore in a busy firm, there are always more pressing priorities – be it a product launch or sales firefighting – than to implement a well-structured process for managing the Product Portfolio.

It requires effort to implement well in an organisation

Product Portfolio Management is by its nature a cross functional undertaking requiring full buy-in from participating stakeholder functions. Therefore it is not in itself a new function but a very important process existing in the organisation. While the people tasked with running the process may be hosted by one function or another, it cannot be implemented by a single traditional business function alone.

A growing business does not realise the potential

A business starting out is usually small enough not experience any of the complexity which Product Portfolio Management sets out to clarify. However as business grows, products get added and the business opportunities become more sophisticated, there is a growing increase in complexity and potentially a loss of clear line of sight of on-going product operations. Rather like the metaphorical ‘boiling frog’, the business does not realise that adding structure and process would improve its business results.

‘We’re using Agile we don’t make long term plans’

The popularity of using Agile techniques for software development often creates questions whether any long term plans (such as a portfolio plan) can be made at all. However while Agile does address the issues of making sure a product is ‘about right’ before over-committing resources and not making unrealistic development predictions, there remains a need to allocate resources to different projects and set the overall aims of a product development if not the feature detail.

Why it’s hard to do well

It’s like trying to hit a moving target

Product Portfolio Management is not about meeting the present day requirements of customers and competing against today’s competition rather is it about anticipating future customer requirements and battling against tomorrow’s competition. The longer the new product development cycle the longer the delay between specifying a product and it reaching the market place.

Since predicting the future is not normally a gift bestowed on most human beings, a great deal of effort is required to understand the possible future scenarios and make choices according to that understanding. The aim of Product Portfolio Management is to improve the probability of hitting the target when it is time to market the product.

Developments do not always go as expected

Not only does Product Portfolio Management need to cope with changes in the outside world, there are those changes arising from problems and delays in product development. The result may be that a product is missing attributes associated with its expected success or come to market so late its specification is no longer relevant.

Significant plan changes often precipitate the need to make tough decisions such as a project cancellation or significant re-direction. These are decisions which typically face significant resistance within the organisation and are often unpopular.

It’s often difficult to get functions to commit and co-operate

As a fundamentally cross functional process, success and failure is often tied up with the attitude present in the key contributing functions. It’s a reasonably normal situation than rivalries exist between functions or that hidden agendas exist which may not be aligned with the good of the business as a whole.

A key to success is therefore the ability to inspire stakeholder functions to commit to the common good of the business in an integrated plan.

Getting the balance right in the portfolio

While many aspects of a portfolio are clearly measurable, balance is one aspect which is perhaps more art than science. The term balance can be applied to several aspects of a portfolio design including: the balance between new product development and existing product engineering, the time balance of the portfolio in terms of when products are expected to come to market or the balance across different segments or price points.

At the end of the day, balance is really an informed management judgement which needs to be facilitated by the right information and informed views of the market; it is never a ‘black and white’ decision.

Conclusion

While there are multiple reasons a business does not adopt well defined Product Portfolio Management techniques, in many cases those businesses are missing out on creating a much clearer and strategy linked way to run their businesses. There is no doubt that Product Portfolio Management is a difficult discipline to master but the potential results far out-weigh the effort to implement it.