A few weeks ago the Wall Street Journal ran an article on the challenges of product portfolio management and presented a strategy for keeping it under control. There was some OK points in the article, but I found one of the main recommendations to be very dangerous when it comes to new product introductions.
What I agree with in the article:
If you ask customers whether they want more variety, I can tell you right now what they’re going to say: Yes. After all, who doesn’t think they want a lot of choices? And it’s common for consumers to be both sad and angry when a product they like is discontinued
Its hard to argue with the this point. Most product categories are filled with a plethora of choices. Youngme Moon does an excellent job writing about unlimited choices in her book, Different: Escaping the competitor heard. Youngme writes,
If aliens were to visit a grocery store or a drugstore in this country, they would have to conclude that we are a people hooked on the pleasures of picking needles out of haystacks—of selecting a cereal among an ocean of cereal boxes, of selecting a bar of soap among an ocean of soap bars.
Category dilution and product over-saturation is an issue but I would argue that this a matter of portfolio tuning, not a cause to abandon ship. How that tuning is done is the real art and this is where the article lost me.
What concerns me in the article:
Consider creating product-pruning teams consisting of people with marketing, sales, finance, production, and research-and-development backgrounds. Have them meet periodically to decide which products to discontinue.
Let’s use a simple example – as a product manager, you have identified a new opportunity targeting an emerging market. You have talked to customers, analyzed competitors, and reviewed market forecasts. This is going to be big but like a lot of new products, will need time to grow (Side note – this task is one of the reasons why you established a product management organization in the first place).
Your forecasts for the first two years look like this:
Growth looks promising however, compared with the rest of the portfolio, the net impact is minimal:
Your new product looks rather insignificant when viewed alongside the current bread winners. Here is where the product-pruning team comes in to wreak havoc.
The pruning team is being judged on its ability to make short term decisions that keep the portfolio small. If it comes down to cutting an existing product that is producing today or something that might be in the future, the future will take the hit.
Often you will hear explanations like this on why the new product should be cut:
• We don’t believe the market is there
• Customers are not asking for this
• If the market does take off, we can always add a new product
But when the market is there and accelerates like this:
Not only are you behind in product development, you also run the risk of missing the opportunity all together. You have missed key development learnings and now trail from a brand perception standpoint. If your competitors define the space you will have to spend considerably on advertising just to create awareness and potentially be seen as a me-too offering.
I do believe that the product team should have constraints and should have to make hard choices on what to keep in the portfolio. I don’t believe all new products should have to pass the same test before they get a try out in the wild. Back to Youngme Moon and why you need to seek out real product differences,
This is the problem with shifts: They tend to happen in real time, which means that there are going to be moments of ambiguity when remnants of the old truth still hold together, even as remnants of it are falling apart.
Risk aversion should not be the guiding principle for your new product introductions. Give your product development organization the leeway to experiment before sending in the pruners and you may end up with an organization known for innovating vs. copying.