Over the last two decades, we’ve observed a puzzling paradox: Great product managers exist at both market-leading and market-losing companies. So what else does it take to build a high-performing product organization that propels companies up and away? What’s the secret sauce beyond having the best talent and great product strategy?
The answer lies in the craft of portfolio product management.
What is portfolio management?
In the financial world, “Portfolio management is the art and science of selecting and overseeing a group of investments that meet the long-term financial objectives and risk tolerance of a client, a company, or an institution,” according to Investopedia.
Besides picking the right individual investments, winning portfolios also focus on smart allocation to various categories of investments. In addition, they adjust allocation periodically based on goals, performance, and markets.
A winning product organization operates similarly by using a portfolio approach. The team consistently evaluates product categories across its portfolio and allocates resources to best achieve positive outcomes for the company. This process is adjusted periodically in response to the market and business needs/priorities.
Does this mean only large organizations with multiple products need product portfolio management (PPM)? Not necessarily. After all, anyone may have a financial portfolio. In the same vein, any product team–regardless of size–can make use of the principles of PPM. To start, let’s take a quick look at the history of PPM.
The evolution of portfolio management
Traditionally, product organizations run product portfolio management, which considers each product line an investment option. For example, Proctor and Gamble’s baby care portfolio has shampoo, powder, diapers, etc.
When IT came along, there was no tangible product line but the need existed to allocate resources (e.g. engineers) to best support its customers, often the internal business groups. This created project portfolio management, which according to Project Management Institute (PMI), is: “the centralised management of one or more portfolios, and involves identifying, prioritising, authorising, managing, and controlling projects, programs, and other related work, to achieve specific strategic business objectives.” Project portfolio management fits well in a waterfall type environment.
When digital products came along, the traditional product portfolio management approach began to struggle. A digital product often appears as a single product from the customer’s perspective, e.g. Google Search. But the product organization for Google Search has many product teams with their own underlying “product areas.” It is a “one product” portfolio. How do you define the categories for product investments when there are no easily separable product lines? How do you evaluate and decide which part(s) of Google Search to focus or reduce investment?
With the adoption of agile development, the project portfolio management with pre-defined fix scoped projects no longer worked. Instead, engineering teams work collaboratively with product managers early on to design much better solutions to customer problems. However if product managers start working with engineers on every ideas, all the time, across teams, it can become very chaotic and confusing.
These were the “new” challenges we faced 15 years ago at PayPal as it underwent Agile transformation. We had to tweak the two PPM methods and built a new portfolio product management practice to support digital products in an agile world. It is now called the responsive product portfolio management (responsive PPM).
Here is a summary of the key differences in the three iterations of PPM:
| What you put in | Investment options | Measure of return | |
| Product portfolio | Capital | Product lines | Revenue or profit |
| Project portfolio | Money or skilled resources | Projects | Completed projects |
| Responsive PPM | Money or skilled resources | Multidimensional factors | Multidimensional metrics |
Regarding investment options, responsive PPM takes a multidimensional approach. One dimension could be business goals, e.g. grow new accounts or retain existing customers. Another dimension could be market segments, e.g. enterprise, SMB, or international. Yet another dimension could be types of product investments such as growing core capabilities, expanding to adjacent markets, or new product innovation. This allows both a big picture level of allocation by portfolio dimension, and carries the spirit of portfolio intent into each agile pod (product manager + her teams) for aligned innovation and collaboration.
Regarding investments, responsive PPM uses skilled resources. The skilled resources are the primary resources, e.g. iOS developers or data engineers, needed to build products. When multiple agile product pods require the same team/skills (aka resource contention), a portfolio allocation approach is applied, followed by a more quantitative prioritization within the same portfolio dimension.
Regarding measures of portfolio outcomes, responsive PPM also takes a multidimensional approach to include both monetary metrics like revenue, and other metrics such as new market penetration velocity, platform uptime, or NPS scores. These metrics reflect the various goals the product organizations need to achieve.
How do you apply the latest PPM best practices?
As you can see by now, a winning product organization does not “peanut butter” resources. It defines portfolio goals responsively to the changing state of market and product performance in many dimensions. In other words, they allocate resources according to overall strategies and focuses.
You might be thinking, Is responsive PPM relevant to individual product managers who may not have control of the entire company’s product portfolio? The answer is a resounding yes.
Portfolio management is the craft of managing complexity and delivering the best product outcomes, given any constraints.
Every product manager leads a portfolio since their product or product area needs to support a number of goals, multiple segments, and various themes. The responsive PPM approach helps product managers to effectively prioritize competing needs from all dimensions and balance the near term goals and longer term vision.
It is important to put your thoughts “on paper” because it not only helps you think better, it also helps you communicate and achieve buy-in from your various stakeholders on why you are building what you are building and where you are now.
Ready to propel your product forward? Check out dragonboat.io.
