Creating and managing value-driven product portfolios

Product portfolio managementWhite paperJune 2009
Creating and managing value-driven
product portfolios.
Improving product portfolio management to optimize your products, services and projects
Michael Lester, market manager, Product, Project and Portfolio Management, Rational software, IBM Software GroupCreating and managing value- driven product portfolios.Page 2
IntroductionContents The product portfolio decisions you make today will determine whether your company is relevant tomorrow. With such a fine line between success and 2 Introduction failure, now is the time to make product portfolio decisions based on fact-not 3 Value to the customer guesswork, political agendas, intuition or the opinions of the loudest voice in 3 Value to the business the room. Successful product portfolios are parked at the intersection of what is 5 Six keys to being value driven valuable to both your customers and your business. Companies with successful 14 Objective product portfolios often utilize a systematic process to effectively guide which 15 A solution that addresses projects are selected. After all, every new product initiative is an investment of your portfolio management scarce resources.challenges Considering its importance, product portfolio management is ironically one of the weakest areas of new product development. Only 21 percent of portfolios contain projects that are of high value to the corporation. Only 25 percent of businesses effectively rank and prioritize their projects. And less than 20 percent 1of companies have the right balance of projects in their development portfolios. And while 76 percent of businesses have too many projects for the resources available, only 21 percent have a portfolio management system in place to help 2them select their best projects.
To increase the chances of marketing a successful product, organizations must become value driven; that is, they must deliver products and services to the consumers they value the most, and they must provide those deliverables when their consumers want them. Benchmark analysis indicates that companies that are best in class at portfolio management are four times more likely to achieve margin advantages of 75 percent or higher for products on the market for less 3than two years. Becoming value driven requires a continual assessment of how value can be increased through the optimization of the products, services and projects that your organization delivers.
Before we look at how you can become more value driven, let's examine what we mean by customer value and business value.Creating and managing value- driven product portfolios.Page 3
Value to the customerHighlights Customer value is the customer's judgment of the benefits versus the costs of conducting business with your company. Thus, it is important that you increase the value proposition of your products while minimizing transaction costs. Both products and services are key components of the value proposition.
Customer value is the customer's A product is a set of attributes and the benefits that the customer derives from judgment of the benefits versus the using those attributes. In combination with services and the brand, the set of costs of conducting business with benefits helps define the total product value for the customer. A slightly different your company. perspective is to view products in terms of the jobs they perform or the services they deliver. Either way, the product is the critical element in delivering your company's value proposition to your customers.
Because consumers are primarily concerned with value, it is important that you understand that value and deliver it. In fact, once product marketers understand the customer value associated with product features-and they have assessed the value to your organization-they can drive product development forward.
Value to the businessA portfolio offers value to the Broadly, a portfolio offers value to the business along four dimensions: value business in four areas: value maxi- maximization, balance, strategic alignment and an optimal number of projects. mization, balance, strategic alignment With value maximization, you manage the active projects in your portfolio so and an optimal number of projects. as to maximize your portfolio's worth in terms of some business objective. A balanced portfolio helps you avoid tipping the scales in the direction of... [download for more]