A product portfolio is comprised of all the products which an organization has. A product portfolio may comprise of different categories of products, different product lines and finally the individual product itself. Management is needed on all the three levels of a product portfolio. You need managers for managing individual products, managing product lines and finally the top level management which manages the complete portfolio.
Lets look at an organization from a macro angle. An organization is comprised of a number of different departments, all focused towards one goal – the betterment of the organization. In the same manner, your product portfolio should be such that each and every product in the portfolio is focused towards one goal – Bringing the organization on top by optimally using the resources available.
As an organization is comprised of different products, it becomes difficult to manage all of them. Thus there needs to be a hierarchy. This is where product portfolio management steps in.
How do we classify the products in a product portfolio?
Product classification is done on the basis of the BCG matrix. The BCG matrix classifies products on the basis of the market share of the product as well as the growth rate which a product may have. On the basis of this classification, a product manager can decide what level of investments a particular product might need and what would be the returns from such a product. As the other goal of product portfolio management is cash flow management, the BCG matrix propagates balancing the cash flow between all products equally. In harsh words – no extra revenue should be given to products which cant give the revenue back to the organization.
The number of products you have today determines the strength of your organization tomorrow. This is why the field of product portfolio management is gaining importance. Although product portfolio management is not an important task for small businessmen, portfolio management is a must for enterprises and it leads to a strong organization with planned goals and optimum resource allocation.
Further reading on Product portfolio
Secrets of managing a product portfolio.
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