3♠️ Product portfolio paradox: Balancing growth and profit 

Are you a business leader? Running a business with a wide range of products that you sell to a wide range of customers? As your business grows, your product offerings often expand to meet the needs of a wider customer base. While this can be a positive development, it can also lead to a complex and unwieldy portfolio. Managing a diverse range of products requires careful consideration of factors such as market demand, profitability, resource allocation, and strategic alignment.

Personal Context:

Having worked with countless business leaders over the years, I've observed first hand the challenges they face in managing their product portfolios. Many businesses find themselves overwhelmed by a vast array of products, some of which may be draining resources without contributing significantly to profits. This experience has led me to develop a deep understanding of the importance of product portfolio optimisation.

Problem or challenge:

You might struggle to strike the right balance between product growth and profitability. Maybe prioritising introducing new products without adequately assessing the performance of existing ones. This can result in a portfolio that is bloated with underperforming products, which can drain resources and hinder overall business success.

Complexities:

Addressing this problem is not as simple as eliminating unprofitable products. It requires a strategic approach that takes into account factors such as:

• Market dynamics: Understanding the changing needs and preferences of your customers.

• Resource allocation: Ensuring that resources are allocated effectively to support your most promising products.

• Competitive landscape: Assessing the competitive environment and identifying opportunities for differentiation.

• Strategic alignment: Ensuring that the product portfolio aligns with the your overall business strategy.

Solution

A often-overlooked aspect of business management is product and service portfolio optimisation. While many businesses focus on introducing new products, it's equally important to evaluate existing offerings.

Many SMEs neglect this role, leaving it to the business leader in their spare time. However, optimising the product portfolio is crucial for maximising profitability.

A dedicated product portfolio manager can analyse product performance, identify underperforming products, and make strategic decisions about discontinuation, revamping, or launching new offerings.

By focusing on the most profitable products, you can reduce overhead costs and improve overall profitability.

To optimise your product portfolio, consider the following strategies:

1. Conduct a thorough portfolio analysis: Regularly assess the performance of each product, considering factors such as sales, profitability, market share, and customer satisfaction.

2. Identify high-potential products: Focus on products that have the greatest potential for growth and profitability.

3. Prioritise resource allocation: Allocate resources to support high-potential products and consider divesting or discontinuing underperforming ones.

4. Continuously monitor market trends: Stay informed about changes in customer preferences and industry trends to identify new opportunities and potential threats.

5. Leverage data analytics: Use data-driven insights to inform decision-making and identify areas for improvement.

6. Consider product lifecycle management: Understand the different stages of a product's life cycle and adjust your strategy accordingly.

Benefits:

By optimising your product portfolio, you can:

• Improve profitability: Focus on products that generate the highest returns.

• Enhance customer satisfaction: Offer a more focused and relevant product range.

• Increase market share: Gain a competitive advantage by offering the right products at the right time.

• Free up resources: Redirect resources to support high-potential products.

• Simplify operations: Reduce complexity and improve efficiency.

Why it works:

By focusing on high-potential products and discontinuing underperforming ones, you can improve profitability, enhance customer satisfaction, and gain a competitive advantage.

Measurement:

To measure the effectiveness of your product portfolio optimization efforts, track metrics such as:

• Profitability: Monitor the profitability of individual products and the overall portfolio.

• Market share: Assess your market position for key products.

• Customer satisfaction: Gather feedback from customers to understand their preferences and needs.

• Resource allocation: Evaluate the efficiency of resource allocation and identify areas for improvement.

• Innovation: Measure the success of new product launches and product enhancements.

Conclusion:

This is a critical task for any business. By carefully assessing your product range, prioritising high-potential products, and discontinuing underperforming ones, you can improve profitability, enhance customer satisfaction, and gain a competitive advantage. Remember, a well-managed product portfolio is the foundation for a successful and sustainable business.