A large product portfolio should appeal to a wide target group and ensure profitability and recurring revenues. Is this really the case, however? Many people we talk to have a continuously growing product portfolio, but the profitability does not increase correspondingly.
Every product in the portfolio carries costs for development, manufacturing or buying, marketing, and storage. It is relatively easy to add new products, but to discontinue products could be cumbersome. Does the product make money? Shall we order more? Is it used during maintenance? The list of questions is long, and the answers are difficult to find, and once the answer has been found, it is not communicated throughout the organization.
A first step is to define the life cycle for the products in order to keep track of which products are under development, for sale, being phased out, and discontinued. The life cycle cuts through all the business processes of a company, and as a result, it is often fragmented. Hence, there is no holistic view.
By establishing a holistic view of the life cycle, everyone in the company gets the same view of the product portfolio, and thus, can make informed decisions on the strategic mix of the product portfolio, instead of using gut feel or acting out of habit. At the end of the day, this results in savings in terms of less scrap, lower cost of inventory and increased customer satisfaction. I have helped several companies to get on top of the life cycle – would you like to hear how we did it?
