Optimizing the financial performance of your product portfolio
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Recently an executive ask us this interesting question..."Less than 10% of the products in my product line are 'successful,' what is causing the low success rate and what should we do to improve it?"
At the highest level it seems there are four broad areas that impact the $ success of a company's product portfolio:
Whether or not products accurately target the "right" customers and/or market segment(s)
Whether or not the "right" product is being developed for and delivered to the "right" customer
Whether or not the product is being delivered to the customer at the "right" time
Whether or not the product is delivered at or under budget
It seems that if these four broad areas were being successfully satisfied by all products in the portfolio then the portfolio would be completely successful. If some products were not successful (i.e. not producing the foretasted revenues/margins) the cause(s) would be due to not succeeding in one or some of these 4 broad areas.
The challenge is finding the root cause(s) for failures/lack of successes and putting in place the right "fixes". I think the method for finding them is a good set of DEDUCTIVE questions posed to the right people. And/or using the process of comparing successful with unsuccessful products and locating what's DISTINCTIVE about the successful vs. the unsuccessful/failures and then putting in place appropriate "fixes" to the failing products and/or canceling them.
Lessons learned from examining the successful products are incorporated into NPD policies/procedures & training of appropriate Product Line Managers. If causes for failures are "beyond" the scope of influence of the management team, then "structural" fixes would also need to be made (e.g. "fix" the product portfolio process, firing non-performers, reorganizing, modifying budgets,etc.).
To this end we've developed a Product Success Index (PSI) which is implemented through a decision model. Above is an example of PSI being applied to a single semiconductor product line (a client). We analyzed six completed (released) products.
Product Success Index (as a mindmap)
The three that scored highest were the products that were most successful. The three at the bottom all failure when released. This analysis validated the decision model that was also used at the front end of the process to select new projects to enter the development pipeline. These four factor categories contribute to your new product success index:
right customers/segments
right product
right time
right results
Using the structure below, we continued the analysis to determine the root causes of the failures which were both systemic and situational to these projects.
Product Success Analysis