Portfolio Management determines the efficiency of R&D and business operations

Product portfolio management directly impacts the efficiency of most key company operations. Large and diverse portfolios containing old and new products create a lot of complexity and tie the key resources of the company to multiple fragmented areas.The challenges with large portfolios can be seen in all company functions. A vast range of products is hard to master in sales. In sourcing, manufacturing, assembly, and delivery, the challenges are even more tangible resulting in problems in finding compatible parts to buy, expanding the component base in fabrication and assembly, and exploding the spare part bases to support.

However, usually, the most significant problems arise in the R&D organizations. Large portfolios are technically complex and hard to keep up to date. However, the bigger problems usually are related to money. A large portfolio of products dilutes even large R&D budgets into small crumps of development money per product and creates headaches for the company management in deciding on how to split the investments.

To keep competitive in the marketplace place, products need to evolve constantly. For large portfolios, this means that most of the R&D money needs to be allocated to maintaining and making incremental changes to existing products as well as redeveloping the existing products. A company having a large portfolio can be happy if it can allocate 20% of the R&D money to creating completely new products.

The key to efficient business operations and especially efficient R&D is effective product portfolio management. Advanced portfolio management means having the right, good quality data on products, but also active decision-making around products to develop, keep, maintain, and phase out. A good portfolio is a fresh portfolio. Phasing out older products means always more opportunities for new ones. Advanced and strategically aligned portfolio management makes it easier to allocate R&D money to the right products and it helps maintain the right balance between money spent on new product creation and product maintenance.